CHANCELLOR George Osborne's deficit-busting plans have received an embarrassing blow after revised official figures showed UK Government borrowing increased in the last financial year.

The Office for National Statistics (ONS) said public sector net borrowing stood at £118.8 billion in the year to the end of March – about £300 million higher than the £118.5bn recorded for 2011/12. The revisions to the annual data overshadowed encouraging figures for May, which showed a deal to recoup £3.2bn of taxes from Swiss bank accounts helped cut public sector borrowing for that month to £12.7bn from £15.6bn a year earlier.

While Labour concentrated on the overall figure, saying the borrowing increase was "another damaging blow to George Osborne's economic credibility", No 10 preferred to look at the monthly numbers and declared that they showed the Coalition was "getting a grip on public spending".

Should the deficit rise as forecast to £120bn this financial year, it will mean an increase in net borrowing for two consecutive years.

Chris Leslie, the shadow financial secretary to the Treasury, said: "The reason why the Chancellor is failing to get the deficit down is because he has failed to boost living standards and economic growth. He's borrowing billions more simply to pay for the costs of his economic failure."

The figures for borrowing in May showed that, without the Swiss tax boost, the monthly deficit would have been broadly level with a year earlier. But, including a £3.9bn cash transfer from the Bank of England's Asset Purchase Facility, the ONS said May's deficit fell by £6.9bn year on year to £8.8bn.

With the Chancellor due to unveil on Wednesday where an extra £11.5bn of cuts will fall in 2015/16, economists said the UK Government faced an "uphill battle" to cut the deficit.