Public finances feel the effect of the recession.

UK public finances deteriorated in December, partly because the £20bn state recapitalisation of Royal Bank of Scotland swelled the government’s net cash requirement to £44.2bn.The budget deficit for the month – tax receipts minus expenditure – totalled £11.4bn against a shortfall of £4bn a year earlier, as the deepening recession slowed tax receipts and pushed up social expenditure. For the financial year to date, a measure that smooths some seasonal fluctuations in the timing of tax receipts and expenditure, the budget deficit was £50.3bn against a shortfall of £22.3bn by December 2007.

But the latest data showed how the deepening recession is taking a toll on tax receipts. Income tax receipts, which include capital gains earned by households and taxes on corporate profits, fell to £13.4bn in December from £14.3bn a year ago and for the current fiscal year are now 1.3 per cent below those of 2007. Overall receipts for April until the end of December are down 1.9 per cent despite a higher tax take of compulsory social contributions which have risen in line with average wages.

Link to FT article