A smaller than expected shortfall in government finances in December has given a slight boost to George Osborne’s hopes of meeting his deficit target at the end of the financial year.

Borrowing of £7.5bn last month was lower than the £10.1bn expected, but analysts warned that this level failed to put the government’s finances back on track to meet the April target.

It will take a huge influx of tax receipts in January and February from Britain’s wealthiest taxpayers and the country’s 4.6 million self-employed workers to meet the forecast by the Office for Budget Responsibility of £73.5bn.

The Office for National Statistics said on Friday that public sector net borrowing – excluding banks – increased by £7.5bn in December versus £13.5bn in the same month a year ago, revised from £14.2bn.

This took the cumulative total for the financial year to £72.9bn, down from the £83bn seen for the same period last year, after November’s figures shocked analysts by showing a 10% rise in borrowing.

Alan Clarke, a UK economist at Scotiabank, said the figures highlighted the volatile nature of the public finances.

“There is a very good reason for the improvement this month. This time a year ago, we had to give billions to the EU as UK GDP was revised up. The bigger size of the UK economy meant that our contribution to the EU budget had to rise. That wasn’t repeated this year, so borrowing is well down on a year ago,” he said.

Britain’s expanding workforce also appeared to play a major role in increasing government receipts in the form of higher than expected national insurance contributions, while corporation tax and VAT recovered from a lacklustre start to the year.



The Treasury clampdown on spending since the Conservative party won the election last year was another factor. Benefit payments fell, despite the increasing number of people aged over 65 and eligible for a state pension. Whitehall spending also dipped.

The Treasury said there was an improving trend distorted by one-off factors that accounted for a worse than forecast November deficit. It cited a payment to the World Bank and income from fines imposed by the City regulator as clouding the trend for deficit reduction.

“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,” the Treasury said.

“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.”

