Deficit down as UK’s recovery surges ahead
BORROWING is falling faster than expected as the economic recovery picks up, the spending watchdog said yesterday, predicting the budget will be in surplus in 2018-19,
Economic growth will accelerate to 2.7 per cent this year, up from 1.8 per cent in 2013, the Office for Budget Responsibility (OBR) said.
The OBR also upgraded its 2015 forecast to 2.3 per cent, and held its 2016 outlook at 2.6 per cent – though the analysts noted that some of the spurt in growth came from consumers running down savings, a trend which will slow down in coming years.
Such healthy growth figures will drive down the deficit to 6.6 per cent of GDP in 2014, and 5.5 per cent next year. By 2018-19 the OBR expects the government to run a surplus of 0.2 per cent of GDP.
In cash terms that means borrowing £95bn next financial year, £75bn the year after and £44bn in 2016-17.
By 2017-18 that will fall to £17bn, before at long last running a surplus of £5bn in 2018-19.
As borrowing falls and the economy grows the national debt should peak at 78.7 per cent of GDP in 2015-16, 0.2 percentage points below the level previously expected.
However, the chancellor said the next parliament will have to decide on more spending cuts if the deficit is to be eliminated completely.
Osborne told MPs he wants to introduce a charter for budget responsibility, pushing future chancellors to keep the public finances as he leaves them.
By 2018-19 total government spending will have fallen to 37.8 per cent of GDP, down from 47 per cent in 2009-10. Meanwhile current tax receipts will have increased to 38.1 per cent of GDP, or £777.7bn by 2018-19.
Although the picture is improving as the recovery takes hold, some areas of the budget did suffer.
The OBR cut North Sea oil and gas revenue forecasts by another £3bn over the next five years. Combined with its previous cut to predictions that means the sector will contribute £8bn less than was expected a year ago.
“This is a reminder of how precarious the budget of an independent Scotland would be,” Osborne told the House of Commons. “These further downgrades in the tax receipts would leave independent Scots with a shortfall of £1,000 per person.”