British government borrowing falls sharply

British state borrowing tumbled by more than expected in July, boosted by its banking sector levy and improving local government finances, official data showed on Friday. Public sector net borrowing -- the government's preferred measure of the public finances -- slid to just £20 million ($33 million, 23 million euros) in July, the Office for National Statistics (ONS) said in a statement. The figure, which excludes the effects of financial interventions, compared with net borrowing of £3.5 billion in July 2010. Market expectations had been for borrowing of about £2.5 billion, according to analysts polled by Dow Jones Newswires. The banking sector levy raised around £660 million in the month, while the public purse was also bolstered by higher corporation and sales taxation revenues. Britain's Conservative-Liberal Democrat coalition government introduced the levy earlier this year in a major austerity plan aimed at slashing a record public deficit that was inherited from the previous Labour administration. Taxation receipts jumped 5.6 percent last month to £52.3 billion after the government ramped up sales tax to 20 percent at the start of the year. The ONS added that corporation or business tax receipts increased by £1 billion to £8.6 billion in July, while local government expenditure moved into a surplus of £1.1 billion. A Treasury spokesman said the official data continued to show "deficit reduction taking effect with the public finances in balance in July". But he added that the government needed to stick to its cost-cutting plans amid ongoing turmoil on global financial markets over soaring sovereign debt in the United States and in the eurozone. "Events have shown with the US ratings downgrade and continued turbulence in Europe, it is vital that the government sticks to this plan," added the Treasury spokesman. For the first time in history, Washington was stripped of its triple-A credit rating earlier this month by Standard & Poor's. Despite the July improvement, Capital Economics economist Samuel Tombs said the government would likely miss its borrowing target of £122 billion for the 2011/2012 year, which runs until next March, as the ONS revised other data. "Borrowing for previous months was revised up, so on current trends it will overshoot the ... full-year forecast of £122 billion by around £10 billion. This overshoot largely reflects the weakness of tax receipts," said Tombs.