UK borrowing less than expected in August

image captionPlans to cut the amount the UK borrows are central to Chancellor George Osborne's policies

The government borrowed less than expected in August, official figures show, helped by a fall in spending by government departments.

Public sector borrowing for the month was £13.2bn, the Office for National Statistics (ONS) said, lower than the £14.4bn recorded in August 2012.

The UK's net public debt pile stands at £1.19 trillion, which is equivalent to 74.6% of GDP.

The government is aiming for a deficit of no more than £120bn this year.

Efforts to reduce UK borrowing and cut the country's debts are central to the government's economic policies.

But Chancellor George Osborne has faced criticism as the deficit reduction plan has stalled, thanks in part to weak economic growth.

'Painfully slow'

The government's latest target is to eliminate the structural deficit by the end of the 2017-18 financial year - three years behind the original schedule.

The August figures suggested the public sector finances were being helped by the government's austerity measures.

Total spending by central government - excluding investment - fell by 2.2%, led by a sharp drop in departmental spending.

Rising tax revenues have also helped the government.

According to the ONS, tax revenues so far this tax year have been 2.8% higher than the same period of 2012.

Ministers hope a recovery in the economy will boost tax receipts, helping it meet its borrowing targets.

The UK economy grew by 0.7% in the second quarter of this year, and is widely forecast to continue growing for the rest of the year.

Rowena Crawford, a senior research economist at the Institute for Fiscal Studies, a think tank, said the first five months of the year had seen faster growth in tax receipts than had been predicted by the government-sponsored Office for Budget Responsibility (OBR).

"A simple extrapolation of borrowing would suggest that borrowing this year, while still historically high, could come in around £13bn lower than forecast by the OBR," she said.

But she also warned that, although better-than-expected economic growth may be one factor, the figures may also be skewed by some high-income people moving some of their income into this tax year to take advantage of the lower top rate of income tax.

"We should be cautious about inferring too much good news from developments over the past few months," Ms Crawford said.

"The improvement in economic growth seen in recent months will help to reduce the deficit further, but progress remains painfully slow," said David Kern, chief economist at the British Chambers of Commerce.

"Our ability to generate tax revenues will struggle to return to pre-recession levels, even when the pace of growth picks up. As a result, the government must continue to make cuts in current spending in order to reduce the deficit further."

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