- Public sector borrowing hits £15.4billion last month, up 4% on 2011
- Economists warn Britain's AAA credit rating is under threat
- Treasury insists economy is 'healing' but is taking longer than expected
- Labour says coalition is failing pledge to get debt and deficit down
George Osborne today warned Cabinet
ministers they must do 'more with less' after new figures revealed he
was forced to borrow millions of pounds more than expected last month.
The Chancellor ordered senior colleagues they must find radical ways to save money and share services between departments as part of budget setting for 2015-16. Downing Street said there would be 'no flinching' from the need to make difficult decisions and refused to rule out more job cuts.
It comes as mew figures today reveal public sector borrowing reached £15.4billion in December, up 4 per cent year-on-year and higher than the City expected.
Mr Osborne has been forced to admit it
will take longer than planned to balance the nation’s books, with
austerity now expected to last until 2018.
As a result, the Tories and Liberal Democrats have agreed to set a joint spending plan for 2015/16, which will begin before the next general election but also bind whoever forms the next government.
Mr Osborne and Lib Dem Chief Secretary to the Treasury Danny Alexander today told the weekly meeting of Cabinet that they had to start planning now for the need to make further savings.
Ministers were told to 'engage' with the Treasury now, and all radical ideas including departments sharing more offices, services and staff would be considered.
David Cameron's official spokesman told journalists: 'There is no flinching from the fact that very difficult decisions will have to be made.
‘Clearly the government has made very clear that there will be further squeezes on departmental spending. We have to be upfront about that.
‘I think there is agreement around the Cabinet table that though the decisions that have to be taken are difficult they have to be made.'
Health, schools and overseas aid remain protected as they were in 2010, but everyone will have to make efficiencies, he added, including the Ministry of Defence which today announced the latest round of 5,300 redundancies.
A spokesman for the Public and Commercial Services union said: 'This Tory-led government's obsession with cuts has already damaged our economy, with chancellor George Osborne's reckless handling of our economy meaning economists are predicting a triple dip recession and figures show he is borrowing more for failure.
'With the blame for this lying squarely at Osborne's door it would be incredible if our communities and public services were punished even further.'
The Treasury is forced to borrow billions to plug the gap between what the government spends and what it raises in tax.
News of higher-than-expected borrowing is likely to put more pressure on Britain’s coveted AAA credit rating, which makes it cheaper for the government to raise money.
The Office for National Statistics said that in December 2012 the borrowing figure, excluding financial interventions such as bank bailouts, was £15.4 billion in December, compared with £14.8 billion in the same month the previous year. It is worse than the £15.2 billion predicted by economists.
It follows a surprise jump in borrowing in November, when borrowing rose to £17.5 billion, up £1.2 billion on 2011 after tax receipts were dented by lower energy company profits.
Almost three years into the coalition, Government spending continues to outstrip tax receipts.
Total expenditure was up 5.4 per cent, with tax receipts up just 3.6 per cent in the month.
A Treasury spokesman said: 'These figures underline what the Chancellor said at the Autumn Statement: it’s taking time, but the economy is healing.
'The deficit has come down by a quarter since 2010 and more than a million private sector jobs have been created.'
Public sector borrowing since April is £106.5 billion which is 7.3 per cent higher than the same period last year. The figures do not include a one-off £28 billion boost from the transfer of the Royal Mail pension fund into Treasury ownership.
Labour's Rachel Reeves, shadow chief secretary to the Treasury, said: 'David Cameron and George Osborne’s economic plan is hurting, but it’s not working. Their failure on jobs and growth means they are now failing on the one test they set themselves – to get the deficit and debt down.
'Borrowing is rising and is over £7 billion higher than at the same point last year. And this is borrowing to pay for economic failure as a flatlining economy and rising long-term unemployment has sent the welfare bill soaring and tax revenues have been revised down.'
Martin Beck, UK economist at consultancy Capital Economics, said December's public finance figures confirmed that Mr Osborne's plan to get a grip on the nation's finances was still off track.
He expects borrowing for 2012-13 to come in at around £113 billion, £5 billion above the tax and spending watchdog's forecast of £108 billion.
All three of the major credit ratings agencies now have the UK's AAA rating on negative outlook.
ING economist James Knightley said: 'The question is how long the UK can hold on to its AAA status.
'With the US and France having been downgraded by one ratings agency in the past couple of years, another disappointing UK borrowing number and a widely expected contraction in GDP on Friday will intensify the threat of the UK suffering the same fate.'
