Public sector net borrowing in October 2012 was £8.6bn, compared with £5.9bn in October 2011

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

“The public sector borrowing figures were much worse than expected in October. Excluding special factors, total borrowing so far this financial year was more than £7bn higher than in the same period of 2011. Unless there are distinct improvements over the next few months, borrowing for the entire financial year could exceed the OBR’s budget forecast by around £15bn. This unwelcome news will only put more pressure on the Chancellor as he prepares for his Autumn Statement in early December.

“Despite the announcement that interest payments for the gilts purchased under the QE scheme would be transferred from the Bank of England to the Treasury, the deficit will still take a few years longer than expected to reduce.

“To maintain credibility, the government must persevere with a realistic plan to reduce the deficit over the medium term. But there is also a risk that if weak growth continues, borrowing could overshoot even further, which could in turn threaten the UK’s credit rating. The government should look to make cuts in areas such as welfare reform, pensions and the size of the civil service to ensure that the structural deficit is gradually reduced. We will also be looking to the Chancellor to announce measures in his Autumn Statement that will boost growth and enhance the productive capacity of the UK.”