Government borrowing dropped by £1.6 billion in September as George Osborne’s deficit reduction plan moved closer to target after last month’s surprise blowout.
The improvement in the monthly borrowing total to £9.4 billion was better than forecasts for £10.1 billion and the smallest September deficit for eight years.
The pick-up will be welcome in the Treasury after a shock £3 billion increase in August that knocked the plan off track and raised fears tax receipts would fall short of hopes for another year.
Despite the improvement last month, the chancellor still looks likely to miss his deficit reduction goal. After six months, borrowing is £7.5 billion below this point last year but official forecasts are for it to drop by £20.6 billion for the full financial year.
In a statement he said: “Today’s figures show that our hard choices are paying off [...] But it also shows the work that is still to be done. We have record employment, strong growth and rising wages. Yet we borrowed £9.4 billion this September, since government spending is still unsustainably high.
Advertisement
“That’s why we have to continue the hard work of identifying savings and making reforms necessary to build a resilient economy, which is what we’ll do at the upcoming Spending Review.”
Alan Clarke, UK economist at Scotiabank, said: “We are moving in the right direction, but not fast enough. There is still six months to make up for lost time, but I suspect that the £69.5 billion target for the year will not be met.”
Capital Economics estimated the deficit was currently on course to remain higher than planned at £78 billion - £12bn lower than 2014/15 but still £9.5 billion above target.
“There is still plenty of the fiscal year to go. So there’s no need for the chancellor to panic yet,” Vicky Redwood, chief UK economist at the consultancy, said.