Government credit at its limit?

The government has limited scope to implement its planned stimulus package as borrowing soars, according to a key economic think-tank. The Ernst & Young Item club forecasts that net borrowing will rise to £180bn in the forthcoming tax year and will exceed the Chancellor's own prediction. It said that public finances were deteriorating "at an alarming rate". Last week the IMF said that the UK would have to borrow 11% of national income to battle the financial crisis - the highest of the G7 nations. That figure was overly optimistic, according to the Item club. It forecasts borrowing to stand at 12.6% of GDP next year and that the UK would be running deficits over the next decade.

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