Chancellor Philip Hammond remained on track to hit his fiscal targets after rising tax receipts helped Government borrowing hit its lowest level for a decade in August.
Figures from the Office for National Statistics (ONS) showed that public sector net borrowing, excluding state-owned banks, unexpectedly dropped last month by £1.3 billion to £5.7 billion in contrast to last year.
The figure came in shy of economists' expectations of £6.4 billion and marked the lowest net borrowing figure for the month since August 2007.
It means Government borrowing for the current financial year - April to August 2017 - eased back by £200 million to £28.3 billion - also the lowest level for 10 years.
The Office for Budget Responsibility (OBR) - Britain's fiscal referee - has forecast borrowing to come in at £58.3 billion for the financial year ending in March 2018.
Prime Minister Theresa May has vowed to deliver a balanced budget by the "middle of the next decade", knocking back Mr Hammond's previous target of putting the public finances back in the black by 2020.
The Chancellor faces an increasingly tough challenge to drive down the deficit, as consumer spending is squeezed by high inflation and sluggish wage growth, threatening to drag on the Government's tax income.
However, Government tax receipts remained bright in August, rising £1.8 billion to £54.6 billion, while spending dropped by £100 million to £54.8 billion.
Focusing on debt, the ONS said public sector net debt, excluding state-owned banks, jumped by £150.9 billion to £1,773.3 billion in August, equivalent to 88% of gross domestic product.
Howard Archer, chief economic adviser at EY ITEM Club, said the result was a boost for the Chancellor as November's budget looms.
He said: "The public finances saw the smallest August deficit since 2007 after seeing a surplus in July for the first time since 2002.
"The public finances were boosted in August by record VAT receipts for the month (up 5.6% year-on-year) which ties in with strong retail sales growth.
"The ONS also reported that taking July and August together, receipts from income-tax self-assessments were up £0.4 billion to a record £9.4 billion.
"A still lacklustre economy and higher interest debt payments look likely to weigh down on the public finances over the coming months.
"Nevertheless, it looks increasingly like the Chancellor will have some wiggle room in November's budget."