By Max Clarke

Public sector net borrowing fell considerably by £3.0bn to £40.1 in July, compared to July 2010, though net debt rose by some £65bn to top £940bn, or 61.4% GDP.

Public sector net borrowing, the Office for National Statistics explain, is a key barometer of economic health. The figure is reached by subtracting public sector current budget from public sector net investment where the public sector current budget is the balance of national expenditure minus tax receipts.

The annual total public borrow has been revised down from £146bn to the £142 calculated by the Office for Budget Responsibility, offering some respite to what has otherwise been a bad month for Chancellor Osborne amidst rising unemployment and falling retail sales.

“The borrowing figures for July were much better than expected," commented the Chief Economist at the British Chambers of Commerce, David Kern," and a welcome surprise for the Chancellor after last month’s disappointing numbers.

"Though it is still possible that the government may overshoot the borrowing target for the year, any excess is likely to be small and considerably less than might have been expected. Making allowances for lower growth and for the worsening international background, the government’s deficit-cutting programme is still on course. Stabilising our public finances must remain a major priority and it would be a mistake to move away from the current strategy.

“The UK’s economic growth, although weak, is likely to remain positive. Reducing the deficit will significantly improve the economy’s long-term prospects.

"However, in order to minimise risks of a setback, the MPC must maintain low interest rates until at least the middle of next year and consider the possibility of increasing the QE programme. On its part, the government must effectively implement policies aimed at supporting economic growth and empowering businesses to create jobs and export.”

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