Britain's public finances posted their biggest monthly surplus in four years in January, helped by a drop in local government spending and a modest rise in tax receipts, and suggesting government borrowing may be less than expected this fiscal year.
The figures will provide relief to Chancellor George Osborne after Moody's warned last week that Britain could lose its top-notch triple-A rating.
The credit agency cited the risk that the country's anaemic economy could undermine its tough austerity programme, and Tuesday's data will fuel a debate about potential for easing back on the fiscal discipline.
Labour as well as some politicians within the government have called for tax cuts to boost growth - but analysts cautioned against expectations of any significant fiscal giveaways in next month's budget.
The Office for National Statistics said the public sector made a net repayment excluding financial interventions of 7.750 billion pounds in January, up from 5.204 billion pounds a year ago.
This was the highest since January 2008 and took borrowing in the fiscal year to date to 93.45 billion pounds, down from 109.14 billion in 2010/11.
The figures suggest the government may have to borrow less than the planned 127 billion pounds in 2011/12, down from 136 billion in the previous year.
The government has made erasing the country's budget deficit -- which peaked at 11 percent at the height of the crisis -- a cornerstone of their economic policy.
But Osborne has been facing calls from within his own Conservative party to cut business taxes to stimulate growth, while the opposition Labour party has been urging him to make a temporary cut in value added tax. The Liberal Democrats want him to raise the threshold at which people start paying taxes.
But a choppy growth outlook for the rest of this year could make it more difficult for Osborne to reduce borrowing further out, leaving little leeway in the March 21 budget, analysts said.
We are doubtful that there will be big giveaways in the budget. He will bank the headroom and create a buffer for unwelcome events, and show to agencies like Moody's that he is serious about tackling the deficit, said Victoria Cadman, economist at Investec.
The coalition has already been forced to admit that a subdued growth outlook means it will take two years longer than planned to eliminate the deficit.
And some economists warned that an uncertain picture for the rest of this year meant the government could struggle to meet its debt reduction target for 2012/13.
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 now signs of a rebound, output could drop again in the second quarter due in part to public holidays for the Queen's diamond jubilee celebrations.
It is vitally important for Osborne that the economy sustains its recent signs of improvement if (the government) is to succeed in trimming borrowing further in 2012/13, said Howard Archer, economist at IHS Global Insight.
The finance ministry said Tuesday's data showed its austerity measures were on track. Our credible deficit plan is working and bringing government borrowing down, said a Treasury spokesman.
The ONS figures showed total government receipts rose 2.8 percent on the year to a record high of 60.9 billion pounds. Total government expenditure rose at roughly the same pace.
However, local government posted a small surplus of 0.4 billion pounds in January compared with a deficit of 1.9 billion a year ago, helping to drive the overall surplus higher.