Commenting, Julian Jessop, Independent Economist and IEA Economics Fellow, said:

‘The latest official data highlight the fragility of the public finances as John Healey prepares his first Budget. Government borrowing was £2.3 billion above forecast in July, and £0.7 billion higher than in the same month a year ago.

‘Most worryingly, spending growth – notably on benefits – outpaced revenues despite a bumper month for income tax receipts.

‘There is some better news today on the economy. The PMI survey of private sector activity and the GfK measure of consumer confidence both picked up further in August.

“Retail sales dipped in July but this follows two strong months, and the underlying trend still looks good. Nonetheless, the Chancellor will have to tread carefully. Higher inflation will boost public spending more than it boosts revenues, and the cost of government borrowing is already rising again.

“The economy may be benefitting from a ‘Burnham bounce’, but this is unlikely to survive another bumper tax-and-spend Budget.”