LONDON (Reuters) – Tumbling tax receipts in January drove the budget deficit for the fiscal year so far to a record high and statisticians warned bank bailouts could raise total debt by up to 1.5 trillion pounds, or 100 percent of GDP.
Public sector net borrowing stood at 67.201 billion pounds between April 2008 and January, official figures showed on Thursday.
That is the highest since records began in 1993.
Company tax receipts were down 24.1 percent on the year in January.
“January’s UK public finances figures confirmed that the downturn in the economy is starting to hit the fiscal position very hard indeed,” said Jonathan Loynes, chief European economist at Capital Economics.
“Public borrowing could now total 100 billion pounds this year before climbing much further next year.”
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This is a compelling article in that it examines a point we recently discussed in class. The main issue here is the Governments financial position as being dire. The first question that arises is the governments ability to manage interest payments. Secondly, what the destabilizing effects are on the overall economy and thirdly, whether the Government potentially faces bankruptcy.
The last point is deliberately provocative, however, should not be ruled out. Consider the case of Iceland!