Government borrowing increased last month dampening any hopes that the Chancellor will have room for tax cuts.

The Treasury borrowed £11.6bn in August, which was £3.5bn more than the same month last year and the fourth highest August borrowing figure since monthly records began in 1993, according to the Office for National Statistics (ONS).

However, the figure was £1.4bn below the forecast made by the Office for Budget Responsibility.

It comes after a surprise fall in inflation on Wednesday which led markets to dramatically cut bets on the Bank of England raising interest rates today, easing pressure on households.

However, Jeremy Hunt insisted it will not mean a pre-election “borrowing binge”.

Total debt reached £2.59trn, which is 98.8pc of GDP.

Britain’s debt ratio to GDP is 2.3 percentage points higher than a year ago and at levels last seen in the early 1960s.

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