The chancellor, George Osborne, will have more room for manoeuvre in next month's budget after the government finances were back in the black last month, recording their biggest surplus for two-and-a-half years.

Bumper VAT and income tax receipts swelled the public coffers, following bigger than expected revenues from the tax on bankers' bonuses earlier in the fiscal year. The figures beat City forecasts and provided a boost to the government, although it stressed that it needs to push on with planned austerity measures to reduce record debt levels.

The government's preferred measure, public sector net borrowing excluding the impact of the banking bailout, showed a surplus of £3.7bn in January, compared with a shortfall of £1.3bn a year ago. Including bailout effects, the surplus was even bigger, £5.3bn, because it includes money paid back by the country's part-nationalised banks.

January usually brings a surplus because the bulk of the year's self-assessment income tax is paid that month, along with corporation tax, with more tax coming in than in any other month. Self-assessment was particularly strong this year but February is likely to see revenues fall back.

Last month's surplus leaves the deficit for the first 10 months of the fiscal year at £113bn, £14bn lower than last year's figure. If this trend continues, borrowing will come some £10bn below the Office for Budget Responsibility's £149bn forecast, City economists said.

"This should therefore give the chancellor a little more wiggle room at the budget on 23 March," said Samuel Tombs, UK economist at Capital Economics.

Philip Shaw, chief economist at Investec, said: "Given that February and March 2010 saw a bout of heavy pre-election spending, this year's total could come in below £140bn."

He added: "But it's a marathon, not a sprint. We would stress, as we have on many occasions, that there is still a long way to go in restoring the public finances to levels that are sustainable in the long-term. A major risk is that the recovery stutters." Government borrowing in 2010 amounted to 10% of GDP, the same size as the Greek deficit, he noted.

Britain's net debt, excluding bailout effects, now totals £857.2bn, equivalent to 57.6% of GDP. Including the bailout, the figure rises to £2.2tn, or 149% of GDP.

A Treasury spokesman said: "It's welcome that this January saw the first surplus for the public finances in two years, but it will take more than one month to deal with borrowing of almost £150bn for this financial year. The government is determined to stay the course to deal with this unsustainable borrowing, and keep Britain out of the financial danger zone."

Income tax receipts climbed to £32.2bn in January from £27.4bn a year ago, while the VAT increase to 20% from 17.5% on 4 January boosted the tax take to £8.5bn from £7.9bn. However, the government is also paying more debt interest than last year, £4bn compared with £3.8bn, as well as £14.1bn in social benefits, up from £13.9bn.

"Though overall revenues have picked up thanks to the boost from the higher rate of VAT, the government still has a long way to go in terms of reining in its expenditure," said Hetal Mehta at Daiwa Capital Markets. On this trend, however, she expects borrowing to hit £140bn in 2010-11, undershooting the OBR's forecast.

"But looking further ahead, we are less sanguine about the outlook. With growth set to remain subdued over the coming quarters and unemployment rising, there is a real danger that the government will end up borrowing more than it currently expects. Next month's budget will be crucial to assessing how committed the government is to bringing the public finances into order, and whether any slippage will be tolerated."