Government borrowing rose to 拢16.6bn last month marking the third-highest September borrowing since records began in 1993.

The Office for National Statistics (ONS) figures revealed that public sector net borrowing was 拢2.1bn more than a year earlier - and more than most economists expected.

In the financial year to date, borrowing stood at 拢79.6bn, 拢1.2bn more than the year before and 拢6.7bn more than forecast by the independent fiscal watchdog the Office for Budget Responsibility.

The ONS added that central government benefit payments fell for the first time since early 2022, partially due to Labour鈥檚 decision to means test the winter fuel allowance.

Jessica Barnaby, ONS deputy director for public sector finances, said: 鈥淏orrowing this month was about 拢2bn up on last year, making this the third-highest September figure on record. While tax revenue increased, this was outweighed by increased spending, partly due to higher debt interest and public sector pay rises.鈥

Treasury chief secretary Darren Jones said the state of the public finances meant there would be 鈥渄ifficult decisions鈥 in the October 30 Budget.

He said: 鈥淲e have inherited a 拢22bn black hole in the country鈥檚 public finances, including no plan to fund pay deals for millions of public sector workers. Strikes cost at least 拢3bn last year, so it was the right thing to do to end those damaging disputes.

鈥淩esolving this blackhole at the Budget next week will require difficult decisions to fix the foundations of our economy and begin delivering on the promise of change.鈥

Liberal Democrat Treasury spokeswoman Daisy Cooper added: 鈥淭oday鈥檚 figures highlight the difficult position of our public finances after years of mismanagement under the previous Conservative government 鈥 but this can鈥檛 be an excuse for the Chancellor to make the wrong decisions at the Budget.

鈥淲e need to see urgent investment in our NHS and public services which have been reduced to their knees and bold action to fix our crumbling schools and hospitals.

鈥淭he burden of fixing the Conservatives鈥 mess mustn鈥檛 fall on hard working households, but on the big banks, social media companies and oil and gas giants that can afford to pay a small amount of their soaring profits to get our public services back on their feet.鈥