LONDON, JAN 24 - British public borrowing fell more than expected in December compared with a year ago, thanks to stronger tax receipts, but total outstanding debt rose above the 1 trillion pound mark for the first time on record, the Office for National Statistics said on Tuesday.



The public finances saw clear improvement in December compared to a year earlier.

However, it seems inevitable that the public finances will be increasingly pressurised over the coming months by muted economic activity eating into tax revenues and pushing up unemployment benefit claims.

There will be a lagged impact of the economy's loss of momentum in recent months and it is likely not yet being fully reflected in the public finance figures. Furthermore, we expect the economy to lose further momentum.

There remains a very real danger that the Chancellor will before long face the difficult decision of accepting further slippage in his fiscal targets or imposing more fiscal tightening on a struggling economy.


Yet again better than expected numbers on UK public finances. Compared with the same month a year ago, borrowing was around 2 billion pound lower - which is fairly similar to last month's improvement.

To put that into context, in the autumn budget statement the OBR projections implied that there would be zero further improvement in public finances over the remainder of the fiscal year and here we are two months later and borrowing is 4 billion lower from forecasts.

January is a big month; we could get a partial setback at that point, but for now it's a case of so far so good.


Overall borrowing is less than expected, which has been a reasonably consistent theme over the past few months. Extrapolating for the rest of 2011/12, the Chancellor looks on course to undershoot his borrowing forecast for this year.

Looking forward further, if the Chancellor's programme is to remain on track, what is needed very critically is a turn in the UK's economic prospects at some stage in 2012.

Recent evidence has been encouraging globally, with the U.S. emerging from its soft patch, we had some better news from the euro zone and there seems to a reasonable chance of a resolution of the euro crisis -- at least there are greater hopes in the market.

So there should be an upturn from the middle of the year, but it's going to be a slow grind rather than anything like a v-shaped recovery.


Public sector net debt excluding financial interventions totalled 1.004 trillion pounds in December, the highest since records began in 1993. The ONS said it expected net debt to dip in January due to tax receipt inflows, but to rise again in February.