Record public sector borrowing for August

The UK sank into the red by £15.9 billion last month during the worst August for public sector borrowing on record, official figures showed today.

The bigger-than-expected figure left borrowing in the first five months of the financial year at £58.1 billion, the Office for National Statistics (ONS) said.

The release of today's figure, which was higher than the £14.1 billion a year ago, comes a month before Chancellor George Osborne sets out his austerity plans in the comprehensive spending review on October 20.

The independent Office for Budget Responsibility is expecting borrowing of £149 billion for the financial year as a whole - down from £155 billion in 2009-10.

Samuel Tombs, an analyst at Capital Economics, said August's public borrowing figure - the highest since records began in 1993 - dented hopes that the fiscal position is on a clearly improving trend.

He said: "August's overshoot clearly casts some doubt on the ability of the Government to meet the June Budget projection of annual borrowing of £149 billion on that measure."

August is usually a demanding month as corporation tax receipts do not tend to feature strongly, and this year's August was no exception, the ONS said.

Today's figures did show some signs of recovery, however, with tax receipts of £37.1 billion - up £2.2 billion on a year earlier. The tax take was up 6.3% on a year earlier.

There was also a downward revision to net borrowing for April to July this year by £2.7 billion. This was largely due to a downward revision of central Government expenditure, and an upward revision of accrued receipts from the bank payroll tax, the ONS said.

The ONS figures exclude the impact of financial interventions by the Government, which reduce overall borrowing due to profit contributions from the part-nationalised banks.

The biggest upward factor in today's figures was an 11% surge in current spending on a year ago, above the running average of 6.5%. This reflected a rise in interest payments on index-linked Government bonds following higher inflation.

Investec Securities economist Philip Shaw said the revision to previous data meant cumulative borrowing is still £3.8 billion below the same period last year.

"If this pace is maintained for the remainder of 2010/11, net borrowing would total £146 billion, some £3 billion below official forecasts," he said.

Next month's figures on the public finances will be released on October 20, the same day as the Comprehensive Spending Review.

Mr Shaw added: "The UK is still four to five years from a position of fiscal sustainability, and this endpoint would be that much further away were it not for the extent of the Government's planned budgetary consolidation."