Chancellor Alistair Darling today said borrowing would be £11 billion below forecast this year thanks to stronger tax revenues and lower unemployment than first feared.
The £167 billion forecast for 2009/10 - although still a record by some distance - falls short of the £178 billion predicted in his December Pre-Budget Report.
Mr Darling added that the UK's overall debt would be £100 billion less than expected by 2013/14 as a result of the Government's measures to protect the economy.
Borrowing will be £13 billion lower than forecast in 2010-11 at £163 billion thanks to one-off factors such as income from the tax on bank bonuses, Mr Darling added.
The Chancellor said VAT receipts had come in £3 billion ahead of hopes, while higher profits had cushioned the fall in the corporation tax take.
Dole queues meanwhile are well below the levels originally feared at the height of the recession, which means income tax revenues are higher.
Mr Darling used the better-than-expected borrowing figures to justify the Government's decision to hold off on spending cuts before beginning to tackle the UK's deficit.
He said plans to slash earlier before recovery was established would be "wrong and dangerous".
"To start cutting now risks derailing the recovery - which is already bringing down borrowing more rapidly than expected.
"To go faster, in the face of uncertainty, would mean taking a huge risk with people's jobs, incomes and our future," he warned.
Mr Darling said the UK's structural deficit - adjusted for the highs and lows of the economic cycle - would fall from 8.4% of national output this year to 2.5% by 2014-15 after the toughest spending round in "decades".
Although the Treasury maintained growth estimates of 1.25% for this year, forecasts for 2011 were downgraded slightly from 3.5% to 3.25%.
Capital Economics' chief European economist Jonathan Loynes said the lower borrowing is welcome, although "fiscal worries are certainly not about to evaporate altogether".
He said: "At close to 12% of GDP, the UK's budget deficit is still similar to that of Greece. And the forecast halving of the deficit over the next four years still relies both on spending cuts which have not yet been properly detailed and on almost certainly over-optimistic projections for the economy.
"In short, further decisive action to put the public finances back into a sustainable position will still be needed after the election."
Conservative leader David Cameron also attacked the Government's track record on growth forecasts, adding: "They have given us the biggest bust in British history and now they are promising us a permanent boom."Reuse content