Public borrowing hits £17.9bn

The Chancellor's plans to tackle to deficit have come under pressure after figures revealed a larger-than-expected surge in government borrowing. Public sector net borrowing was £17.9 billion in May, up from £15.2 billion the previous year.

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Labour: 'Borrowing figures are another nail in the coffin of Osborne's failed economic plan'

Labour Treasury spokeswoman Rachel Reeves said: "These figures are another nail in the coffin of David Cameron and George Osborne's failed economic plan.

"As we consistently warned, if you choke off the recovery and push the economy into recession, the Government ends up having to borrowing more, not less.

"In the year so far, the Government has actually borrowed £3.9 billion more than in the same period last year - as the recession meant tax receipts fell and spending on benefits rose.

Labour Treasury spokeswoman Rachel Reeves

"This is on top of the extra £150 billion the Government has already admitted it will have to borrow to pay for the costs of high unemployment and slow growth.

"Trying to raise taxes and cut spending too far and too fast has totally backfired and the Government's pledge to balance the books by 2015 is now in tatters.

"If we're to succeed in getting the deficit down, we need tough decisions on tax, spending and pay, but we also need a plan for jobs and growth.

"Unless the Chancellor finally changes course and adopts a more balanced plan, he will end up borrowing billions more to pay for economic failure and cause long-term damage to our economy too."


Economists: 'Borrowing on course to significantly overshoot expectations'

Vicky Redwood, chief UK economist at Capital Economics, said borrowing is on course to overshoot "significantly" the official full-year forecast of £120 billion.

She said:

The main problem remains a sharp slowdown in tax receipts. And with the economy probably still in recession, receipts are likely to remain weak.

The combination of worsening public finances and renewed recession is likely to intensify calls for the Government to change tack on its austerity programme.

Treasury: It's too early to draw conclusions

A spokesman for the Treasury said:

It is too early in the financial year to draw conclusions about the year as a whole, especially as today's public finances data include a number of one-off factors and temporary distortions.

The Government is committed to dealing with the deficit, which will help keep interest rates lower for longer and support millions of families and businesses across the country.

GDP rises by almost 4%

Debt as a percentage of gross domestic product (GDP) - a broad measure for the total economy - hit 65% in May, up from 61.3% last year.

April's borrowing figures were flattered by a one-off £28 billion lift from the value of assets transferred from the Royal Mail pension plan.

But excluding this one-off impact, total borrowing for the current financial year stands at £28.4 billion.

Earlier this month, the Chancellor and Governor of the Bank of England Sir Mervyn King unveiled a multibillion-pound lending scheme to stimulate economic growth - but ministers insisted the move was not a "Plan B".


Recession bills strain the Treasury purse strings

The Chancellor is in the process of rolling out a series of tough austerity measures in a bid to cut the budget deficit, which include billions of pounds of spending cuts and hundreds of thousands of public sector job losses.

But the economy fell back into recession in the first quarter of the year, which has significant implications for tax revenues, while high levels of unemployment are increasing the burden on the state purse.

Chancellor of the Exchequer George Osborne holding up his red Ministerial Box outside 11 Downing Street on budget day Credit: Lewis Whyld/PA Wire

In a further blow to Mr Osborne's hopes, total borrowing for the last three financial years was revised up after changes to the way it is calculated.

Total borrowing, excluding financial interventions, in 2011/2012 was revised up by £3.2 billion to £127.6 billion, above the £126 billion target for that year.

Total government spending was 7.9% higher in May at £55.1 billion, while total tax receipts only rose by 1.6% to £38.7 billion.

Net debt excluding financial interventions now stands at £1.01 trillion, compared with #921.3 billion last May.

Fall in tax and rises in welfare benefits fuels rising borrowing

The impact of the double-dip recession on the public purse was underlined today as official figures revealed a larger-than-expected surge in Government borrowing.

The Bank of England Credit: Carl Court/PA Wire

The surge was driven by a 7.3% fall in income tax receipts and an 11.7% jump in welfare benefits, providing evidence that the struggling economy is piling pressure on the Government's already-stretched finances.

While May is only two months into the financial year, the weak figures will trouble Chancellor George Osborne, who is trying to trim borrowing in 2012/2013 to £120 billion, excluding a one-off boost from the transfer of the Royal Mail pension fund into Treasury ownership.

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