The government's economic policy looks increasingly troubled after it had to borrow more money in July - a month traditionally viewed as good for tax receipts.

The Office for National Statistics said borrowing to cover the gap between spending and revenue was £600m in July. In the same month a year earlier, there was a surplus of £2.8bn. The Treasury said it was down to disappointing corporation tax receipts.

Nida Ali, economic advisor to the Ernst & Young ITEM Club, said public finances 'seem to be going from bad to worse with every successive month'.

'The jump in government spending and decline in revenues is a genuine cause for concern. If this trend continues in the coming months, the government will be on course for a massive overshoot of the OBR's borrowing forecast, which has the deficit falling by £3bn in 2012/13.

'On the current budget measure, the deficit is already running over £11bn ahead of 2011/12 in just four months.'

The Office for Budget Responsibility, the official UK economic forecaster, said there was still "significant uncertainty" about the outlook for borrowing in 2012.

The coalition's coffers were 0.8% lighter in tax than a year earlier because of a fall in corporation tax receipts. Spending on areas such as welfare payments increased more than initial forecasts.

Labour said it was 'a damning indictment of a chancellor who promised to secure the recovery and get the deficit down'.

A Treasury spokesman defended the figures, saying: 'The government remains committed to the credible plan we have set out to deal with Britain's debts.'

Jason Conibear, market analyst at the forex specialists Cambridge Mercantile, said: 'The government is borrowing more to pay the bills too - all of which makes a mockery of the chancellor's centrepiece economic policy.

'When austerity is merely an article of blind faith and not an economic instrument, something is badly wrong. It's time to try something else.

'As we approach the end of the first month of the Funding for Lending Scheme, all eyes will look to see if it has provided the stimulus the stagnant economy needs.'