Faltering economy threatens George Osborne's plans

Chancellor George Osborne today faced warnings that a stalling economy may scupper his plans to balance the nation's books despite better news on the public finances.

Public borrowing came in at £6.5 billion last month, bang in line with City forecasts, while the nation's credit card bill for the financial year to date is more than £10 billion lower than last year at £68.3 billion.

This leaves Osborne on track to meet the Office for Budget Responsibility's £122 billion borrowing target for the current year. But the independent watchdog is set to ratchet up borrowing forecasts next week to take account of much weaker growth than the 1.7% for 2011 originally pencilled in.

Capital Economics economist Samuel Tombs said: "There are usually fairly long lags between developments in the economy and their impact on the public finances, so the full effects of the economic slowdown have not yet been felt."

The figures showed tax receipts up £1.8 billion on last year, buoyed by January's hike in VAT. This outstripped a smaller, £500 million rise in day-to-day spending as rising interest and benefit bills were offset by lower outlays by government departments.

Barclays Capital's Blerina Uruci said that the macroeconomic weakness would "become apparent in weaker receipts and higher welfare spending".