Latest public finance figures indicating a marginal reduction in public sector borrowing totals last year suggest the Coalition must sell or inject private capital into state-owned enterprises and assets, top consultants have advised.

Reacting to the news annual net borrowing in 2012/13 was £120.6bn - £300m less than forecast in March's Budget – Alan Downey, head of public sector at KPMG said the big question facing chancellor George Osborne is to find ways of investing without increasing government debt.

‘Part of the answer lies in the sale or better use of state-owned assets,' said Mr Downey.

‘There is still plenty to go at, from Urenco to Land Registry and from the Post Office to Ordnance Survey.'  According to Mr Downey, these will not be straightforward privatisations on the lines of BP or BT, and would have to ensure the ongoing interest of the taxpayer and employees were protected.

‘That requires the adoption of new approaches and new models, involving innovation and ingenuity from the government, with joint ventures and mutualisation forming part of the solution,' Mr Downey added.

However, leading independent economics think tank the Institute for Fiscal Studies (IFS) noted that public sector finances figures show underlying public sector net debt now stands at more than three quarters, 75.4% of national income – compared with 71.8% the previous year.

Rowena Crawford, senior research economist at the IFS described the £300m reduction in projected borrowing as ‘negligible'.  She warned that although Mr Osborne might feel relieved at evidence borrowing fell between 2011/12 and 2012/13, revisions to data are common, and the figures might not be the last word on the matter.

Ms Crawford also noted that the deficit had decreased by around a quarter in cash terms between 2009/10 to 2011/12.  ‘Last year saw further austerity measures being implemented, but weak economic performance has meant that the deficit was largely unchanged from its 2011–12 level,' Ms Crawford said.  ‘The same is also forecast to be true of the current financial year.'