LONDON (Reuters) - Britain ran a smaller than expected budget deficit last month but borrowing in the financial year to date rose by more than a quarter ahead of the country's planned departure from the European Union next month.
Public sector net borrowing in August totaled 6.418 billion pounds, excluding public-sector banks, down from 6.917 billion in August 2018 and below economists' average forecast of a 7.15 billion pound deficit in a Reuters poll.
Looking at the five months since the start of the current tax year in April, borrowing was up 28% percent from the same period in 2018, the Office for National Statistics said on Tuesday.
Tuesday's figures reflected a change in the ONS's treatment of student loans, to take account that around half of them will not be repaid. This added 12.4 billion pounds to the borrowing figures for the 2018/19 financial year that ended in March, the ONS said.
Along with corrected corporation tax data and changes to the way public sector pensions are recorded, the ONS estimated the deficit excluding public sector banks for 2018/19 at 41.4 billion pounds rather than 23.6 billion previously -- or 1.9% of GDP instead of 1.1%.
In March Britain's Office for Budget Responsibility forecast public borrowing would rise from a 16-year low of 1.1% of economic output in 2018/19 to 1.3% of GDP or 29.3 billion pounds in 2019/20, excluding the effect of future statistical changes.
However in July it predicted borrowing could jump by 30 billion pounds a year by 2020/21 if Britain leaves the EU without a transition deal on Oct. 31, triggering a recession.
Earlier this month new finance minister Sajid Javid said he was "turning the page on austerity" as he promised the biggest spending increases in 15 years, a move widely seen as part of Prime Minister Boris Johnson's push for an election to break the Brexit impasse.
Day-to-day spending, adjusted for inflation, will jump by 4.1% in the next financial year, with more money for education, healthcare and police, he said.
The full impact of this on the public finances will only become clear once the Office for Budget Responsibility publishes new forecasts when Javid presents a full annual budget before the end of the year.
On Saturday the Financial Times reported Javid wanted to hold this during the week starting Oct. 21, but that this would hinge on parliament having approved a deal to leave the EU. If a no-deal Brexit was probable, the budget would be delayed until after when the impact was clearer.
Tuesday's figures showed that public sector net debt totaled 80.9% of GDP in August, excluding public-sector banks, or 72.7% once the effect of a temporary Bank of England lending scheme was stripped out too.
There was little effect on the total from the statistical changes announced on Tuesday.
Britain's debt-to-GDP ratio was below 40% before the 2008/09 financial crisis.