Government borrowing was significantly higher than forecast in July, adding fresh pressure to the public finances ahead of the Autumn Budget.
Latest figures from the Office for National Statistics (ONS) show that borrowing reached £1.8 billion during the month.
Official forecasters had expected the government to record a £500 million surplus, meaning the public finances came in around £2.3 billion worse than anticipated.
The figures could make the Chancellor’s position more difficult as the government prepares for the Autumn Budget on 28 October.
Economists have warned that higher-than-expected borrowing may limit the amount of money available for new spending commitments, tax reductions or further measures designed to ease cost-of-living pressures.
Chancellor John Healey has said the government will maintain “strong fiscal discipline” when setting out its plans in the Budget.
Responding to the latest figures, Mr Healey said the government remained focused on reducing the deficit while also providing support with household costs and helping more young people into employment.
The borrowing figures arrive at a sensitive time for the government, with Prime Minister Andy Burnham already facing pressure to deliver further support for households while maintaining confidence in the public finances.
For businesses and individuals, attention will now turn to the Autumn Budget, where decisions on taxation, spending and borrowing will determine how the government responds to the latest deterioration in the fiscal outlook.
The figures underline the challenge facing the Chancellor: balancing calls for economic support with the need to keep government borrowing under control.
