Without a few tough decisions, this is precisely where the US is headed sooner than later. If there were any signs of anyone able to make tough decisions whether in Congress or the White House it might be averted but there will be no changes. The borrowing can't go on forever.
Britain's public finances plunged further into deficit last month – usually a period when the Treasury sees an inflow of funds. Compared with the £5.2bn positive contribution to the public finances recorded in July 2008, this year saw a net outflow of £8bn, thanks to a collapse in VAT and corporation tax receipts.
City analysts were expecting a net outflow of just £500m, and the news renewed fears that the Government may find it increasingly difficult to fund its deficit – especially once the Bank of England stops buying gilts for its quantitative easing programme.
July is one of four months in the year when a substantial proportion of corporation tax receipts are received by the Exchequer; but corporation tax receipts for July 2009 were 37.9 per cent lower than the same month last year, an indication of the pressure of the downturn on business.
Only four months into the current fiscal year, cumulative public borrowing is running at £49.8bn, more than three times the comparable figure in 2008-9, and more than in the 2006-7 fiscal year. It means that the public finances are well on track to hit the Chancellor's Budget forecast of £175bn total borrowing this year, and many economists believe that borrowing could easily shoot beyond that, to £200bn, or close to 15 per cent of GDP, easily a peacetime record.
