Declining government grants have led to a £1.5bn increase in local government borrowing since April, according to the latest figures from the Office of National Statistics.
While central government borrowing dropped by £4.8bn in the financial year-to-date, local government's net borrowing surplus dropped significantly as decreasing grants were partially offset by slashing expenditure on services.
Central government increased expenditure by £0.8bn in July as a result of increased departmental spending and EU contributions.
The rise in spending was partially offset by the decrease in current transfers to councils.
Local government increased borrowing in July by £0.9bn compared with the same month last year. It stood at £0.4bn.
The public sector as a whole borrowed £23.7bn between April and July - £3bn less than the previous financial year-to-date.
Annual borrowing has followed a downward trend since the peak in the financial year ending March 2010.
Whitehall’s income was 3% higher than the same period the previous year, mainly due to receiving more income tax, corporation tax, national insurance contributions, VAT and stamp duty.
