Brown busts PBR targets on borrowing

23 Jan 03
Gordon Brown's public sector spending plans were dealt a potential blow this week when it was revealed that the chancellor had exceeded his £20bn annual borrowing forecasts with three months left of the financial year.

24 January 2003

Experts gave the news a mixed response. Some analysts claimed that Brown could again be forced to revise his forecast for the full financial year and water down his ambitious spending plans for the health, education and transport sectors. Others predicted longer-term tax rises to shore up Labour's spending plans.

Latest figures from the Office for National Statistics, published on January 21, revealed that net borrowing (including capital investment) for April-December 2002 had risen to £21.4bn, compared with £5.1bn the previous year.

Some analysts are now predicting a shortfall of £22bn–£26bn for the full 2002/03 financial year – around £4bn more than Brown's own revised forecast in last November's pre-Budget report.

But the Centre for Economics and Business Research, the independent think-tank that recently went head-to-head with the Treasury over its longer-term forecast for Britain's economic growth, said Brown's spending proposals 'could still be upheld in the short term'.

Angus McCrone, the CEBR's senior economist, said: 'It's too early to say that the full-year figures will be worse than the chancellor now anticipates. We're forecasting a net public sector debt of £18.6bn – less than Brown.'

But McCrone acknowledged that the chancellor's long-term spending may have to be boosted by more tax rises.

'That's a distinct possibility now. We've got the electoral cycle to consider and there would be a political cost involved in the chancellor missing his spending targets.'

PFjan2003

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