Government borrows record amount for October

(Sharecast) The UK government borrowed more money last month than in any October on record, according to the latest numbers from the Office for National Statistics.

Public sector net borrowing rose to £10.3bn from £10.1bn a year ago and was slightly more than the £9.6bn predicted by economists.

But borrowing for the current tax year has still fallen due to favourable revisions to back data, down to £81.6bn from £87.5bn a year ago. That keeps chancellor George Osborne on target to meet, or even undershoot, his target for 2010/11 of £149bn.

“Much will depend on how well economic growth holds up over the rest of the financial year,” said Howard Archer, chief UK economist at IHS Global Insight. “If current trends are replicated over the whole fiscal year, the PSNBR would come in around £145bn.”

An improvement in economic conditions have given a boost to tax receipts and VAT, back up to 17.5 percent from 15 percent and due to increase to 20 percent soon. VAT receipts rose 8.5 percent year-on-year in October and corporation tax receipts jumped 29 percent.

“A serious problem for the government though is that interest payments are increasing markedly,” warned Archer. The Treasury paid out £3.9bn in interest last month.

Net debt at the end of October was £845.8bn, or 57.1 percent of gross domestic product (GDP), up from £694.7bn, or 49.3 percent of GDP at the end of October 2009.