–Government Puts Blame For Rise On Climbing Debt Interest
–But Overall Improvement In 2010-11 Finances Still Intact: Analyst

LONDON (MNI) – Today’s public finance data show just why the
government had to take action to tackle the budget deficit, the UK
Treasury said.

A spokesman for the Treasury said that, “although broadly in line
with the OBR’s Budget forecast, today’s borrowing figures demonstrate
just why the Government needs to tackle the deficit”.

He continued: “The increase in borrowing compared to the same
month last year is more than accounted for by the increase in debt
interest of stg2.5 billion…”

“If the Government had not announced decisive action to bring
borrowing down, debt interest would have been over stg65 billion by
2014-15, more than is spent on schools or defence.”

Public Sector Net Borrowing rose to its highest level for an August
on record, as spending growth outstripped receipts, figures from
National Statistics Tuesday showed.

Excluding financial sector interventions PSNB rose to Stg15.91
billion in August from Stg14.08 billion in August 2009.

For the month of August there was an 11% rise in current spending
compared with a year earlier, while receipts growth was up 6.3%. Part of
the rise in spending was due to increased interest payments on
government borrowing.

Howard Archer of Global Insight said that the worsening public
finance picture would keep the pressure on the government to push ahead
with its austerity programme. Details of the departmental budget cuts
are due to be unveiled on Oct. 20.

“The public finances disappointingly deteriorated in August,
thereby keeping pressure on Chancellor George Osborne to fully deliver
on the targeted overall spending cuts in October’s Comprehensive
Spending Review. Indeed, the increased August public deficit is likely
reinforce the government’s determination not to ease up on its austerity
efforts – given that this remains critical to the UK retaining its AAA
credit rating”.

Archer pointed out, however, that so far in FY2010-11
an improvement in the overall public finance situation was still
observable and that if this improvement was maintained through the rest
of the fiscal year then the PSNB would come in at stg146bn. The
government’s target for this year is stg149bn.

–London bureau: email: ukeditorial@marketnews.com

[TOPICS: MT$$$$,M$B$$$,MABDS$]