Treasury borrows record £37bn in just six months

GOVERNMENT borrowing has surged to record levels as Gordon Brown and Alistair Darling look to spend their way through recession.

Official figures today showed the Treasury borrowed £37.6 billion between April and September as tax receipts sank and spending soared.

It dwarfed the £21.5 billion borrowed in the same period last year and was the highest for a first-half since records began in 1946.

Critics in the City and Westminster warned worse is to come as Britain enters recession, tax receipts fall, and the Government increases spending. Tory leader David Cameron attacked the Chancellor's plans to spend his way through the downturn by fast-tracking construction of schools, hospitals and housing. He said the spending "splurge" would eventually lead to higher taxes and undermine Britain's recovery.

Experts also warned the £500 billion bail-out of the banking system will put further strain on the creaking public finances. Paul Dales, an economist at Capital Economics, said: "The triple whammy of the economic downturn, the recapitalisation of the banks and the Chancellor's plans to frontload public spending is set to push borrowing to alarmingly high levels.

"The key message is that the higher public borrowing goes, the larger the eventual fiscal consolidation will need to be. Tax rises and/or spending cuts will restrain the eventual economic recovery, underlining the need for a prolonged period of very low interest rates."

Borrowing for September alone hit a record high of £8.1 billion, almost double the £4.8 billion borrowed in the same period last year and well above predictions of £6.6 billion. It left Mr Darling with little hope of achieving the £43 billion borrowing total for the full year with economists warning it could be as high as £70 billion this year, rising to more than £100 billion.

Last month's surge was driven by falling tax receipts from the likes of stamp duty and corporation tax.

Philip Shaw of Investec said it was "of major concern, particularly bearing in mind that the figures are, as yet, relatively unaffected by the recession" and a significant fall in tax receipts.

Howard Archer, chief UK economist at Global Insight, said: "The September public finances were dreadful, deteriorating even more than expected. This highlights the extremely poor state of the public finances as they are hit by past largesse, the economic slowdown, markedly weak housing market activity and prices, rising unemployment and government policy concessions since the March Budget."

Figures on Friday are expected to show that the economy contracted in the third quarter of the year for the first time since 1992, leaving Britain on the brink of recession. Recession is official defined as two consecutive quarters of negative growth.