Treasury coffers looking unhealthy

Jonathan Loynes of Capital Economics predicts net borrowing will rise to
£45bn this year and £50bn in 2009-10 – far above the chancellor’s forecast of

He told the Financial Times borrowing was close to 3% of national
income and ‘the public finances are in a worryingly poor position to cope with
the coming downturn in the economy’.

The warning comes despite public sector net borrowing recording a surplus of
£500m in April – the best start to a financial year since 2001-02. But the
Treasury expects borrowings to rise from £33.7bn last year to £43bn by the end
of the financial year.

Economists cautioned it was early days to be judging the government’s fiscal
position this year, which would depend on linked issues – how rapidly the
economy slowed; what happensed to oil prices, North Sea production and profits;
and whether the government chose to fund its £2.7bn tax giveaway later in the
financial year.

Further reading:

the Financial Times story

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