ANNUAL public borrowing figures came in lower than the Chancellor’s forecast, but the UK’s £163.4bn plunge into the red was still the worst since records began, it was revealed yesterday.

The total for the year to the end of March – excluding the temporary effects of Government financial intervention – fell short of Alistair Darling’s £167bn Budget forecast and was comfortably below his original £178bn estimate.

While the Government said the result confirmed the success of its actions to help the economy, one expert said the undershoot could reignite the debate over the need for next year’s planned National Insurance hike.

And the public finance figures were still the worst since at least the Second World War, confirming the magnitude of the task ahead for whoever forms a government following the General Election.

The Office for National Statistics (ONS) said Britain added another £35.5bn in public sector net borrowing last month, according to the Government’s preferred measure.

With the inclusion of financial intervention outlays and benefits – such as fees received by Royal Bank of Scotland for the toxic asset protection scheme – annual public borrowing hit £152.8bn, up from £86.9bn in 2008/09.

This saw net debt soar to £890bn in 2009/10 – a record 62% of gross domestic product (GDP).

The budget deficit widened by £14.8bn in March, to take the gaping hole in public finances to an all-time record of £107.6bn over the financial year – more than double the £49.7bn figure recorded a year earlier.

Borrowing has soared amid the recession as unemployment and Government spending to prop up the economy have taken a heavy toll.

However, there were signs of further improvement in yesterday’s figures. Total tax receipts rose 3.8% in March, having now increased in four out of the last five months.

VAT receipts lifted after the rate reverted back to 17.5% in January as the Government’s temporary reduction ended, while corporation tax increased by a hefty 51.4%. The ONS figures also showed borrowing was not as bad as first feared for the year to March, revising borrowing down by £2.5bn for the first 11 months of the year.

However, March is a bad month for Government spending as departments rush to secure spending before the end of the financial year, particularly so this year given the general election pressure.

Jonathan Loynes, chief European economist at Capital Economics, said: “The undershoot may heighten the debate between the parties over Labour’s planned £6bn hike in National Insurance in 2011 – the Conservatives may argue that the undershoot supports their view that the hike can be avoided.

“But the big picture is that this is still the biggest budget deficit since the Second World War and on a rough par with that of Greece.

“With all parties’ fiscal plans based on extremely optimistic economic assumptions and unspecified spending cuts, a further sizeable fiscal squeeze will still be needed after the election, whoever is in charge.”