LONDON (Reuters) - Higher tax revenues boosted Britain's public finances in September, putting the Conservative-led government on track to comfortably undershoot its borrowing forecast this year.
Britain's deficit narrowed to 11.1 billion pounds in September, based on a widely used measure which strips out some of the effects of bank bailouts.
That was a billion pounds lower than at the same point last year and a shade better than economists had forecast.
"I think we already see the benefits in the UK of having a clear economic plan and sticking to that plan," Osborne said at a Thomson Reuters Newsmaker event.
But he cautioned that economic recovery on its own would not be enough to fix the causes of overspending, and vowed to keep the budget tight.
Aiding the improvement was a 7 percent rise in government revenues. Receipts from the property transaction tax known as stamp duty jumped by a third, reflecting the upturn in Britain's housing market.
But total current expenditure for the fiscal year-to-date was 321 billion pounds, up 2.4 percent on last year and marginally faster than the budget target of 2 percent for the year as a whole.
Chancellor George Osborne's original plans to tackle overspending were set back by Britain's unexpectedly slow recovery from the financial crisis. Now economists say he could beat his borrowing forecast for this year, lopping off as much as 15 billion pounds.
"If these trends continue in the second half of the fiscal year then the government is on track for a significant undershoot of the projections made by the Office for Budget Responsibility in March," said Brian Hilliard, UK economist at Societe Generale.
The government is aiming for a deficit of no more than 120 billion pounds or 7.5 percent of GDP this year, stripping out the effect of cash transfers from the Royal Mail's pension fund and the Bank of England.
For the first six months of the current tax year, the deficit on this measure totalled 56.7 billion pounds, down more than 9 percent compared with the same point in 2012.
When the coalition came to power in May 2010, the deficit had reached 11 percent of annual economic output.
Osborne said earlier this month that a re-elected Conservative government would aim to wipe out Britain's budget deficit altogether by 2020 and use a surplus to pay down the national debt.
Third-quarter GDP figures, due on Friday, are expected to show economic growth picked up to 0.8 percent from a surprisingly strong 0.7 percent in the second quarter.
Editing by Ruth Pitchford