Coalition plans cuts as borrowing rises

As news broke that government borrowing went up higher than expected during December, reports surfaced that Mr Osborne had ordered ministers to plan for more spending cuts after the next election.

It's believed details of the new cuts will come in a spending review in the first six months of this year.

For the sixth month in a row government borrowing went up higher than expected. It rose £15.4 billion in December compared with £14.8bn in the same month in 2011.

But all the Treasury told the Star was that recovery in the government's finances was taking time but the economy was healing.

Shadow chief secretary to the Treasury Rachel Reeves said the government's economic plan was "hurting but not working."

The borrowing news came after an unexpected increase in November, when borrowing rose to £17.5bn, up £1.2bn from last year, after tax receipts were dented by lower energy company profits.

But borrowing for the full 2012/2013 year is expected to come in above forecasts at around £113bn, according to economist Martin Beck of consultancy Capital Economics.

This is £5bn above the tax and spending watchdog's forecast of £108bn.

All three of the major credit ratings agencies now have Britain's AAA rating on negative outlook.

ING economist James Knightley said: "The question is how long the UK can hold on to its AAA status."

With fears of a fall in Gross Domestic Product later this week foreshadowing an unprecedented triple-dip recession the risk is high.