The UK public sector debt increased in July, fuelled by lower corporation tax receipts and higher benefit payments.
Government debt in the UK increased by £600 million in July, heaping more pressure on the government and its deficit reduction policy, according to official figures released by the Office for National Statistics (ONS) today.
Tax receipts are usually strong in July, so the figures are even more disappointing as a surplus rather than deficit was expected. Corporation tax receipts were 20 per cent lower than expected and benefit payments increased by five per cent.
Analysts expected to see a surplus of £2.5 billion in July.
The government borrowed £600 million more than it received in June, reversing the £2.8 surplus seen in June, representing a £3.4 billion fall compared to June.
The public sector current budget surplus was down at £1.2 billion from £4.2 billion in June.
The total public sector net debt now stands at £1.032 trillion, a £92.4 billion rise from 12 months ago when the total government debt was £940 billion. This represents 65.7 per cent of GDP, up from 61.8 per cent 12 months ago.
The ONS also revised down the total public sector borrowing figure for last year from £126 billion to £125 billion.
Some analysts expect the government to miss its borrowing target for 2012-13 of £119 billion. So far, this year, excluding the one-off receipt this year from the Post Office, and banking interventions, borrowing has risen by £44.9 billion, compared to £35.6 billion last year.
Jason Conibear, market analyst at Cambridge Mercantile, said: “Despite the Government's austerity measures, it still seems powerless to reduce the deficit.
"Net debt continues to march upwards, and now stands at nearly two thirds of GDP.
The Treasury said the shortfall was due to low corporation tax receipts, particularly from North Sea oil production.
“Tax receipts are coming in below forecast but this is mostly explained by the weakness in corporation tax, especially from North Sea oil production,” said a staement from the Treasury.
Rachel Reeves MP, Labour’s Shadow Chief Secretary to the Treasury, said: “The deficit is up by more than a quarter compared to the same period last year, despite the OBR predicting a fall at the time of the Budget just a few months ago.
The Office for Budget Responsibility (OBR) predicted that total borrowing would reach £119 billion for the whole financial year. July’s borrowing figures means that this will be more difficult to achieve.
A Treasury spokesman said: "The government remains committed to the credible plan we have set out to deal with Britain's debts."
Sign up to the Myfinances.co.uk newsletter to receive the latest financial news direct to your inbox.