Britain's state borrowing hits record in August

British state borrowing struck the highest August level on record, official data showed on Wednesday, dealing a blow to the coalition government's plans to slash the deficit. Public sector net borrowing -- the government's preferred measure of the public finances -- surged to £15.9 billion (18.2 billion euros, $25 billion) last month, the Office for National Statistics (ONS) said in a statement. The figure, which excludes the effects of bank bailouts, compared with net borrowing of £14 billion in August 2010. Market expectations had been for borrowing of £13 billion, according to analysts polled by Dow Jones Newswires. Britain's coalition government is seeking to slash public spending and lift taxation in order to slash the deficit, amid wider tensions on financial markets over soaring sovereign debt levels in the eurozone and the United States. However, in August, government borrowing increased due to falling income tax receipts and rising expenditure after unusually low spending levels in the previous month. On Wednesday, the ONS also revised down the government's borrowing for the previous 2010/2011 fiscal year. State borrowing was lowered to £136.7 billion, compared with the previous figure of £142.7 billion. The Office for Budget Responsibility (OBR) has forecast that the deficit will drop to £122 billion in the current 2011/2012 financial year, which runs until next April. "So far in 2011/2012, the public finances have shown a modest improvement over last year, and are broadly consistent with the deficit narrowing to £124 billion, close to the OBR's forecast," said Investec economist Philip Shaw. "However, with unemployment starting to rise again and economic prospects uncertain the chances are that this forecast will be not be met."