Concerns over Osborne's borrowing
Chancellor George Osborne's deficit-busting plans are set to come under more pressure as figures show Government borrowing is on course to miss full-year targets.
Public sector net borrowing, excluding financial interventions such as bank bailouts, is expected to be £13.3 billion in June, compared with £13.1 billion last year.
The weak figures will trouble the Chancellor who wants to trim borrowing in 2012/2013 to £120 billion, excluding a one-off £28 billion boost from the transfer of the Royal Mail pension fund into Treasury ownership, from £127.6 billion last year.
June's borrowing figures will be impacted by a lack of tax receipts, which analysts said was a consequence of the recession and sluggish economic recovery.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "June's public finances are expected to have been pressurised by the hit to tax revenues coming from weakened economic activity. This is seen outweighing any beneficial impact of more fiscal tightening starting to kick in."
May's borrowing figures were higher than the same month last year as the double-dip recession forced a plunge in income tax receipts and a rise in welfare benefits.
Some economists have warned that the Chancellor is already on course to significantly overshoot his full-year borrowing target of £120 billion, while others have said the country's prized AAA credit rating is under threat.
Last week, the official forecaster warned the Government must find £17 billion of additional spending cuts or tax hikes at the end of its current austerity plan or eventually face a £65 billion hole in the public finances. The Office for Budget Responsibility (OBR) said the additional £17 billion in savings by the year to April 2018 would be needed to get Britain's debt back to pre-crisis levels by 2061.
The Chancellor is in the process of rolling out a series of tough austerity measures, which include billions of pounds of spending cuts and hundreds of thousands of public sector job losses. Last week, Mr Osborne and Bank of England Governor Sir Mervyn King launched a multibillion-pound lending scheme to stimulate economic growth - but ministers insisted the move was not a "plan B".
Philip Shaw, chief economist at Investec, said the Chancellor was set to overshoot official forecasts "unless the economy suddenly finds a new lease of life".