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Last Updated: Monday, 24 September 2007, 11:06 GMT 12:06 UK
Public finances in UK deteriorate
Corporation tax receipts were down sharply from a year previously
Both key measures of the UK's public finances were further in deficit than expected in August, latest Office for National Statistics (ONS) figures show.

The government's preferred measure, of public sector net borrowing, was 9.1bn, against 6.7bn a year earlier.

The public sector net cash requirement was in deficit by 5bn, compared with 3.7bn in August 2006.

The figures could be a headache for Chancellor Alistair Darling, still dealing with the Northern Rock crisis.

Less corporate tax

The figures showed a sharp drop in corporation tax receipts, which almost halved to 704m from 1.28bn in August 2006, and a modest fall in VAT receipts.

However, the deficits follow record surpluses in July, meaning the government's overall borrowing target of 34bn for the full financial year may still be achievable.

August is traditionally a deficit month for the public finances and July tends to be a month of surpluses.

"The public finance data for August were substantially worse than expected, adding to Chancellor Alistair Darling's current woes," said Howard Archer at Global Insight.

"Public finances could be significantly hit over the coming months if the current financial market turmoil increasingly weighs down on economic activity," he added.

And David Page at Investec said: "On both measures the public finances were very disappointing."

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