Chancellor George Osborne has inched closer to meeting his deficit reduction targets despite mounting fears over the strength of the economy.

Public sector borrowing, excluding financial interventions such as bank bailouts, fell to £18.1 billion in November, which is £2.3 billion lower than the previous year, and below the City's expectations of £19.7 billion.

However, this was tempered after borrowing in the previous seven months of the Government's financial year was revised upwards by £1.9 billion as a result of fresh data from local councils.

The fall in borrowing in November, which was driven by higher tax receipts amid the new levy on banks and the increase in VAT to 20%, leaves the Government broadly on course to meet the full-year borrowing target of £127 billion set by the Office for Budget Responsibility.

But there are fears that the Government's deficit reduction plans could yet be derailed amid rising unemployment and predictions that the UK's economy is on the brink of another recession. This threatens to reduce the Government's tax income and saddle it with higher benefits bills.

The importance of the Government hitting its borrowing target was outlined by rating agency Moody's, which confirmed the UK's cherished AAA credit rating but that warned the Government's austerity measures needed to stay on course for it to retain it.

The Government's independent tax and spending watchdog last month increased its full-year borrowing target by £5 billion after it lowered its forecasts for economic growth.

Net borrowing in the financial year to date is now at £88.3 billion, which is £10.4 billion lower than the previous year. Despite the progress being made, the Government's debt rose to a fresh record of £977.1 billion, which is 62.8% of GDP.

A Treasury spokesman said: "Today's figures show that the Government is making good progress on deficit reduction, with borrowing between April and November over £10 billion lower than over the same period last year.

"These figures demonstrate the coalition Government's unwavering commitment to dealing with the debts it inherited, despite the economic uncertainty in the eurozone and the heightened turbulence in global financial markets."