Public sector borrowing declined in July to £3.8bn, according to the Office for National Statistics (ONS).

This figure is a vast improvement on the £6.1bn borrowed in July last year and brings the total so far this financial year to £44.9bn, below last year's £47.5bn. The forecast for borrowing for 2010-11 is £149bn, down from the £155bn borrowed in 2009-10.

"While these figures show an improvement compared to a year ago, they also highlight the UK's massive deficit and the major challenge in restoring stability to the public finances," said David Kern, chief economist at the British Chambers of Commerce.

"British businesses understand that painful measures will be needed to reduce the country's unsustainable deficit and support the government's focus on spending cuts rather than tax rises. But, the task of reducing the deficit will only be successful if the austerity measures are supplemented by a positive programme aimed at ensuring businesses can grow, invest and create jobs."