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UK slumps another £10bn into red

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Britain slumped into the red by another £10.3 billion last month despite a leap in business tax and VAT revenues, figures have revealed.

Public sector net borrowing in October set a record high for the month and marked an increase on the £10.1 billion seen a year earlier, according to the Office for National Statistics (ONS).

The rise came in spite of signs that the recovery was boosting government tax take, with corporation tax revenues up 29% and VAT also higher as shoppers rushed to beat January’s VAT hike to 20%.

Some economists had expected borrowing to fall year-on-year, with October traditionally seen as a strong month for taxes.

The figure, which excludes the impact of financial intervention by the Government, has taken borrowing in the financial year to date to £81.6 billion.

But the ONS revealed hefty downward revisions to borrowing in August and September, down to £14.1 billion and £15 billion respectively, which gives hope that the Government remains on track to come within the £149 billion forecast by the Office for Budget Responsibility for 2010-11.

The further borrowing in October saw Britain’s budget deficit widen by another £7.1 billion last month. Net debt is now £845.8 billion, which represents 57.1% of gross domestic product (GDP) – also a record for October.

The figures are likely to reinforce the Government’s argument for slashing public sector spending, with the full scale of cuts announced last month.

While tax revenues are increasing and falling unemployment is helping reduce spending on jobless benefits, economists said the Government is battling against ever-increasing interest payments on its mammoth debt levels.

The figure for last month, which includes financial intervention – which reduces overall borrowing due to profit contributions from the part-nationalised banks – was £9.8 billion in October, up on the £9.4 billion seen a year ago.

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