George Osborne set for borrowing boost
Chancellor George Osborne should receive a Budget day boost when official figures show public borrowing on course to undershoot the full-year target.
However, the estimated borrowing of £7.9 billion for February - due to be released by the Office for National Statistics this morning - will still put the Government in line for a deficit of around £125 billion for the fiscal year to the end of March.
The monthly figures will be released three hours before the Budget, when the independent tax and spending watchdog, the Office for Budget Responsibility (OBR), is expected to estimate slightly lower borrowing for the years ahead than it did in its November forecast.
Meanwhile, the OBR could nudge up its growth forecasts for 2012 and 2013 amid a slightly improved outlook for the economy at the start of the year - though the rate of growth will still be sluggish by historic standards.
The Chancellor is under pressure to stick to his tough austerity measures after agencies Fitch and Moody's both put the UK's AAA credit rating on negative outlook.
Economists predict the OBR's 2012/13 public borrowing estimate will hold in line with its November forecast for £120 billion, but taking into account the transfer of the Royal Mail pension will result in a boost to the deficit of £28 billion.
The estimate will come as the OBR holds its growth forecast for 2012/2013 at around 0.7% and 2.1% for 2013, although some economists said a slight improvement could be on the cards.
The OBR offered a bleak view of the UK economic outlook at its last forecast in November, when it slashed growth estimates and predicted a surge in public borrowing over the next five years.
But a slightly improved start to the year, which has seen upbeat surveys from the manufacturing and services sector, may temper its predictions ahead of the Chancellor's Budget.
The Government's recent decision to take on the state-owned Royal Mail pension scheme will have a significantly beneficial impact on borrowing in 2012/13 - but that improvement will not follow through to forthcoming years.
The Royal Mail transfer could bring the borrowing forecast down to around £92 billion pounds in 2012/13 - the first time the budget deficit has dropped below £100 billion pounds since the financial crisis.
Economists have speculated that 2011/2012 borrowing could come in below the November forecast of £127 billion but last-minute departmental spending and lower self-assessment tax receipts are likely to leave it somewhere around the £125 billion mark.
Victoria Cadman, economist at Investec, said: "With the February figures due to be released on Budget day, the scale of the likely 2011/12 undershoot is something the Chancellor may be keen to promote as evidence that his fiscal plan is working."
The economy declined in the final quarter of last year by 0.2% but recent evidence suggests it will avoid a double-dip recession in the first quarter of 2012.
The OBR's forecasts are likely to reflect that, economists said, but the Queen's Jubilee celebrations could hit activity later in the year.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "The forecasts used by the Chancellor in the Budget which are produced by the OBR are unlikely to be changed markedly from those contained in the autumn statement."
He added: "It will be a major source of relief to Mr Osborne if the OBR does not make further downward revisions to the growth forecasts as if the OBR did it would almost certainly mean that the Chancellor would have to find more spending cuts or tax increases if he is to achieve his fiscal mandate."