Britain's public finances swung back into the red last month with net public sector borrowing at its highest for any August since 1993, data showed today.
But this followed a record repayment in the previous month, and the Office for National Statistics said the fact July 31st was a Monday affected last month's figures, since it meant more self-assessment income tax receipts were accounted for in July.
The ONS said the government's preferred accruals-based measure of borrowing came in at £7.595 billion pounds last month. This was up from £5.472 billion pounds in August 2005 and above forecasts for £5.3 billion pounds.
"Revenues are holding up well but spending is also rising rapidly. For the Chancellor to meet his targets, he will need to get a firmer grip of public spending," said Geoffrey Dicks, UK economist at RBS.
The public sector posted a net cash requirement of 3.731 billion pounds last month, below expectations of 4.9 billion pounds and down from 4.643 billion in August 2005.
Meanwhile it emerged today that all eight members of the Bank of England's Monetary Policy Committee voted to keep interest rates steady at 4.75 per cent this month, judging there had been little news to warrant another change after the August hike.
Minutes of the Sept 6th and 7th meeting published today showed that by and large MPC members thought the economy was performing in line with the August inflation report.
Even David Blanchflower, who had resisted last month's surprise quarter-point rise, felt "it would be unwise to vote for reducing rates this month" because of the need to send a signal to wage and price-setters before the January pay round.
Indeed, MPC members were worried that a pick up in inflation expectations could boost demands at the next pay round.
The minutes are likely to reinforce expectations that the next move in interest rates will be up despite Mr Blanchflower's concerns about a weaker labour market and the US economy posing a downside risk.