The UK's debt mountain today smashed through the £1 trillion barrier for the first time in history.
The grim milestone, equivalent to some £16,400 per person in the UK, was
reached despite a bigger-than-expected fall in borrowing in December as
the Government's austerity measures increasingly kick-in.
Public sector borrowing, excluding financial interventions such as bank
bailouts, fell £2.2 billion to £13.7 billion in the month. The City had
expected it to fall to £14.9 billion.
But this was still enough to drive net debt to £1,003.9 billion, or
64.2% of GDP, up from £883 billion a year ago, and its highest since
records began in 1993.
A Treasury spokesman said: "That our national debt has reached more than
£1 trillion simply shows the unsustainable level of spending this
country built up over the past few years, and shows why it is critical
for our nation's future that we deal decisively with the deficit.
"Today's figures show that we are making good progress, with borrowing
over £11 billion lower than in the same period last year."
It means the UK is one of a small number of countries measuring its debt
in trillions rather than millions, including the US, Italy and Japan.
It is understood that the Government's debt will fall back below the £1
trillion barrier in January as its coffers are swelled by increased tax
returns. But debt is expected to push back back past £1 trillion in
February.
The Government's £1 trillion debt figure excludes financial
interventions but when these are added, net debt hit £2.3 trillion in
December, which is 149% of GDP, and reflects the impact of taking a
stake in some of the UK's largest banks following the credit crunch.
Central Government spending fell in December, while the tax haul rose
with the help of last year's rise in VAT to 20% and the levy on banks'
balance sheets. It is the fourth month in a row that borrowing has
fallen on the previous year.
But December's fall was partly offset by a £1.3 billion increase in
estimates for borrowing between April and November after local
Government spending was revised upwards.
However, Chancellor George Osborne is still on track to hit a target set
by the Office for Budget Responsibility to reduce borrowing to £127
billion in the financial year.
The Government borrowed a total of £103.3 billion between April and
December, which is £11.3 billion lower than the previous year.
But there are fears that the deficit reduction plans may be derailed,
with many economists expecting another recession, which would hit tax
revenues and increase spending on benefit payments.
The Office for National Statistics will tomorrow release GDP figures for
the final three months of 2011, with many expecting the economy to have
contracted in the quarter.
Vicky Redwood, a UK economist at Capital Economics, said the figure was a
reminder of the "enormity of the challenge that still lies ahead to get
the public finances back on a sustainable footing".
She fears that weaker growth than the OBR is currently forecasting will make future borrowing forecasts much harder to meet.
"So far, it has been weaker spending growth helping borrowing to fall,
whereas tax receipts are falling short of the fiscal forecasts," she
added.
Labour's shadow chief secretary to the Treasury Rachel Reeves said: "By
pushing unemployment up to a 17-year high and choking off the recovery
over a year ago, well before the recent eurozone crisis, the
Government's reckless decision to raise taxes and cut spending further
and faster has completely backfired.
"Of course we need tough decisions on tax, spending and pay to get the
deficit down but it's also vital we get people off the dole and into
work."
