The Treasury Denies Plan to Move the Debt Goalposts; ECONOMICS
Byline: By Sumeet Desai Special correspondent
The UK may have to relax its fiscal rules after data yesterday showed public borrowing at record levels - threatening to breach the restrictions the Government set itself on debt.
Public sector net borrowing for the first quarter was pounds 24.4 billion - the biggest quarterly figure since records began in 1946.
The deficit for the period was pounds 20.4 billion, also a record high.
"Horrific, absolutely horrific. Net borrowing this financial year is almost pounds 10 billion above the same period last year, which suggests the full year figure is going to be way, way above official government forecast," said Investec economist Philip Shaw.
As Chancellor, Gordon Brown established two rules to govern public finances - that the Government only borrows to invest over the economic cycle and public debt be limited to a prudent and sustainable level - 40 per cent of GDP.
Public debt is running close to 40 per cent and analysts say the Government could breach the limit as the economy is slowing and there is greater pressure to spend.
According to some reports yesterday, Treasury officials are working on plans to reform the rules and this could be announced in the pre-budget report in the autumn, and possibly allow for greater borrowing.
A Treasury spokesman said the report was "pure speculation and based on comments over three months old".
"We have always said at the end of this cycle we will set rules for the next cycle," he said.
However, suggestions the Government might relax its rules spooked markets.
Sterling fell against the dollar and euro on investors' growing sense the UK economy is facing severe headwinds and the government is unable to support it. …