Wage Threat To Osborne As Borrowing Rises

Evidence is mounting that a rise in self-employment, low-wage jobs and stagnating levels of pay could mean the Government misses its fiscal targets.

A widening hole in the public finances emerged on Tuesday when the Office for National Statistics (ONS) showed that public sector borrowing for September was £11.8bn - £1.6bn ahead of the same month last year.

It meant that halfway through the financial year, the Treasury looked to be well behind the target for a 12% fall in the annual deficit expected by the independent Office for Budget Responsibility (OBR).

Borrowing for April to September stood at £58bn, 10% higher than for the same period in 2013/14.

The additional borrowing - which took place against a background of rising employment and economic recovery - was blamed on the six-year squeeze on earnings growth in addition to tother employment-related statistics.

Taxes on income and wealth for September of £13.1bn were flat on the same month last year and just 0.6% ahead for the year to date.

OBR chairman Robert Chote had previously warned that the squeeze on pay growth was hitting the Government's revenues from income tax, despite record numbers in work.

Annual pay growth has been lagging behind inflation since 2008 and latest official figures showed it was just 0.7%.

The property market was among the best winners for the Treasury - with stamp duty on land and property rising to £1.1bn for September, matching a high in July that was a seven-year record.

Underlying public sector debt was £1.45trn, or 79.9% of gross domestic product (GDP), compared to 79.2% last month and 77.9% in September last year.

Samuel Tombs, of Capital Economics, said: "The continued run of poor UK public borrowing figures looks set to severely hamper the Chancellor's ability to announce giveaways to address his party's deficit in the national opinion polls before next year's general election."

Chris Leslie, shadow chief secretary to the Treasury, said: "These figures are a serious blow to George Osborne.

"Not only is he set to break his promise to balance the books by next year, but borrowing in the first half of this year is now 10% higher than the same period last year.

"As the OBR said last week, stagnating wages and too many people in low-paid jobs are leading to more borrowing."

A Treasury spokesman said: "We have seen stronger growth in receipts this month, but as today's figures show, the impact of the great recession is still being felt in our economy and the public finances."