Government borrowing hits record

Will the chancellor break his golden rule?

Government borrowing reached a record monthly high in May, according to the latest set of official figures.

Public sector net borrowing hit £8.7bn in May, the Office for National Statistics (ONS) said, the highest level since records began in 1993.

The ONS said the jump was driven by a 7.5% rise in government spending, which outweighed a 4.3% rise in receipts.

Analysts say the worse-than-expected figure means the government is in danger of missing its borrowing target.

Chancellor's dilemma

The surge in borrowing means public sector borrowing for the year so far stands at £10.25bn. Chancellor Gordon Brown had forecast total borrowing for the current financial year would be £31.9bn.

Analysts warned high spending could leave the chancellor with some stark choices.

"We think it's likely that soon the chancellor will face the choice of raising taxes or breaking his golden rule," said Gavin Rednap of Standard Chartered Bank.

"He will likely go for the former, which will be a further impediment to economic growth."

The ONS said part of the spending rise during the month may have been caused by a change in the timing of educational grants.

The ONS figures also showed that the public sector net cash requirement stood at a higher-than-expected £5.89bn in May, against £3.23bn at the same point last year.