George Osborne's hopes of cutting the deficit in 2012/13 are fading fast, the Chancellor's own watchdog has conceded.
After digesting January's disappointing public finances, the Office for Budget Responsibility said there would need to be an implausibly large surge in tax revenues into Government coffers or a significant drop in state spending over the final two months of the financial year for Mr Osborne to live up to his boast made in December that the deficit would still fall in cash terms in 2012/13.
In December the OBR predicted that even excluding one-off accounting changes that will flatter the public borrowing figures the deficit would decline from £121.5bn in 2011/12 to £119.8bn in 2012/13. This forecast came as a major surprise to economists as the public finances had been deteriorating for the first half of the year as the economy slipped into a double dip recession.
But the OBR now appears to have accepted its public borrowing forecast was over-optimistic. The watchdog says that in order to hit the £119.8bn target, borrowing will need to be £6.4bn lower in February in March than it was in the same months of 2012.
"To meet our autumn forecast would now require much stronger growth in tax receipts in the last two months of the year than we have seen since December or much lower-than-forecast expenditure by central or local government" the independent watchdog said in a statement.
The verdict follows a blow this week when Ofcom revealed the auction of the 4G mobile phone spectrum had raised just £2.3bn, rather than the £3.5bn the Treasury had pencilled in.