Official figures show that Britain posted its first budget deficit for the month of January on record after government spending shot up and tax receipts dived.
The Office for National Statistics said public sector net borrowing, the government's preferred measure, came in at just under £4.34 billion last month compared with a £5 billion repayment a year ago. That marked the first PSNB borrowing for a January since records began in 1993.
January is traditionally a big surplus month for the UK due to deadlines for self-assessed income tax and corporation tax. Analysts had forecast a surplus of £2.8 billion.
Worries about Britain's budget deficit - set to hit a record above 12% of gross domestic product this financial year - have raced up the political agenda with an election expected on May 6.
The opposition Conservatives, favourites to win, have warned that Britain may lose its top credit rating and sterling could suffer unless more stringent action is taken to curb the deficit than the Labour government has pencilled in. Labour argues that going beyond its plans to halve the deficit over four years could derail Britain's fragile economic recovery.
The cumulative PSNB for April - when Britain's tax year begins - to January came in at £122 billion, the highest on record.
Separate figures from the Bank of England showed that lending to British businesses contracted at a record pace in December, after the flow of funds sharply reversed from November to drop £4.3 billion on the month.
The BoE said in its monthly Trends in Lending report that the 8.1% annual fall in the stock of loans was the biggest decline since the series began in 1999 - news that may sharpen concern about the sustainability of Britain's economic recovery.
Separate BoE figures for January released at the same time showed monthly M4 money supply growth rose 0.6% in January after a 0.9% drop in December. But on an annual basis there was the slowest growth in M4 money supply since February 2000 and the weakest M4 lending rate since December 1994.
The BoE's Monetary Policy Committee has said it is particularly concerned about a shortage of credit for small and medium-sized businesses.
Its report also suggested mortgage lending had weakened last month and approvals for mortgages for house purchase had fallen sharply in January.
