Public finances posted their biggest monthly surplus in four years in January, driven by a drop in local government borrowing and a modest rise in tax receipts, the Office for National Statistics said on Tuesday.
The figures will come as a relief for Chancellor George Osborne after ratings agency Moody's warned last week that Britain could lose its prized triple-A credit rating in the next 18 months.
The Office for National Statistics said the public sector made a net repayment excluding financial interventions of 7.750 billion pounds last month, up from 5.204 billion pounds a year ago.
This was the highest since January 2008 and above the average forecast in a Reuters poll for a net repayment of 6.3 billion pounds. Borrowing in the fiscal year to date to came in at 93.451 billion pounds, down from 109.139 billion in 2010/11.
The figures, published just a month before Osborne presents his annual budget to parliament, suggest that government borrowing is on track to meet or even fall below its target of 127 billion pounds in 2011/12,down from 136 billion in the previous year.
Nonetheless, Osborne will have little room for any giveaways next month, and choppy growth in the rest of this year could make it more difficult for him to reduce borrowing further out.
Official data on Friday is expected to confirm the economy shrank by 0.2 percent in the final three months of 2011 and, although there are signs of a rebound early this year, output could drop again in the second quarter due to public holidays for the Queen's diamond jubilee celebrations.
Tuesday's data showed that government receipts rose 2.8 percent on the year, roughly in line with growth in total government expenditure.
However, local government borrowing fell in January compared with a year ago.
January is usually a strong month for income and corporation tax receipts, but the ONS said full data would not be available until February.
Britain's total public sector net debt, excluding financial sector interventions, fell back to 988.7 billion pounds, having surpassed a psychologically significant 1 trillion pounds in December. (Reporting by Fiona Shaikh and Olesya Dmitracova)