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THE government will fail to hit its target of balancing the books by 2025, says fiscal watchdog the Office of Budget Responsibility (OBR) in a report published today.
Its conclusion, revealed just hours after Chancellor Philip Hammond’s Spring Statement, removed the last vestige of credibility from the Tories’ 2017 manifesto pledge to eliminate the deficit by the middle of the next decade.
Predicting that this objective would be “missed,” the OBR blamed growing demands on the public purse from an ageing population, while acknowledging that this would be the case even as state pension ages continue to be pushed back.
The watchdog added that the government could instead record a budget deficit of £21.4 billion, a headline deficit of 0.9 per cent of GDP, by 2022-23 — the point at which the current OBR forecast ends.
Mr Hammond used OBR statistics in his statement to show that government borrowing is due to fall to £45.2bn this year — £4.7bn lower than forecast at the time of the Budget in November, and £108bn lower than in 2010.
He described this drop as the “light at the end of the tunnel.”
However, the OBR report says: “While the budget deficit looks likely to come in almost £5bn lower this year than we expected in November, the explanations for this imply smaller downward revisions for future years.
“As a result, the government’s headroom against its fiscal targets is virtually unchanged.”
Debt is forecast to be 1 per cent lower than what was expected in November, peaking at 85.6 per cent of GDP in 2017-18, before falling gradually to 77.9 per cent in 2022-23.
Economic growth for this year has been revised up slightly from 1.4 per cent to 1.5 per cent and is then forecast to be unchanged at 1.3 per cent in 2019 and 2020.
After 2020, it will again rise to 1.4 per cent in 2021 and 1.5 per cent in 2022 — meaning GDP growth in the latter year will be at the same rate as recorded for 2018.
In the Commons, shadow chancellor John McDonnell said that improvements to the public finances announced by the OBR were “marginal,” adding that Mr Hammond’s decision to delay any spending increases to the autumn was “astounding.”
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