Osborne misses public sector borrowing target

21 Apr 16

Chancellor George Osborne missed the public sector borrowing goal in 2015-16 by around £1.8bn, with the deficit totalling £74.0bn according to provisional figures published by the Office for National Statistics today.

Publishing the public finances for March, the last month of the financial year, the ONS said borrowing in the month was £4.8bn.

Overall, borrowing in 2015-16 was down by £17.7bn compared to the previous year, but was still above the £72.2bn forecast by the Office for Budget Responsibility in last month’s Budget statement.

According to the ONS, central government spending made the largest contribution to the amount borrowed by the public sector, although spending remained flat in cash terms in 2015-16 while revenues increased by around 4%.

Analysing the figures, the Centre for Economics and Business Research said today’s provisional figures may not reflect the fall in borrowing expected by the OBR and that the final figures may be closer to last month’s forecasts.

While today’s figure was worse than the OBR’s projection, it was below the consensus market expectations, senior economist Nina Skero highlighted.

“Nonetheless, CEBR maintains the view that the OBR and the chancellor are overly optimistic about the UK’s chances of eliminating the budget deficit by 2020 [the last of Osborne’s three targets for the public finances].

“As has become even more clear in the aftermath of the latest Budget, the list of ring-fenced expenditure categories is only growing. The list, which already included health, pensions, international aid, tax credits for working families and education, now also contains Personal Independence Payments for people with disabilities.”

Given income tax thresholds are set to rise over the remainder of this parliament, the government faces restrictions on generating revenue as well as cutting spending, she added. “Therefore, it is very likely that within a couple of years the chancellor will be faced with the unenviable task of deciding between cutting long-term investment spending or giving up on the self-imposed goal of eliminating the deficit by 2020.

“As cutting long-term investment spending eventually results in lower economic growth, CEBR believes that in this situation the chancellor would be forced to abandon or postpone his deficit-eliminating ambitions. We expect a deficit of just over £30bn in 2020.”

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