The UK’s public finances were much worse than expected in January, as government spending rapidly increased and tax receipts came through much weaker.

The public sector debt now amounts to 59.5 per cent of the UK’s overall Gross Domestic Product (GDP).
 
Mark Bolsom, head of the UK trading desk at Travelex, said, ‘The figures are very poor and really challenge the fiscal reality of Chancellor Darling’s forecasts. They are far too optimistic, given our tentative economic recovery. He also expects tax receipts to recover a lot quicker, which is unlikely, given the rise in unemployment claims yesterday.
 
‘This figure will only endorse the argument for full-scale spending cuts in the public sector and is quite likely to have negative consequences for growth. Unfortunately, we are about to undergo a period of fiscal austerity, whoever wins the general election.’
 
Sterling hit a session low against a basket of currencies in response to the news. Against the dollar it slid to $1.5597, down from $1.5620 and hit a day’s low against the euro of 87.05 pence, from 86.80 pence.