Chancellor George Osborne's deficit reduction plans were dealt a blow on Tuesday when official figures revealed a shock rise in borrowing in July.
Public sector net borrowing, excluding financial interventions such as bank bailouts, came in at £600m in July, compared with a surplus of £2.8bn in the same month last year, dashing the City's expectations of a surplus of £2.5bn.
July is normally a strong month for tax income for the Treasury, but total receipts fell 0.8%, driven by a drop in corporation tax, while Government spending increased 5.1%.
In a further blow to the Chancellor, net borrowing for April to June, was revised up by £1.4bn.
That means borrowing so far this year, excluding a one-off boost after assets from the Royal Mail's pension fund was transferred to the Treasury, is £44.9bn, £9.3bn higher than a year ago.
Earlier this month Osborne has said he would focus "110%" on pulling the UK economy out of recession in the wake of a warning from the Bank of England that there would be zero growth in 2012.
The chancellor admitted that the forecast was "disappointing" but said the government now had the opportunity to "give its 110% attention and effort and energy" to create growth.