December public finances swing further into the red

LONDON - Public finances swung deeper into the red last month, recording the biggest deficit for a month of December since records began and casting serious doubt over the government's borrowing targets.

The Office for National Statistics said on Monday public sector net borrowing last month was 7.8 billion pounds, above the 7.0 billion forecast by analysts.

This brought the total for the financial year to date to 43.6 billion pounds, more than 11 billion pounds higher than in the same period last year.

"The public finance figures are shocking," said Philip Shaw, chief economist at Investec. "It looks as if it will be very difficult to contain net borrowing within 45 billion pounds this year, well above the government forecast."

Chancellor of the Exchequer Alistair Darling has a borrowing target of 38 billion pounds for the full financial year and will be forced to revise it up again in the March budget unless January tax receipts come in well above normal.

January is the most important month in the public finances calendar due to the timing of corporation tax and personal self-assessment receipts.

The public sector net cash requirement came in at 16.975 billion pounds, well above the 14.35 billion analysts had expected.

A breakdown of the figures showed the deterioration had been driven by higher spending by central government and public corporations.

The ONS said it had not yet been consulted on the government's plan to convert its lending to stricken bank Northern Rock into bonds, so could not comment on the potential impact on public finances.

Northern Rock is estimated to owe the Bank of England 24 billion pounds since seeking emergency funds in mid-September after being unable to raise cash in financial markets.