Government borrowing drops as UK records biggest January surplus since 2008

Britain saw borrowing fall last month as it recorded its biggest public finance surplus for January since 2008.

The Office for National Statistics said the Government managed to raise £11.2 billion more than it spent in January, as it rode high on strong tax receipts.

The improved performance means Government borrowing was £66.5 billion for the financial year between April 2015 and January, down £10.6 billion over the same period before.

The Government counts on January as a strong month for tax receipts, as it is when many companies and individuals pay their taxes.

But despite the boost, Chancellor George Osborne remains under pressure to meet his borrowing targets.

January's performance means the Government would have to record a deficit of £7 billion for both February and March if he is to meet a target of £73.5 billion for 2015/16.

Mr Osborne said while the figures show the deficit is falling, there is still more work to do.

He added: "We've learned there is no shortcut to fixing the public finances and when confronted with global economic turbulence, we can't let up in taking the action necessary to build a resilient economy and deliver economic security for working people.

"With warnings of a weaker outlook for the economy and the challenges for future tax receipts this could bring, we cannot be complacent in thinking the job is done."

The Government saw self-assessed income tax receipts record a year-on-year rise of £200 million to £12.4 billion for January 2016.

But the strong overall surplus for last month still came in shy of forecasts of £12.6 billion.

The borrowing update comes after Mr Osborne said he would scrap controversial cuts to tax credits in his November Autumn Statement because the outlook was brightening for public sector finances.

Since then, fears over whether global growth is stalling have wreaked havoc in the markets, as investors continue to worry about a slowdown in China, the falling oil price and low interest rates.

The Bank of England cut its growth forecasts for the UK economy and voted to keep interest rates on hold at 0.5% at the beginning of this month.

It revised down its forecast for UK GDP for the next three years - to 2.2% for 2016, 2.4% in 2017 and 2.5% in 2018.

Howard Archer, chief European and UK economist at IHS Economics, said Mr Osborne is likely to be in the "uncomfortable position" of admitting he will miss his 2015/16 targets.

He added: "The Chancellor could be bailed out from having to announce slippage in his future fiscal targets by lower interest rates and inflation than had been expected back in November's Autumn Statement."