Economy: Weak Tax Receipts Stoke Borrowing

Economy: Weak Tax Receipts Stoke Borrowing

The Government borrowed more than forecast in October as a 10% fall in Corporation Tax receipts hurt Treasury coffers.

Public Sector Net Borrowing, excluding financial interventions such as bank bailouts, came in at £8.6bn.

It means that for the tax year-to-date, the total stands at £73.3bn - £5bn higher than the year before.

The Chancellor wants borrowing for the full year 2012/2013 of £120bn and the latest figures leave George Osborne facing tough choices ahead of his Autumn Statement to the Commons on December 5.

As he remains under pressure to loosen the austerity drive that his critics argue is damaging economic growth, Mr Osborne is equally squeezed on the option of imposing more spending cuts to cover weaker than expected income.

Economists suggest one of his golden rules - ensuring that the UK's debt-to-GDP ratio starts falling toward 2015 - may be abandoned.

The chances of such a move were heightened after Bank of England governor Sir Mervyn King effectively endorsed it last week, on condition that the global economy was growing slowly.

The Office for National Statistics said total tax receipts were 1.8% higher at £47.5bn in October, but total expenditure rose 7.4% to £52.8bn.

Tax revenues were dragged down by corporation tax raising only £8.1bn, while spending on social benefits, such as state pensions, jumped 7.7% to £16bn.

In response a Treasury spokesman said: "The economy is healing but it still faces many challenges. These numbers illustrate that, but also show the Government's plans to bring spending under control are on track for the year."

Labour dismissed that argument, with shadow chief secretary to the Treasury Rachel Reeves saying: "George Osborne is borrowing billions more simply to pay for the cost of his economic failure. Having failed on jobs and growth, the Government is now failing on the deficit too.

"With long-term unemployment rising and our economy flatlining, the welfare bill is now soaring while business tax receipts are down.

"By squeezing families and businesses too hard, choking off the recovery and so pushing borrowing up not down, the Government's economic plan has completely backfired.

"The Chancellor cannot rely on a short-term bailout from the Bank of England's quantitative easing scheme to get him out of his hole.

"Smoke and mirrors will fool nobody. People will want to see borrowing and debt figures without the impact of a £35bn transfer of money from the Bank of England so they can make proper comparisons and judgements."