December public sector borrowing down to £7.5bn

The Office for National Statistics (ONS) said public sector net borrowing excluding state-backed banks fell by £4.3bn year-on-year in December, taking the overall figure to £74.2bn for the first nine months of the year.

The December figure is lower than the £10.5bn expected by economists.

Government revenue increased in December due to rises in income tax, VAT and corporation tax.

While year-to-date borrowing is £11bn less than a year earlier, experts warned Mr Osborne will struggle to meet his £68.9 billion borrowing target for the full year.

Mr Osborne will need a huge surplus in January, typically a strong month for revenue, to bring down borrowing sufficiently if he is to avoid overshooting the year-end forecast.

In total for the first three months of this year the Government will need a surplus of £5.3bn to hit its targets.

A Treasury spokesperson said: “Today’s figures show that borrowing is down compared to last year, as a number of one-off factors that have affected the data in recent months have unwound.”

“But there is more to do. At a time when we face a dangerous cocktail of risks from the global economy we must continue to work through our plan to deliver a surplus and provide economic security for working people.”

Earlier this week, Bank of England governor Mark Carney said policymakers are in no rush to raise interest rates amid a weakened world economy, driven by slowing growth in China and falling oil prices. UK growth rates have also slowed.

Scotiabank head of European fixed income Alan Clarke said: “Public finances were much better than consensus forecasts. There is a very good reason for the improvement this month.

“This time a year ago we had to give billions to the European Union as UK gross domestic product was revised up, the bigger size of the UK economy meant that our contribution to the European Union budget had to rise.”