Osborne closes in on borrowing targets

Public sector borrowing, excluding financial interventions such as bank bailouts, fell to £18.1bn in November, which is £2.3bn lower than the previous year, and below City expectations of £19.7bn.

However, this was tempered after borrowing in the previous seven months of the Government’s financial year was revised upwards by £1.9bn as a result of fresh data from local councils.

The fall in borrowing in November, which was driven by higher tax receipts amid the new levy on banks and the increase in VAT to 20 per cent, leaves the Government broadly on course to meet the full-year borrowing target of £127bn set by the Office for Budget Responsibility.

But there are fears that the Government’s deficit reduction plans could yet be derailed amid rising unemployment and predictions that the UK’s economy is on the brink of another recession.

This threatens to reduce the Government’s tax income and saddle it with higher benefits bills.

The importance of the Government hitting its borrowing target was outlined by rating agency Moody’s on Tuesday, when it confirmed the UK’s AAA credit rating but said the Government’s austerity measures needed to stay on course for it to retain it.

The Government’s independent tax and spending watchdog last month increased its full-year borrowing target by £5bn after it lowered its forecasts for economic growth.

Net borrowing in the financial year to date is now at £88.3bn, which is £10.4bn lower than the previous year. Despite the progress, the Government’s debt rose to a fresh record of £977.1bn, which is 62.8% of gross domestic product.

A Treasury spokesman said: “Today’s figures show that the Government is making good progress on deficit reduction.”