The coalition Government is on course to miss its full-year targets for tackling the huge budget deficit, official figures showed today, as public borrowing broke August records.
Public sector borrowing, excluding financial interventions such as bank bail-outs, hit £15.9 billion in August, up £1.9 billion on the same month a year ago and the highest figure for the month since records began in 1993, the Office for National Statistics (ONS) said.
Economists warned the Government that it is set to overshoot the full-year target set by the Office for Budget Responsibility (OBR) of £122 billion if the current rate of borrowing continues.
The worrying figures were published as the Treasury denied speculation that it could rethink spending plans and pump another £5 billion into the stalling economy.
Nida Ali, economic adviser to the Ernst & Young ITEM Club, said: "The Government needs some very optimistic results in the coming months to meet this target and, given a further darkening of growth prospects, it will be no easy feat."
Chancellor George Osborne has repeatedly been forced to defend his tough austerity measures in the face of a deteriorating economic outlook, most recently after the International Monetary Fund (IMF) slashed its growth forecasts for the UK yesterday.
Opposition politicians, business leaders and unions have accused the Chancellor of choking off the economy with spending cuts which have gone too far and too fast.
Total borrowing in the first five months of the financial year now stands at £51.5 billion, after the ONS made a series of revisions, down £3.9 billion on the same period the previous year.
The Government borrowed more after income tax receipts fell for the first time in the month and expenditure rose after an unusually low figure in July.
The OBR's estimates are based on assumptions that the UK's economy will grow at 1.7% this year, but even the Chancellor has conceded this is too optimistic as the global economy falters.
But the Treasury remained defiant and said total tax receipts were still growing while spending was meeting the OBR's targets.
A spokesman said: "These figures also include a welcome and substantial downward revision to borrowing so far this year and to overall borrowing last year."
The figures revealed a £2.2 billion downward revision for borrowing in the first quarter of 2011 while July's figure was reduced by £2.4 billion. Elsewhere, the borrowing figure for the last financial year to March was revised down by £5.9 billion to £136.7 billion.
Chief Secretary to the Treasury Danny Alexander and Energy Secretary Chris Huhne both played down suggestions that the Government was set to channel extra capital into infrastructure projects such as roads, railways and superfast broadband networks.
A Treasury spokesman flatly denied that there was any shift in position. "We have our spending plans and we are sticking to them," he said.
Chris Williamson, chief economist at financial information services company Markit, said spending in the financial year to date equals cuts of just £800 million per month, compared to a need to cut spending by £1.7 billion per month if the Government is to hit its target of £122 billion for the year.
He said: "There seems little hope that the Government will hit its spending targets this year, as slower growth means less tax revenues and higher welfare spending."
But David Kern, chief economist at the British Chambers of Commerce (BCC), said the fiscal strategy is still largely on course and it is "important that the Government perseveres with the job of reducing the deficit and stabilising Britain's public finances".
He said: "There is room for modifications within the plan that could make it easier for business to deliver growth.
"Meanwhile, to reduce risks of a setback, the MPC (Bank of England Monetary Policy Committee) must maintain low interest rates and give active consideration to increasing the QE programme."