4G sale helps borrowing fall £9bn

The Office for National Statistics (ONS) said public sector net borrowing, excluding financial interventions such as bank bailouts, fell to £2.8 billion last month from £11.8 billion a year earlier.

Higher tax receipts helped borrowing fall, but the biggest impact came after the Government received a £2.3 billion haul from the 4G airwaves auction and also thanks to another £2.7 billion in interest from the Bank of England’s asset purchase programme.

The borrowing figure - the lowest recorded in February since 2008 - provides a chink of light after Chancellor George Osborne’s Budget yesterday revealed that the Government would have to borrow nearly £60 billion more than originally forecast by 2017/18.

The ONS said borrowing so far this financial year was £37.3 billion lower at £66.9 billion.

The Office for Budget Responsibility (OBR) yesterday revised its forecast for borrowing in 2012/13 to £86.5 billion.

It also ruled once more that Mr Osborne will breach his rule that the ratio of net debt to gross domestic product (GDP) will be falling by 2015/16 and will now not start to come down until 2017/18.

Today’s figures showed public sector net debt was equivalent to 73.5% of GDP at the end of February.

But a Treasury spokesman said: “Today’s figures show that borrowing is down on this month last year, and well below market expectations.

“The numbers underline what the Chancellor said yesterday: we are slowly but surely fixing this country’s economic problems. The deficit is now down by a third, a million and a quarter new jobs have been created and interest rates are at record lows.”

Figures have been flattered by transfers from the Bank of England’s quantitative easing scheme and another payment is due in March, although the total amount allowed to go towards reducing the deficit is lower than originally hoped by the Government.

The ONS said even with the Bank of England transfers and the effect of last April’s Royal Mail pension boost stripped out, borrowing is £2.9 billion lower so far this financial year, at £101.3 billion.

A 28% hike in receipts from corporation tax last month provided a fillip to borrowing, with receipts from income tax also up 6.4% and up 3.8% for VAT.

Borrowing also declined as Government spending fell, according to the ONS.

Howard Archer, chief economist at IHS Global Insight, said Mr Osborne may be on course to undershoot his current-year borrowing target thanks to a “genuinely decent figure for February”.

But concerns remain over the underlying picture, with spending on Government departments up over the year to date, despite a fall in February.

James Knightley, economist at ING Bank, said: “While it is a good headline borrowing number, the underlying story on fiscal consolidation remains poor.”