UK government uses 3G windfall to cut borrowing

The UK government will reduce borrowing by £2.2bn this year, after raising £22.5bn through its third generation mobile licence auction.

Following the auction windfall - which was four times higher than original expectations - the government cancelled one of the six remaining gilt auctions in this financial year, at which they had planned to raise £2.2bn.

The Treasury will spend £5.9bn of the money on foreign exchange to repay foreign currency denominated debt. A further £3.5bn to £5bn will go on the government's programme to buy back gilts.

A decision on how to spend the remaining £10.7bn has been postponed until November's pre-budget report. However, the Treasury has ruled out any further cancellation of gilt auctions.

The Treasury has pledged to use the money to reduce short-term debt, despite calls from market analysts to invest in longer-term strategies like foreign currency assets to weaken the pound.