The UK government borrowed £18.3bn in August, significantly exceeding both City expectations and the official forecast. The figures increase pressure on Chancellor John Healey ahead of next month’s Budget, as higher borrowing and recent bond-market turmoil have reduced the government’s room to meet its fiscal rules.

August borrowing was £2.9bn higher than a year earlier and £3.5bn above the OBR’s forecast, while borrowing since April has exceeded the forecast by £8.1bn. Rising inflation is pushing up public-sector pay, benefits and pensions, while debt-servicing costs remain high; public-sector net debt is just below £3tn, or about 94% of GDP. However, borrowing so far this financial year remains £2.2bn below last year’s level, at £77.3bn.