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Osborne set to meet deficit target

Britain’s public finances improved in February leaving government borrowing down a third from a year earlier.

The Government raised £4.2 billion in self-assessed income tax for the last month, helping borrowing fall by £3.5 billion to £6.9 billion from the same period last year, according to the Office of National Statistics.

Economists taking part in a Reuters poll had forecast a shortfall of £8.4 billion.

The finances were boosted by a surge in income taxes, which in the first 11 months of the financial year stood at £153.9 billion- their highest level since records dating back to 1997/98 began.

January and February are traditionally the biggest months of the year for tax receipts as self-employed workers and top taxpayers make payments for income earned in 2013-14.

The Treasury said the figures showed that Britain’s plans for deficit reduction were working, but warned that Britain was “still borrowing £1 for every £10 we spend and have more to do.”

Samuel Tombs, economist at Capital Economics, said full-year borrowing was likely to come in at about £89bn, almost £10bn lower than last year.

He also added:

“While there are differences regarding how long the austerity programmes of the various political parties would last, whichever party leads the next government will want to get as much of the tightening out of the way in the early years of the next parliament.”

Osborne has been helped by plunging inflation, which has lowered the cost of interest payments on government debt.

While there is now a good chance Osborne will meet his borrowing target for 2014/15 next month, the outlook for the years ahead hinges on a May 7 national election that remains too close to call.