Public sector net borrowing climbed to £13 billion in June - a record high for the month - compared with £7.5 billion a year earlier. The government's tax take has tumbled by £32 billion in the past year - the biggest fall since the 1920s.

While the figure came in below the £15.5 billion expected by analysts, the government's finances remain on a sharply deteriorating path. In the April to June period, public sector net borrowing stood at £41.2 billion, nearly double the level in the same period a year ago.

Said Alan Clarke, UK economist at BNP Paribas, "It wasn’t a terrible number on the day today but it doesn’t change the bigger picture that public sector finances are in bad shape."

The latest figures take public sector net debt as a percentage of GDP to 56.6 percent, the highest since records began in 1974.

The government has forecast borrowing for the full year of 175 billion pounds, a record post-war h

On the stock market this morning shares continued their upward run  with the FTSE100 index up  26.37 at  4469.99, extending the rally over the past fortnight to seven per cent.

Supermarket retailers made a storming start to the session after Morrisons said profits were likely to be ahead of expectations.

The update caused shares in Bradford-based Morrisons to surge 6 per cent, or 16.5p to 269.75p, while rivals Sainsbury’s and Tesco also benefited with gains of 7.75p to 324p and 7p to 377p respectively.

Other retailers were given further encouragement by a trading update from Next, which also raised profit expectations as sunny weather boosted business.

Marks & Spencer added 2.75p to 332.75p and B&Q owner Kingfisher added 0.25p to 207.25p, but Next fell 18p to 1626p as the stock succumbed to a bout of profit taking after a recent strong run.

Other big moves were seen from the nationalised banks as Lloyds Banking Group added 13p to 73.3p and Royal Bank of Scotland grew 0.6p to 40.4p.