Government borrowing fell last month, official figures have shown, in a sign that the Chancellor's austerity measures are increasingly taking hold.
Public sector net borrowing, excluding financial interventions, was £12.8 billion in September, compared with a revised £13.5 billion in the same month last year. It was the lowest level of borrowing for a September since 2008.
The improvement was partly driven by a 4.5% fall in central government net investment to £2.4 billion, which includes the purchase and sale of assets such as buildings and vehicles.
The figures came as experts warned that the underlying health of the public finances will remain problematic for George Osborne despite the better picture in September.
A slight improvement in overall economic activity was behind a 3.7% rise in tax receipts to £42 billion in September. But the pressures of recession continued to impact Government spending as total expenditure rose 3.7% to £52.5 billion, including a 1.6% rise in social benefits, such as unemployment claims.
The Chancellor wants to record borrowing for the full year 2012/2013 of £120 billion, compared with £121.6 billion in the previous year. But despite September's improvement in borrowing, the public finances continue to be worse off year on year.
Stripping out the one-off impact of the transfer of £28 billion of assets from the Royal Mail's pension funds, public borrowing was £65.1 billion, up from £62.4 billion in the corresponding period in 2011/12.
Mr Osborne is now widely expected to announce in his Autumn Statement in December that the Government will be unable to start bringing down debt as a percentage of GDP in 2015/16.
The chances of this happening were heightened last month after Bank of England Governor Sir Mervyn King effectively endorsed such a move - on condition that the global economy was growing slowly.
Martin Beck, UK economist at Capital Economics, said it still looks like borrowing for 2012/13 will overshoot the forecast of £120 billion by about £7 billion. He added: "Given this deterioration and increasing concerns over the true impact of deficit reduction on the economy, the Chancellor may be compelled to alter his fiscal rules at December's autumn statement."
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