Hopes for budget strengthened after improvement in public finances

According to figures released on Tuesday by the Office for National Statistics (ONS), the public sector made a net repayment excluding financial interventions of £7.8bn in January, up from £5.2bn a year ago.

This was the highest monthly surplus since January 2008 and takes government borrowing to £93.5bn in the tax year to date, down almost £16bn from £109.14bn in 2010/11.

A reduction in local government borrowing helped drive the improvement in public finances.

The figures suggest government borrowing is on track to meet or fall below its £127bn target for 2011/12 and will come as welcome relief to George Osborne after Moody's last week warned the UK could lose its prized triple-A rating.

The figures will also provide a lift to the coalition government's deficit-cutting agenda ahead of next month's Budget.