UK finances were in much better shape in December than expected thanks, in part, to a rebate from the European Union after changes to its budget.
Public sector net borrowing during the final month of 2017 fell to £2.6bn, down from £5.1bn in the same month a year ago. Markets had expected borrowing to dip to £5bn.
Furthermore, November's £8.1bn figure for net borrowing was revised down to £6.6bn.
November's substantial drop in public sector net borrowing was helped by a £1.2bn credit from the European Union and was the lowest December reading since 2000.
The Office for Budget Responsibility, however, believes borrowing will increase this financial year as January's self-assessment tax receipts will be lower after changes were made in 2016 to the taxation of dividends.
"Some deterioration in early 2018 still looks in prospect as strong self-assessment tax receipts collected early last year – due to changes in the dividend tax rate – won’t be repeated," said Ruth Gregory, UK economist at Capital Economics.
There was little reaction on UK bond markets - the yield on the benchmark 10-year Gilt fell 0.01 basis points to 1.36%.
Sterling was lower. Down 0.26% to $1.3949 against the dollar, and down 0.18% to €1.1387 versus the euro.