Page last updated at 10:20 GMT, Friday, 18 July 2008 11:20 UK

Public borrowing at June record

Analysts warn that public finances are likely to get worse

Public sector borrowing rose by more than expected in June, official figures have shown, suggesting the economic slowdown is hitting government coffers.

Public sector net borrowing (PSNB) was £9.16bn, a record amount for June and more than analyst forecasts of £7.4bn.

Borrowing so far this financial year has reached £24.4bn since April - the biggest quarterly figure since 1946.

The figures came as it emerged the government is considering relaxing its own rules on how much it can borrow.

'Horrific' figures

The larger-than-expected increase in the PSBR means the government could break one of its key fiscal rules.

The fiscal situation looks very unhealthy
Jonathan Loynes, Capital Economics

The government has pledged to keep borrowing below 40% of national income, but Treasury officials are considering loosening the borrowing rules.

"(The figures are) horrific, absolutely horrific," said Philip Shaw at Investec.

"The fiscal situation looks very unhealthy, especially if you take into account that economic growth is going to be considerably weaker than government estimates," he added.

The Budget forecast for net borrowing in the 2008 financial year was £43bn, with debt expected to be 38.5% of national income.

"At this rate of increase, borrowing will come in at around £57bn this year, almost £15bn higher than the chancellorís Budget prediction," said Jonathan Loynes at Capital Economics.

"And this is before the slowdown in the economy has really had much effect," he said.

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