The government borrowed £18 billion last month, £3.5 billion more than the same month last year and the highest August figure in five years, according to the Office for National Statistics.
That takes borrowing for the first five months of the financial year to £83.8 billion, making it the second-highest April-to-August total on record. Debt is now at 96.4% of GDP, a level not seen since the 1960s. The current budget deficit for the year so far stands at £62 billion.
Russ Mould, investment director at AJ Bell, said: “Alarm bells are ringing in the Treasury after new figures showed public finances to be in a worse state than expected. That’s saying something, given expectations were already rock bottom.”
He added: “It makes Chancellor Rachel Reeves’ job of plugging the black hole even harder and raises the likelihood of a swathe of uncomfortable decisions at November’s Budget.”
Markets didn’t like the update either, with the pound slipping and gilt yields rising. Mould warned that businesses are already nervous about tax changes and delaying investment, while consumer confidence could also take a hit.
He warned that the uncertainty could weigh on businesses and consumers ahead of the Budget: “Businesses are already showing signs of nervousness around potential tax changes at the Budget, and that’s causing many to delay investment or halt recruitment activity. The latest government figures will add to corporate uncertainty, and consumer confidence may also deteriorate.”