A £1.2bn rebate from the European Union helped deliver a sharp improvement in public finances last month in a boost for Chancellor Philip Hammond.
Official figures showed public sector net borrowing – excluding the impact of bank bailouts – fell by nearly half to £2.6bn, its lowest December reading since 2000 and much better than expected.
That followed a credit from the EU after the bloc shrank its budget and recalculated contributions from other member states after their economic prospects were upgraded.
Public finances were also boosted by record take from VAT receipts, which were up by 4.9% to £12.3bn, Office for National Statistics data showed.
Borrowing for the financial year to date since April last year stood at £50bn, 12% lower than in the same period a year earlier – with tax revenues holding up despite a Brexit-linked economic slowdown.
January traditionally shows a surplus thanks to a slew of self-declared income tax receipts, though this is likely to be balanced out by more borrowing for the following couple of months.
More from Business
Experts said the latest figures suggested Mr Hammond was on course to meet or better his fiscal target of £49.9bn for the year to the end of March.
However, in the longer term the picture for the public finances looks gloomier in the wake of official forecasts late last year downgrading the outlook for productivity growth.