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UK public borrowing rises 10% in tax year so far, ahead of election spending pledges

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LONDON, Nov 21 (Reuters) - Britain ran a much bigger than expected budget deficit last month, showing government borrowing on the rise even before politicians have a chance to implement costly election spending pledges. Public sector net borrowing, excluding public-sector banks, was the highest in five years for the month of October at 11.2 billion pounds, up from 8.9 billion in October 2018 and above all economists' forecasts in a Reuters poll. In the seven months since the tax year began in April, borrowing was 10.3% higher than during the same period in 2018 at 46.3 billion pounds, the Office for National Statistics said. Prime Minister Boris Johnson's Conservative Party and the opposition Labour Party have promised big increases in spending on health, schools, police and infrastructure ahead of a national election on Dec. 12. Cutting the budget deficit was the Conservatives' main economic policy after they came to power in 2010. Last year the deficit fell to its lowest since 2001/02 at 1.9% of the economy, down from more than 10% in 2009/10. But borrowing now looks almost certain to rise significantly in the coming years due to looser budget policy, over and above the likely negative impact from leaving the European Union. In September, finance minister Sajid Javid announced the biggest increase in day-to-day spending in 15 years and Labour wants to nationalize energy companies and other utilities. Both parties have promised higher infrastructure investment. The Resolution Foundation think-tank predicts public spending is set to hit its highest share of the economy since the 1970s whoever wins the election. Labour has said it would fund some of the increased spending through higher income tax on the top 5% of earners - who already pay half of all income tax - as well as reversing cuts in corporation tax made since 2010. Johnson has said he will not go ahead with a planned further cut in corporation tax but does intend to reduce workers' social security contributions. Thursday's data showed a 6.2% year-on-year fall in revenue from corporation tax in October, the biggest annual drop for that month in four years. Overall tax revenues are up by 2.4% so far this year, compared with a 3.1% rise in day-to-day government spending, driven by a big rise in staff costs and spending on other goods and services. As in most other big economies, debt is much higher than before the financial crisis. Public sector net debt totalled 80.4% of GDP in October, excluding public-sector banks, or 72.2% once the effect of a temporary Bank of England lending scheme was stripped out too. Britain's debt-to-GDP ratio was below 40% before the 2008/09 financial crisis. (Reporting by David Milliken and William Schomberg)