George Osborne hits UK deficit reduction target for 2014-15

George Osborne has met his deficit reduction target for 2014-5 with new data showing that borrowing fell by more than £10bn in the 12 months to March compared with the same period last year.

The figures will be welcomed by the chancellor, whose Conservative party is running neck-and-neck in the polls with the Labour opposition ahead of the May 7 general election.

Britain expanded by 2.8 per cent in 2014, faster than any other major advanced economy, but until recently the recovery had failed to markedly improve the budget deficit, which remains one of the highest in the EU.

"March's public finance figures bring some good news for the coalition parties in the run-up to the general election," said Vicky Redwood, chief UK economist at Capital Economics.

Net borrowing stood at £87.3bn in the full 2014-5 financial year, compared with £98.5bn in 2013-4. The independent Office for Budget Responsibility had predicted £90.2bn, meaning the government has met the borrowing target.

"If the government had missed its fiscal targets for 2014/15, it would not only have been embarrassing but would have facilitated attacks on the Conservatives about the overall credibility of their budget figures," said Howard Archer, chief European and UK economist at IHS Global Insight.

The budget deficit - the difference between receipts and spending - fell from £71.1bn in 2013-4 to £56.9bn while net investment rose from £27.4bn to £30.4bn.

The level of government net debt continued to rise, hitting 80.4 per cent of national income, compared with 79.1 per cent in 2013-4 and in line with the OBR's forecasts.

Tax receipts rose steeply in the financial year 2014-5, with income and capital gains taxes jumping by 5 per cent to £169.7bn compared with 12 months before. Value added tax receipts were also 4.1 per cent higher, soaring to £125.1bn.

Central government current spending rose by 0.6 per cent, hitting £648.5bn in the course of the financial year. Net social benefits rose by 2.7 per cent to £201.7bn, while the government had to pay less in interest payments, which fell by 5.3 per cent to £46.1bn.

While borrowing by the central government and non-financial public corporations fell sharply, there was a marked increase in borrowing by local governments, which rose by £4.7bn to £3.2bn.

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