S&P has warned that the UK could lose its AAA rating for its sovereign debt.
New public sector spending figures have been released, as a credit ratings agency threatens to strip the UK's AAA rating in response to big government deficits.
The government found that net borrowing over 2008/09 - the amount of debt built up over the year - stood at £86.7 billion. This means that public sector net debts stood at £609 billion, 43 percent of national income.
In April, the situation worsened, with deficits of £8.5 billion run up.
A marked deterioration in the public finances is predicted to occur over the years to come, with the economic downturn damaging tax revenues and the cost of bank bailouts filtering through the system. Last month's Budget predicted that the net debt would peak at 80 percent.
However, ratings agency Standard & Poor's (S&P) said yesterday that the deficit could go over 100 percent due to the public spending gap - and downgraded its outlook on the rating for the UK's sovereign debt to "negative".
S&P said in a statement: "How quickly the government can stabilise and then reduce the government debt burden will also depend on the timing and shape of the economic recovery and whether the cost of government support of the banking system is higher than we currently assume, areas where we also see continued downside risks."
This raises the possibility that Britain could lose its top-of-the-line AAA rating in future - potentially causing great damage to the economy. This is because a ratings downgrade makes the UK less credit-worthy and therefore less attractive to foreign investors.
Commenting on the government figures, Gemma Tetlow at the Institute for Fiscal Studies said: "Figures for the first month of the 2009/10 financial year suggest that cash tax receipts have fallen compared to the same month last year, while spending particularly on social benefits has grown strongly, as last month's Budget forecast.
"However, as this is only the first month of the financial year, these figures on their own give us little clue as to how borrowing will compare to the Treasury's Budget forecasts over the year as a whole."
