Budget gap may undershoot gloomy forecast

The country is still heading for its biggest deficit ever after borrowing hit a record high for the month, Office for National Statistics data showed on Thursday.

But the figure of 12.361 billion pounds, while topping the 8.766 billion pounds of February 2009, was well below economists' expectations of 14.75 billion.

Any sign that government borrowing is not as terrible as previously thought would be a boost for the Labour Party, as its management of the public purse has been fiercely criticised by the opposition Conservatives.

Chancellor Alistair Darling delivers his budget on Wednesday and may now have room for some giveaways to sway swing voters ahead of an election expected on May 6 that polls suggest could produce a hung parliament.

Given concerns about the stability of Britain's triple-A credit rating and warnings about the size of the deficit, however, he may prefer to settle for the credibility-building chance to say borrowing has come in better than his forecasts.

"February's public finances have provided Alistair Darling with a very timely boost ahead of next Wednesday's budget," said Capital Economics economist Jonathan Loynes. "He now looks likely to have a little wriggle room in the budget to either cut borrowing or fund a few pre-election sweeteners.

"We suspect that he will choose the latter. Make no mistake, though, a prolonged and painful fiscal squeeze still lies ahead."

WRIGGLE ROOM

British government borrowing, forecast to reach a record high of more than 12 percent of gross domestic product this year because of the effects of an 18-month recession and government stimulus measures, has been hitting monthly records all year.