UK government finances worsen

Disappointing news for the chancellor

Increases in government spending aimed at upgrading Britain's creaking public services have pushed the country's public finances deeper into the red.

Public sector borrowing - the difference between revenues and spending - widened to £4.8bn ($7.6bn) in August, up from £1.8bn one year earlier, according to the Office for National Statistics.

Just five months into the financial year, the public sector deficit has risen to £16.8bn, nearly two thirds of the £27bn forecast by Chancellor Gordon Brown for the year as a whole.

The widening budget gap shows that the government is spending money more quickly than it can collect it in the form of tax and other revenues.

According to the Institute for Fiscal Studies (IFS), government spending since the beginning of the financial year in April is up 10% on the same period last year, compared with a 5.8% increase in central government receipts.

Falling short

Total government receipts would need to rise by 7% for the financial year as a whole for the government to stay within its budget, according to IFS figures.

"There is more disappointing news for the chancellor on both sides of the public accounts," said Christine Frayne, senior research economist at the IFS.

"Growth in tax receipts is falling further behind the Budget forecast, while central government current spending is running further ahead.

"So the current deficit continues to widen rather than shrinking as the chancellor had hoped."

The figures are likely to stir fears that the government may be forced to raise taxes or scale back its spending if the shortfall in revenues continues to grow.

The latest snapshot of Britain's public finances follows a warning from the International Monetary Fund that the UK economy is likely to growth by just 1.7% this year, down from its previous forecast of 2%, and well below the 2.5% pencilled in by Mr Brown.