Economists warned the 'walls are closing in' on Andy Burnham today as figures showed Government borrowing surging ahead of forecasts.

The public sector borrowed £18.3billion last month, up around a fifth on August 2025, as rising tax revenues failed to keep pace with Labour's spending.

That was around £3billion more than expected, and £3.5billion more than the Treasury's OBR watchdog predicted. 

Some £8.8billion went on interest payments for the debt mountain, which was hovering just below £3trillion. 

The grim picture came as ministers brace for the impact of the latest spike in energy prices from the Middle East chaos. 

Fears are mounting that Chancellor John Healey will be forced to increase taxes again on October 28 in order to keep the books balanced and cover Mr Burnham's spending commitments. 

Banks and capital gains have been mooted as potential targets for hikes, despite alarm at the impact on businesses and exodus of wealth from Britain. The economy is already struggling under the weight of £75billion a year of extra taxes imposed by Rachel Reeves, with the burden heading for an all-time high.

The Tories have been demanding ministers slash benefits instead of ramping up pain on taxpayers, who are already suffering from rocketing inflation and mortgage rates.  

ONS senior statistician Tom Davies said: 'Borrowing in the financial year so far was lower than over the same period last year. 

'However, it was higher than the official forecast, largely because central government borrowed more than anticipated.

'On the month, borrowing was up by almost a fifth on last August, as spending increased more than government income, partly reflecting the impacts of inflation.'

Net spending on social benefits - including working age and pensioner welfare - was up 7.2 per cent in the financial year to August, to £145billion.  

Martin Beck, chief economist at WPI strategy, said spending was the biggest surprise in the figures.

'If you look at tax receipts, tax revenues have actually grown a bit more than the OBR expected since the start of the fiscal year in April,' he told BBC Radio 4's Today programme.

'What has really overshot is spending, particularly spending on debt interest, and also spending on welfare and social spending.'

'The Government has got three options. One is to raise taxes, but the tax burden is already heading to a post-war high. Is there really any scope to do more there?

'The Government can borrow more, but borrowing is already very high. Borrowing costs are also very elevated.

'So the third option is to spend less.

'But while that may be the most economically sensible approach the Government is under a lot of pressure from its backbenchers not to reduce spending on welfare, plus it's got additional spending pressures around defence.'

'Borrowing costs keep climbing, while borrowing itself is outpacing the teeny rise in tax receipts. 

'Everyone can diagnose the problem, but it's far from clear that a PM who swept to power promising good things for all is capable of holding a fractious Labour party together to carry out the tough work needed.' 

Shadow Chancellor Andrew Griffith said: 'Labour have lost control of the public finances.

'They are borrowing so much they've overshot the OBR 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.'

Reform'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 £80billion Reform has identified to welfare, foreign aid, Net Zero, and Whitehall. 

'Britain needs proper spending control not more of the same failed approach.'

Chief Secretary to the Treasury Emma Reynolds 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.'

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 £353billion 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.'