Report predicts double Budget blow
Published 18/03/2013 | 00:11
This week's Budget will reveal a double blow for Chancellor George Osborne as official forecasters are expected to downgrade UK growth and confirm an £8 billion borrowing overshoot, according to the Ernst & Young ITEM Club.
The ITEM club said the Office for Budget Responsibility (OBR) is likely to slash its growth forecasts to just under 1% for 2013 from 1.2%.
Weak income tax receipts, disappointing revenues from the sale of the 4G spectrum and a lower-than-expected boost from the Bank of England's asset purchase programme is also expected to see the OBR reveal that public borrowing has climbed to over £88 billion this year - up from the £80 billion forecast at the Autumn Statement.
Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, said this year's Budget forecasts would be politically "embarrassing" for Mr Osborne.
He added: "Yet again borrowing is going to come in higher than forecast.
"The Chancellor is faced with having to backtrack on his earlier claim that borrowing will fall between 2011-12 and 2012-13 if the statistical fudges are excluded."
Mr Osborne is already under significant pressure after the UK lost its prized AAA rating following the recent Moody's downgrade while the economy is on the brink of an unprecedented triple-dip recession after contracting by 0.3% at the end of 2012.
Mr Goodwin said now was the time for a "bold move" from the Chancellor to kick-start the recovery.
The ITEM Club report is calling for spending on a £10 billion package of infrastructure projects in each of the next two years, even if this would require more borrowing. It said this would add 0.5% to gross domestic product each year, without impacting Mr Osborne's main fiscal targets.
The Government should also consider reinstating the stamp-duty holiday for first-time buyers to help breathe life back into the housing market.