UK government borrowing drops in September

British state borrowing shrank by more than expected in September, official data showed yesterday, boosting the coalition government’s deficit reduction plans.

Public sector net borrowing – the state’s preferred measure of the public finances – fell to £14.1 billion (€16.2 billion) last month, the Office for National Statistics said in a statement.

The figure, which excludes the effects of bank bailouts, compared with net borrowing of £15.4 billion in September 2010.

Market expectations had been for borrowing of £14.5 billion, according to analysts polled by Dow Jones Newswires.

The government’s coffers were lifted last month as taxation receipts climbed 4.2 per cent to £40 billion.

In addition, the ONS also revised down the government’s borrowing for August to £13.7 billion.

That leaves the Conservative-Liberal Democrat coalition government on course to meet its official 2011/2012 forecast for annual borrowing of £122 billion, according to economists.

“September’s public finances figures suggest that the chance that the government actually manages to bring borrowing down in line with its fiscal plans has increased,” said Samuel Tombs at the Capital Economics consultancy.

He added: “On current trends, borrowing is now broadly on track to meet the full-year forecast of £122 billion.”

However, the flat economy and rising unemployment could sap taxation revenues and lower the government’s chances of hitting the target.

“The September public finance figures provided some very welcome good news for George Osborne as they came in below expectations and showed improvement on 2010,” noted IHS Global Insight economist Howard Archer.