Rebound in public finances helps give Brown a buoyant beginning to the year

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The Independent Online

Gordon Brown was given his best start to a fiscal year since he became Chancellor yesterday, according to official figures showing the public finances unexpectedly swung into the black in April.

But revisions to earlier figures put borrowing for the year to March even further above the Chancellor's March Budget forecast than initially thought.

Dominic Walley, at the Centre for Economics and Business Research, said: "Although this month's headline figure is better than expected, the significant creep upward revisions in historic borrowing will take the edge off any good news."

In a mixed batch of data for the Chancellor, the Office for National Statistics said the Government repaid debt last month, confounding forecasts of a deficit. Public sector net borrowing, the Government's preferred measure that smoothes out volatile months, recorded a surplus of £1.8bn compared with economists' forecasts of an £800m deficit. This boosted the measure of the current budget surplus - the tool for gauging Mr Brown's cherished "golden rule" - to £3.0bn compared with £1.7bn in the same month last year.

This was the best April since modern records began in 1998, when the current budget assumed greater importance under Mr Brown's new fiscal rules.

The higher surplus was achieved despite an accounting change that shifted North Sea oil revenue payments to January from April, which meant corporation tax revenues were 6 per cent lower than last year.

The ONS said excluding oil, corporation tax receipts were up on a year ago. Meanwhile, VAT receipts were up 4.7 per cent and income tax 3.7 per cent ahead.

Howard Archer, at the analysts Global Insight, said: "VAT receipts add to the evidence that consumer spending has picked up recently. This boosts the Chancellor's chances of reducing the PSNB this year - but there is still a long way to go."

The March Budget pencilled in a PSNB deficit of £36.0bn, falling to £23bn by 2011. However some analysts said the figures did little to ease their worries over the long-term outlook for the public finances.

Jonathan Loynes, at Capital Economics, said: "Borrowing remains undesirably high and significant further tax rises will ultimately be required to meet the fiscal rules convincingly."

The concern was amplified by revisions that added £1bn to the current deficit and the PSNB for 2005-06 because of an unidentified overspend. It means the current deficit, which measures day-to-day non-investment spending, was £11.8bn last year rather than £10.4bn. ONS figures showed that despite the increase, the Government was still meeting the golden rule to balance the current budget over the economic cycle by 0.77 per cent of GDP.

Separate figures showed homebuyers' appetite for borrowing waned in April. Net mortgage lending by the major banks slowed to £5bn last month from £5.5bn in April, the British Bankers' Association said.

The Council of Mortgage Lenders said lending fell 12 per cent between March and April, although last month's £25.1bn of lending was the highest on record for an April.

Meanwhile Paul Tucker, a member of the Bank of England's Monetary Policy Committee, said business investment was not as strong as in previous economic cycles. "The current business investment recovery looks much weaker than those in the past," he told a conference of corporate treasurers held in Wales.