THE disastrous state of Britain&rsquo;s public finances was laid bare yesterday, as new figures showed that July&rsquo;s deficit hit a record &pound;8bn following a slump in tax receipts.<br /><br />Figures from the Office for National Statistics (ONS) showed that government net borrowing widened to &pound;8bn in July, far worse than the &pound;0.5bn that the City had expected and the first deficit recorded in July since 1996.<br /><br />July usually sees a surplus in public sector net borrowing thanks to corporate tax inflows, but these were down 38 per cent on last July while receipts from VAT also collapsed by &pound;3.6bn. Receipts are shrinking more quickly than the Treasury had predicted.<br /><br />Politicians slammed the figures and criticised the government&rsquo;s lack of concrete plans to get the country&rsquo;s finances back on track.<br /><br />The Conservatives&rsquo; shadow Treasury minister Mark Hoban said: &ldquo;These appalling figures are even worse than the already dire expectations. Yet the Government persists in the outright deception that there is no debt problem, and that it will increase spending after the election.&rdquo;<br /><br />Liberal Democrat shadow chancellor Vince Cable said: &ldquo;What is concerning is that the government&rsquo;s hopes for the recovery of the public finances are based on extremely optimistic growth forecasts. Without this growth we will be heading for even higher levels of debt.&rdquo;<br /><br />The Treasury maintained that the impact of the recession on tax receipts was reflected in the Budget forecast and the position to date this year was broadly in line with its full-year forecasts.<br /><br />Central government revenues fell 11.9 per cent year-on-year over the fiscal year to date, a deeper drop than the 7.5 per cent over the whole year that the Budget implied. Total government spending rose 7.8 per cent over the fiscal year so far, above the 6.8 per cent allowed for in the Budget.<br /><br />Vicky Redwood at Capital Economics said: &ldquo;At this rate, borrowing looks set to overshoot vastly the Chancellor&rsquo;s full-year forecast of &pound;176bn. We expect a figure of at least &pound;200bn.&rdquo; She added that today&rsquo;s public finances figures also underlined the need for sharp tax rises and government spending cuts in the next few years.<br /><br />Net debt is now &pound;800bn and national debt is forecast to reach &pound;1.4 trillion in the next five years. Tory leader David Cameron warned earlier this week that Gordon Brown's spending could lead to Britain defaulting on its debt.