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MPs have criticised an unexpected surge in government borrowing as a “national embarrassment”. Government borrowing in August rose to the second-highest level for the month on record, the Office for National Statistics (ONS) said. Borrowing was £18.3billion last month, almost a fifth higher than the year before. That figure, which is the difference between tax receipts and government spending, was £3.5billion more than official forecasters expected.

Reform UK’s Treasury spokesman Robert Jenrick said: “These borrowing figures are a national embarrassment. It has never been more urgent to make savings, such as the £80 billion Reform has identified to welfare, foreign aid, net zero, and Whitehall. Britain needs proper spending control, not more of the same failed approach.” The figures, released on Tuesday, will heap pressure on Chancellor John Healey ahead of his first Budget at the end of October.

Persistently high inflation has been blamed as the cause for soaring borrowing.

Shadow Chancellor Andrew Griffith MP said: “Labour have lost control of the public finances. They are borrowing so much they’ve overshot the Office for Budget Responsibility forecast by an extra £8 billion of debt. It takes a rare fiscal incontinence to both have the highest tax take in history and see borrowing still shoot up.”

Since the start of the financial year in April, the Government has borrowed £77.3 billion.

This is £2.2 billion less than over the same period last year, but £8.1 billion more than the Office for Budget Responsibility’s (OBR’s) forecast in March.

John O’Connell, chief executive of the TaxPayers’ Alliance, said: “These borrowing figures are a stark warning that Britain is living far beyond its means.

“Welfare spending alone is forecast to hit almost £353 billion this year, yet ministers still refuse to confront a benefits bill that places an ever-growing burden on taxpayers.

“The chancellor should focus on tackling the ballooning welfare bill not reaching for another tax raid.”

Mr Healey faces the prospect of having less room to deliver on the Government’s priorities such as strengthening cost-of-living support.

Thomas Pugh, chief economist at RSM UK, estimated that the Chancellor’s fiscal headroom will be between £10 billion and £15 billion – which is less than the £24 billion left by his predecessor Rachel Reeves to balance the books.

Emma Reynolds, the Chief Secretary to the Treasury, said: “Britain has huge potential to deliver good growth in every postcode, creating jobs, raising living standards and investing in the services people rely on.

“But we can only deliver that growth with fiscal discipline.

“At a time when debt interest costs billions of pounds that could otherwise be spent on improving lives, we must always know where the money is coming from to pay for public services.

“That is why we are committed to meeting our fiscal rules with a buffer against uncertainty, taking the tough decisions needed to keep the public finances on a sustainable path.”