2010 will see a general election in the UK and from the current opinion poll predictions there may well be a change of government as a result. For that reason, one must take Alistair Darling’s (Chancellor of the Exchequer) prediction that he will cut the UK public debt in half over the next four year from its current level of about 9% of GDP. It is easy to sound confident about measures that one may never need to bring to fruition. 
     
The UK government had to increase its borrowing in January by a further £4.3 billion. The figure is disturbing because the UK government is usually able to repay some of its debt in January from boosted income tax receipts. Indeed, since record keeping began for these statistics in 1993, this is the first time that borrowing has been required in January.

The figures have been an unpleasant surprise as it had been anticipated that the Exchequer would have had up to £2.8 billion available to reduce debt. The tax receipts from income tax and capital gains tax were 11.8% below their 2009 levels. Last year, the January bonanza was sufficient to repay £5.3 billion of the UK debt. Projections for this financial year suggest that the UK debt will stand at £122 billion and public sector borrowing will peak at £178 billion (12.6% of GDP). 

The Chancellor is reluctant to move against public spending now for fear that it will harm the fragile recovery that saw the UK economy recover from recession last quarter. The UK managed growth figures of just 0.1% in Q4 2009, but at least it was enough to formally end the UK recession. The UK general election must take place by May 2010 by the latest, so it may not be Mr Darling’s headache for much longer.