Osborne set to ditch debt target amid high borrowing

Public sector net borrowing, excluding financial interventions such as bank bailouts, was £14.4bn in August, equal to borrowing in the same month last year.

The figures will pile pressure on George Osborne, who is widely expected to announce in his autumn statement in December that the Government will be unable to start bringing down debt as a percentage of GDP in 2015/16.

The likelihood of the Chancellor dropping this target was heightened after Bank of England governor Sir Mervyn King effectively endorsed such a move – on condition the global economy was growing slowly.

Public sector net borrowing in the financial year to date was £59bn, the ONS said, excluding a one-off £28bn boost from the transfer of the Royal Mail pension fund into Treasury ownership.

The Chancellor wants to restrict borrowing for the full year 2012/2013 to £120bn, excluding the Royal Mail pension effect, compared with a downwardly revised £119.3bn in the previous year.

But Mr Osborne’s chances of hitting this target are looking increasingly slim, according to most economists, as the ongoing recession impacts on tax receipts and Government spending.

If the Chancellor sticks to the debt target, he will be faced with announcing tax rises and spending cuts in his autumn statement.

But Sir Mervyn indicated that he would not complain if the target was missed.

He said: “If it’s because the world economy has grown slowly, so we have in turn grown slowly, then that would be acceptable. It would not be acceptable if we have no real excuse.”