Public finances weaken ahead of pre-budget report

By Fiona Shaikh and Matt Falloon

LONDON (Reuters) - Public finances posted their first October deficit in 14 years, data showed on Thursday, just days before Chancellor Alistair Darling is expected to unveil costly measures to boost the economy.

The Office for National Statistics said the government posted a public-sector net borrowing requirement of 1.382 billion pounds for last month -- the first October deficit in the measure since 1994.

October's figures are usually bolstered by corporation tax receipts, but these were flat compared with a year ago, while current expenditure was up 5 percent on the year.

Meanwhile, separate figures on retail sales showed some signs of weakening demand, although the headline figures belied a raft of gloomy reports from the High Street.

The pressure on government finances is set to increase amid growing indications that Darling will present eye-catching measures in his pre-budget report on Monday to help businesses and households weather a sharp economic downturn.

Some experts reckon the government's fiscal stimulus package could cost as much as 30 billion pounds -- roughly 2 percent of GDP -- and could include help for small businesses as well as increased public investment.

Treasury minister Yvette Cooper defended plans to give a fiscal boost to the economy, saying Britain could suffer a slump comparable to that in the early 1980s if it didn't act.

"It's right to increase borrowing to support the economy and to boost the economy right now, because otherwise we'll see a recession that lasts longer and runs deeper and that will cost all of us more in the long run," she told Sky television.