UK plunges £10bn into red in June

Brown's forecasts "at risk"

The UK's public finances were £10.1bn in the red last month, the worst June figure on record, official data show.

The public sector net cash requirement - the difference between government spending and receipts - was also the worst since March's £10.9bn shortfall.

And it gave a deficit of £16.1bn for the first three months of the tax year compared with £7.1bn a year earlier.

The deterioration in public finances has come as government spending surges despite lower tax receipts.

Picture worsening

June is traditionally a bad month for the government's cash position because interest on government bonds, known as gilts, is payable twice a year, in June and December.

But the figures also showed that the underlying position is worsening sharply because government spending is up over 13% so far this fiscal year, while receipts - hit by stagnant equity markets - are up only 3%.

Chancellor of the Exchequer Gordon Brown forecast in his April Budget that net borrowing for this fiscal year would rise to £27bn this year from £22.2bn in 2002/03 before falling to £24bn next year.

Those forecasts are considered very optimistic by most City economists, especially as Brown is forecasting a much sharper upturn in the economy than expected by the City or the Bank of England.

Lehman Brothers economist Alan Castle said: "Our forecast of £34bn for this fiscal year looks about right and the Chancellor's £27bn is looking at risk."

'Horrible' figures

Philip Shaw, an economist at Investec, added: "The figures are horrible. They continue the trend so far this financial year of a very steep deterioration."

The government's preferred statistic, public sector net borrowing, which gives an underlying picture of the health of the public coffers, stood at £4.8bn in June against a revised deficit of £7.1bn for May, the Office for National Statistics said.

But even by that measure, the deficit stood at £13.8bn for the first three months, already half the borrowing the government plans for the full fiscal year.