? Pressure on George Osborne as borrowing hits �7.7bn
? Rightwingers seek tougher action over cuts
Government borrowing last month hit the highest figure ever recorded for April, news that is likely to intensify the pressure on George Osborne from the right of the Conservative party to step up public spending cuts.
A fall in tax receipts got the new fiscal year off to a disappointing start with public sector net borrowing hitting �7.7bn compared with �5.3bn in April last year.
Extra spending to finance the Treasury's debt mountain added to the government's costs, figures from the Office for National Statistics revealed.
Despite growing public anger over cuts to services, the chancellor has come under repeated attack from rightwing commentators frustrated at the prospect of a significant rise in the UK's public sector debt. Many want Osborne to take a tougher line to reduce spending to make sure he hits his debt reduction targets.
Labour joined in the criticism, though from the opposite standpoint, arguing that austerity measures themselves were the cause of the downturn in growth and tax receipts and should be tempered while the economy remained weak.
David Hanson, Labour's shadow Treasury minister, said: "Cutting too far and too fast risks a vicious circle. Slow growth and more people out of work and on benefits will make it harder to get the deficit down. That's why the government is now forecast to borrow �46bn more than they were expecting last autumn."
The National Institute of Economic and Social Research recently warned that lower growth over the next two years would hit tax receipts and knock the government's debt reduction plan off course.
Nida Ali, economic adviser to the Ernst & Young Item Club, warned that the figures were heading in the wrong direction and undermined gains made last year when the government beat its borrowing target of �146bn.
Ali said: "A fall in central government tax receipts and an acceleration in spending growth doesn't paint a particularly promising picture for the austerity programme.
"Given that the worst of the pain is yet to come, the chancellor's target of reducing borrowing by �30bn in 2011/12 looks more stretching than ever, especially with economic growth looking likely to disappoint."
Excluding support for banks and other "financial interventions", public sector net borrowing was �10bn, �2.7bn higher than in April 2010, when net borrowing was �7.3bn. Spending in April was 5% higher than a year ago at �54.1bn. This was mainly caused by a 26% rise in interest payments to �1bn as the government services its growing debts and interest rates rise along with inflation. Tax receipts came down 0.8% to �42.9bn.
The overall figure for UK debt reached �910bn, or 60.1% of GDP, up from �765.5bn, which was equal to 53% of GDP at the end of April 2010.
However, there was some good news for the government, as borrowing figures for the year to March 2011 were revised downwards to �139.4bn, from �141.1 billion. This was mainly caused by tax receipts being boosted after VAT was raised in January to 20% from 17.5%.
The ONS said last month's fall in tax revenues was also exaggerated by Labour's one-off bank payroll tax, which boosted accrued tax receipts by �3.5bn last April, but was not repeated by the Tory-led administration.
Samuel Tombs of Capital Economics was more optimistic about the prospects for borrowing this year, while worrying about the longer-term trend of low and fitful growth.
He said: "These are just one set of figures and the trend in borrowing should improve as more of the spending cuts kick in later this year. What's more, last year's borrowing figures have been revised down from �141.1bn to �139.4bn.
"Together with last month's better figures, this has left borrowing in 2010/11 nearly �7bn lower than predicted by OBR back in March."
He added: "The bigger picture, though, is that the fiscal forecasts are predicated on overly optimistic forecasts for economic growth. As a result, we continue to think that the government will struggle to meet its borrowing forecasts this year and in the future."
The Treasury said the bonus tax caused a glut of payments last April, distorting the longer-term trend. Its new levy on banks' balance sheets will raise more money than the bonus tax but will be spread more evenly throughout the year, it added.
A spokesman for the Treasury said: "One-off factors affected borrowing this month, but it is clear from the downward revision to last year's borrowing figures that the government's deficit reduction strategy is making headway in dealing with our unsustainable deficit."
Source: http://www.guardian.co.uk/business/2011/may/24/government-borrowing-hits-record-figure-april
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