Borrowing – excluding the effect of bank bailouts – was a fraction over £10.1 billion in May, some £2.2bn lower than in the same month last year, according to figures from the Office for National Statistics (ONS) yesterday. It marks the lowest May reading in eight years.
Public finances were bolstered by VAT receipts, cuts in government investment and banking fine contributions from Barclays and Germany’s Deutsche Bank.
The figures are the last set of public finance data to be published before the Chancellor’s first all-Tory summer Budget on 8 July.
Earlier this month, Osborne set out plans for tough new fiscal rules that will force governments to run a surplus when the economy is in good health.
Finance watchdog the Office for Budget Responsibility is currently forecasting a fall in UK annual borrowing to £75.3bn for 2015-16. For 2014-15 it was £89.2bn so the improvement pencilled in for the year is 15.6 per cent.
Chris Williamson, chief economist at Markit, said: “The economic upturn, and the buoyant labour market in particular, is feeding through to big improvements in government borrowing figures.
“Better-than-anticipated tax revenues could perhaps even pave the way for a less aggressive stance on spending cuts, sources of which are becoming increasing hard to identify.”
Capitial Economics UK economist Paul Hollingsworth added: “May’s UK public finances figures provided some more good news to the Chancellor ahead of his first Budget of the new parliament.
“Nonetheless, with a long way to go in order to restore the public finances to better health, a major re-intensification of the fiscal squeeze is looming.”
A Treasury spokesman said: “Today’s figures show that our deficit reduction plan is working, with borrowing in line with budget expectations.”