UPDATE 2-UK lowers borrowing estimates by 3 billion pounds after tax data error

(Adds comments from ONS official paragraphs 8-11, background) LONDON, Oct 8 (Reuters) – Britain's statistics office said on Wednesday that government borrowing in the previous and current fiscal years was a combined 3 billion pounds ($4 billion) lower than previously reported after a value added tax receipt data error was found. The ONS said the error was in data provided by the government's tax office and did not affect data from before January this year. "Correcting for the error reduces public sector net borrowing by between 200 million pounds and 500 million pounds per month within the period affected, resulting in a reduction in borrowing of 1 billion pounds for the financial year ending March 2025 and a reduction of 2 billion pounds for the financial year to date," the Office for National Statistics said. Figures published last month showed Britain's borrowing in the 2024/25 financial year stood at just over 146 billion pounds and totalled almost 84 billion pounds in the first five months of the current one. The ONS has come under criticism from the Bank of England and private economists for problems with other figures it publishes, including its measures of the British labour market. At a revised 82 billion pounds, the borrowing for the current financial year to date would be about 10 billion pounds higher than a forecast from Britain's official budget watchdog, whose projections underpin the government's budgets. Finance minister Rachel Reeves is expected to raise taxes in her budget in November in order to remain on course to hit her target to fix the public finances. The ONS's new director general, James Benford, said the error stemmed from an omission by tax officials of some payment streams from the data used to estimate VAT receipts. "It is difficult for the ONS to set up a mechanism to independently check these external inputs," he said. However, Benford said he was talking to tax and Treasury officials as well as the Office for Budget Responsibility watchdog about ways to avoid similar problems in future. "Over the coming weeks, we will work together with the OBR and our data suppliers to identify steps to ensure processes within the data suppliers are robust and the mechanisms to understand and challenge what is provided to the ONS are as strong as possible," he said. ($1 = 0.7468 pounds) (Reporting by Alistair Smout Writing by William Schomberg; editing by Sarah Young)

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