UK public borrowing dropped more than expected in December thanks to improved tax revenues and savings in public spending as the economy recovered.

Public sector net borrowing was estimated to have been £16.8bn last month, £7.6bn less than in December 2020 when most of the country was under tight restrictions, data from the Office for National Statistics showed on Tuesday.

Borrowing was lower than the £18.5bn expected by economists polled by Reuters and in line with last October’s forecast by the Office for Budget Responsibility.

Central government receipts were £68.5bn last month, up 10 per cent compared with December 2020, boosted by stronger tax receipts as the economy recovered.

At the same time, the government spent £86.7bn, down £1bn from the same month the previous year, reflecting savings from the job retention scheme that ended in October.

However, some of the savings were offset by higher spending on the NHS Test and Trace programme and the cost of vaccines. Interest payments were also up compared with December 2020 due to high retail price inflation to which index-linked gilts are pegged.

In the year to December, borrowing was £147bn, nearly half that in the same period the previous year.

Public debt — borrowing accumulated over time — rose to about 96 per cent of gross domestic product, a level not seen since the early 1960s.

Rishi Sunak, chancellor, said: “Risks to the public finances, including from inflation, make it even more important that we avoid burdening future generations with high debt repayments.”