But a Treasury spokesman said the figures underlined that the recovery in the Government's finances was taking time but the economy was healing.
The Chancellor ordered senior colleagues they must find radical ways to save money and share services between departments as part of budget setting for 2015-16. Downing Street said there would be 'no flinching' from the need to make difficult decisions and refused to rule out more job cuts.
It comes as mew figures today reveal public sector borrowing reached £15.4billion in December, up 4 per cent year-on-year and higher than the City expected.
Surprise figures today showed government borrowing was higher in December than a year earlier, hitting £15.4billion
As a result, the Tories and Liberal Democrats have agreed to set a joint spending plan for 2015/16, which will begin before the next general election but also bind whoever forms the next government.
Mr Osborne and Lib Dem Chief Secretary to the Treasury Danny Alexander today told the weekly meeting of Cabinet that they had to start planning now for the need to make further savings.
Ministers were told to 'engage' with the Treasury now, and all radical ideas including departments sharing more offices, services and staff would be considered.
David Cameron's official spokesman told journalists: 'There is no flinching from the fact that very difficult decisions will have to be made.
‘Clearly the government has made very clear that there will be further squeezes on departmental spending. We have to be upfront about that.
‘I think there is agreement around the Cabinet table that though the decisions that have to be taken are difficult they have to be made.'
Health, schools and overseas aid remain protected as they were in 2010, but everyone will have to make efficiencies, he added, including the Ministry of Defence which today announced the latest round of 5,300 redundancies.
A spokesman for the Public and Commercial Services union said: 'This Tory-led government's obsession with cuts has already damaged our economy, with chancellor George Osborne's reckless handling of our economy meaning economists are predicting a triple dip recession and figures show he is borrowing more for failure.
'With the blame for this lying squarely at Osborne's door it would be incredible if our communities and public services were punished even further.'
The rise in borrowing will be a blow for Chancellor George Osborne, pictured in Downing Street yesterday
News of higher-than-expected borrowing is likely to put more pressure on Britain’s coveted AAA credit rating, which makes it cheaper for the government to raise money.
The Office for National Statistics said that in December 2012 the borrowing figure, excluding financial interventions such as bank bailouts, was £15.4 billion in December, compared with £14.8 billion in the same month the previous year. It is worse than the £15.2 billion predicted by economists.
It follows a surprise jump in borrowing in November, when borrowing rose to £17.5 billion, up £1.2 billion on 2011 after tax receipts were dented by lower energy company profits.
Almost three years into the coalition, Government spending continues to outstrip tax receipts.
Total expenditure was up 5.4 per cent, with tax receipts up just 3.6 per cent in the month.
A Treasury spokesman said: 'These figures underline what the Chancellor said at the Autumn Statement: it’s taking time, but the economy is healing.
'The deficit has come down by a quarter since 2010 and more than a million private sector jobs have been created.'
Public sector borrowing since April is £106.5 billion which is 7.3 per cent higher than the same period last year. The figures do not include a one-off £28 billion boost from the transfer of the Royal Mail pension fund into Treasury ownership.
Labour's Rachel Reeves, shadow chief secretary to the Treasury, said: 'David Cameron and George Osborne’s economic plan is hurting, but it’s not working. Their failure on jobs and growth means they are now failing on the one test they set themselves – to get the deficit and debt down.
'Borrowing is rising and is over £7 billion higher than at the same point last year. And this is borrowing to pay for economic failure as a flatlining economy and rising long-term unemployment has sent the welfare bill soaring and tax revenues have been revised down.'
More for
less: Cabinet ministers including Foreign Secretary William Hague, Home
Secretary Theresa May, universities minister David Willetts and Business
Secretary Vince Cable were told to find more savings
The latest round of jobless figures
is due to be published tomorrow while some analysts predict that the
economy shrank in the last three months of 2012.Martin Beck, UK economist at consultancy Capital Economics, said December's public finance figures confirmed that Mr Osborne's plan to get a grip on the nation's finances was still off track.
He expects borrowing for 2012-13 to come in at around £113 billion, £5 billion above the tax and spending watchdog's forecast of £108 billion.
All three of the major credit ratings agencies now have the UK's AAA rating on negative outlook.
ING economist James Knightley said: 'The question is how long the UK can hold on to its AAA status.
'With the US and France having been downgraded by one ratings agency in the past couple of years, another disappointing UK borrowing number and a widely expected contraction in GDP on Friday will intensify the threat of the UK suffering the same fate.'
But a Treasury spokesman said the figures underlined that the recovery in the Government's finances was taking time but the economy was healing.
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