Public sector net borrowing was £14.4bn in August 2012, equal to the net borrowing in August 2011

Commenting on the public sector finance figures for August 2012, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:  

“The deficit in August was slightly smaller than the markets expected. But taking the entire period from April to August 2012 and removing the effect of one-off transactions, total borrowing so far this financial year was almost £13bn higher than in the same period in 2011. Unless present trends are reversed in the next few months, we now expect total borrowing in 2012/13 as a whole to exceed the total predicted by the OBR at the time of the Budget by more than £20bn. This situation is worrying, and is largely due to the continued stagnation in economic activity.   

“To maintain credibility, the government should persevere with a realistic plan to reduce the deficit, but if persistently weak growth causes borrowing to overshoot, the UK’s credit rating may be endangered. Given these difficult circumstances, it is important to continue with spending cuts in areas such as welfare, pensions and the size of the civil service. These cuts should be supplemented with policies to boost growth such as more infrastructure spending, a reduction in NICs and support for business lending. Such measures will stimulate the productive potential of the economy and help businesses to create jobs. “As long as the Chancellor can persuade the financial markets that he is determined to tackle the deficit, he should be able to preserve confidence and avoid threatening the UK’s credit rating.”