King's Debt Excuse As Borrowing Disappoints
Figures show the Government's annual borrowing target is under further pressure amid comments from the Governor of the Bank of England that a weak world economy would excuse a relaxation in debt reduction.
Public sector net borrowing, excluding financial interventions such as bank bailouts, hit £14.41bn in August - the highest figure for the month on record.
The weak figures, although not as bad as some had forecast, signal more trouble for the Chancellor George Osborne who wants to trim borrowing in 2012/2013 to £120bn from £127.6bn last year.
The Office for National Statistics said a lack of corporation tax receipts - a consequence of recession and the sluggish recovery - continued while higher benefit spending also kept pressure on Government expenditure.
In July, total year-to-date Government borrowing was already more than £9bn higher than in the same month the previous year, if the transfer of Royal Mail pension assets is stripped out.
It has added to speculation that Mr Osborne will use his autumn statement in December to admit either that he will be unable to start bringing down debt as a percentage of GDP by 2015/16 or announce further austerity measures.
In a TV interview on Thursday night Sir Mervyn King appeared to sympathise with the Government's predicament on debt reduction - plans he largely supported ahead of the last election.
He told Channel 4 News that if there was a genuine excuse for being unable to lower the UK's debt, the Treasury could ditch the coalition's pledge and allow debt to keep rising in three years' time.
He said: "If it's because the world economy has grown slowly, so we in turn have grown slowly, then it would be acceptable to be in that position.
"But if the world economy were to pick up and we could grow quite quickly then it would be not acceptable to miss it if we had no real excuse for it."
The Government's deficit reduction plans are said by its critics to be harming economic recovery as the UK struggles to escape recession.
Labour accuses ministers of hiding behind the eurozone debt crisis and world slowdown and damaging recovery by cutting 'too far and too fast.'
The Treasury reacted to today's borrowing numbers by saying they demonstrated the UK is dealing with its debts and that "we should not second guess" what the Office for Budget Responsibility will project on UK borrowing targets.