UK had to borrow for first time in January

The UK's pressured finances suffered another blow last month as the public sector borrowed in January for the first time on record, official figures showed today.

Net borrowing was £4.3 billion in a month that usually sees a seasonal surplus thanks to income and corporation tax, according to the Office for National Statistics (ONS).

It is the first borrowing figure for a January since records began in 1993 and is likely to surprise economists who had predicted a repayment of around £1 billion.

For the 10 months of the financial year so far, public sector net borrowing has reached £122.4 billion.

The figures reflected the impact of the economic downturn on the UK's finances as tax revenues slumped while spending grew because of measures such as the jobseeker's allowance.

It compares to a £5.3 billion repayment in the same month last year.

The ONS said spending was £4.4 billion higher than in January 2009, while receipts were down £4.2 billion.

Government receipts stood at £50.5 billion as income tax was 19 per cent lower than last year at £19.4 billion.

VAT income grew 16 per cent year-on-year after the rate returned to 17.5 per cent at the end of the Government's temporary move to help the economy.

Spending grew to £49.5 billion in the month, with layout on social benefits up 3 per cent at £14 billion in January.

The UK's net debt hit £848.5 billion, which is equivalent to 59.9 per cent of the country's annual output - the highest proportion for a January since the 1974 financial year.

Today's data will renew pressure on the Government to set out plans to ease the burden on public finances, with many predicting a future of tax rises and spending cuts.

A Treasury spokesman said the Government remained on track to meet its Pre-Budget Report (PBR) forecast for public sector borrowing in 2009/10.

He said: "The PBR predicted a sharp decline in self-assessed capital gains tax and income tax receipts for 2008/09, with January being the most important month for these receipts, that fall is evident in today's figures."

But Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said today's figures were "pretty ghastly".

He said: "January usually yields a healthy surplus due to receipts from corporation tax and even in the current climate it is surprising to see the Government rack up a deficit. If this overshoot is replicated in February and March, then the Chancellor's full-year forecast will certainly be under threat.

"These figures emphasise the scale of the fiscal challenge facing the next government. The current Treasury forecasts are far too optimistic, both in terms of the speed of recovery and the extent to which tax revenues will recover, and it is clear that major additional tightening will be required."