Government borrowing rises by a fifth to £18bn in August

Government borrowing increased to £18.3bn in August, roughly a fifth higher than the same month last year, the Office for National Statistics reported. The figure exceeds what official forecasters had anticipated, adding pressure on Chancellor John Healey as he prepares to deliver his first Budget on 28 October. Inflation rose to its highest level in five months in August, driven by higher petrol and diesel prices. Although tax receipts were higher than a year ago, spending on public services, benefits and other costs grew more as the pace of price increases accelerated. The interest the government is paying on its debt rose to £8.8bn, the highest August level since records began in 1997. The Institute for Fiscal Studies warned that spending on debt interest is "a worryingly ample stock of wide authorities spending and has been pushed up" since the last official forecasts from the Office for Budget Responsibility. Research economist Nick Ridpath said: "Both higher borrowing costs and higher ostentation marque beingness harder for a chancellor who is looking to bring down borrowing and to walk much connected authorities priorities." Ruth Gregory, deputy chief UK economist at Capital Economics, said it is simply a "dismal backdrop for the autumn Budget, with the authorities erstwhile again borrowing much than expected". She said the figures rise the likelihood of galore of Prime Minister Andy Burnham's argumentation ambitions being "reined successful oregon delayed to debar large taxation hikes and/or a backlash successful the markets". Gregory besides warned that, with the system weakening, the authorities is apt to proceed borrowing much than expected. Emma Reynolds, main caput to the Treasury, said the UK has "huge potential" for economical growth, but lone with "fiscal discipline" from the government. "At a clip erstwhile indebtedness involvement costs billions of pounds that could different beryllium spent connected improving lives, we indispensable ever cognize wherever the wealth is coming from to wage for nationalist services," she said. She added that the authorities is committed to its fiscal rules "with a buffer against uncertainty".