More cuts pledged as debt spirals to £1.1 trillion

Britain’s debt rose again in December despite ongoing attempts by chancellor George Osborne to bring the deficit down.

According to the latest economic indicators, analysts believe that Osborne will miss targets by as much as £10bn.

This will put Britain’s AAA rating at further risk, with ratings agencies long hinting that failure to control spending would lead to a downgrade.

Even deeper cuts are now expected, with Osborne yesterday telling Whitehall that more austerity will be enacted after the 2015 general election.

We will have to do “more with less” and find ways to cut departmental budgets for the 2015-16 financial year, Osborne told cabinet members yesterday.

The new budgets will be binding regardless of who wins the next election, a Downing Street spokesperson told City AM.

 Where does Britain stand?

December’s deficit was £15.4bn for December 2012, up 3.8% on the same month last year, Office for National Statistics figures show.

Since the start of the financial year in April, the deficit is so far £106.5bn. Excluding one-off transfers this is a rise of 7.3% on the previous year.

Tax revenue is swelling. It is up 3.6% and banked £43.8bn in December. However, it is being lapped by spend which rose 5.4% and stands at £55.3bn.

Where is the extra spending coming from?

The social security bill increased by 3.3%. But part of the rise was caused by rising debt interest payments. They’re up 5.1% year-on-year to £4.4bn in December.

“If this trend were to continue for the remaining three months of this financial year, borrowing for the whole of financial year 2012–13 would be about £130.5bn. This is around £10bn higher than forecast by the OBR in December,” analysts at the Institute for Fiscal Studies told City AM.