Borrowing fall fails to stop debt reaching £1trillion

Public sector borrowing, excluding financial interventions such as bank bailouts, fell £2.2bn to £13.7bn in the month. The City had expected it to fall to £14.9bn.

But this was still enough to drive net debt to £1,003.9bn, or 64.2 per cent of GDP, up from £883bn a year ago, and its highest since records began in 1993.

The bigger-than-expected fall in Government borrowing in the month was partly offset by a £1.3bn increase in estimates for borrowing between April and November after local Government spending was revised upwards.

But Chancellor George Osborne is still on track to hit a target set by the Office for Budget Responsibility to cut borrowing to £127bn in the financial year despite fears the UK is on the brink of recession.

Central Government spending fell 0.9 per cent as the Chancellor’s austerity measures increasingly kick in, while the tax haul rose with the help of last year’s rise in VAT to 20 per cent and the levy on banks’ balance sheets.

It is the fourth month in a row that borrowing has fallen on the previous year.

But there are fears that the deficit reduction plans may be derailed, with many economists expecting another recession, which would hit tax revenues and increase spending on benefit payments.

The Government borrowed a total of £103.3bn between April and December, which is £11.3bn lower than the previous year.

A Treasury spokesman said: “That our national debt is more than £1trillion shows the unsustainable level of spending built up over the past few years, and why it is critical for our future that we deal decisively with the deficit.

“The figures show that we are making good progress, with borrowing over £11bn lower than in the same period last year.”

It is understood the Government’s debt will fall back below the £1trillion barrier in January as its coffers are swelled by increased tax returns. But debt will return to past £1trillion in February as the Government continues to borrow more.