Inflation danger as public borrowing hits pounds 3.4bn
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Your support makes all the difference.Signs of inflationary pressures building up in the jobs market alarmed the City yesterday, as did figures showing that government borrowing was surprisingly high last month.
The headline unemployment rate in September fell to 7.4 per cent, its lowest for more than five years, while the gap between public spending and tax revenues was, at pounds 3.4bn, above pounds 1bn more than expected.
Labour called for an independent audit of the public finances ahead of next month's Budget. "The British people have a right to know the real state of the nation's books," said Alan Milburn, the Treasury spokesman.
"These terrible figures show that the Government is continuing to run up debt at the rate of over pounds 1,000 per second," said Malcolm Bruce, spokesman for the Liberal Democrats.
But the Chancellor is still expected to approve plans for tax cuts worth pounds 2bn to pounds 4bn at the Treasury's pre-Budget meeting tomorrow. Analysts think he will also leave the cost of borrowing unchanged after the next monetary meeting, due on 30 October.
The unemployment claimant count fell by 35,600 to 2,073,100 last month, the biggest monthly drop since December 1994 when the economy was growing well above trend. The number of vacancies at JobCentres increased by 16,600.
Employment rose by 35,000 in the April-June quarter, the latest economy- wide figure based on a survey of employers. The Labour Force Survey, a survey of employees, showed an increase of 70,000 in employment in June- August, of which 15,000 were full-time jobs.
Most worrying for the financial markets, the underlying growth of average earnings was estimated at 4 per cent in August, with July's figure revised up to the same level. Earnings have now been on an upward trend for more than a year.
"This will no doubt fuel concern that conditions in the labour market are tightening," said Alex Garrard, an economist at UBS.
Separate figures showed that the Public Sector Borrowing Requirement was an unexpectedly large pounds 3.4bn last month. Excluding privatisation receipts, which amounted to just under pounds 1bn in September, the PSBR is scarcely any lower than at the same stage last financial year.
Although the gilts market fell in reaction to the figures, analysts agreed the gap between revenues and spending would be close to target. "The public finances are still on an improving trend," said Simon Briscoe at investment bank Nikko.
Tax revenues have grown in line with the Treasury forecast so far this year, but spending is running ahead of plans. Last month this was due partly to a pounds 1.2bn one-off payment to clear some index-linked government debt. The Treasury said yesterday the PSBR was on line to meet the pounds 27bn target this year.
The FTSE 100 index fell nearly 29 points to 4,022 yesterday. Sterling edged down to DM2.4368.
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