UK fiscal watchdog rules out Government balancing the books by 2025
The Office for Budget Responsibility said Philip Hammond’s objective of securing a balanced budget by 2025 was challenging.
Britain’s fiscal watchdog has said the Government is set to miss its target and would not balance the books until 2027, despite handing the Chancellor a rosier economic outlook.
The Office for Budget Responsibility (OBR) said Philip Hammond’s objective of securing a balanced budget by 2025 was challenging due to the growing financial pressures from an ageing population.
It said the Chancellor would miss the target by around two years if the deficit and public spending continued to fall at the same rate pencilled in for 2022/23.
While such an outcome would be a blow to Mr Hammond, the prediction is brighter than the OBR’s forecast in November when it said the public finances may not shift into the black until 2030/31.
If the deficit was to continue falling at the average rate expected beyond the Spending Review then it wouldn't disappear until 2027/28 Robert Chote
Speaking after the Spring Statement, OBR chairman Robert Chote said: “(The Government’s) fiscal objective is to bring the public finances to balance as soon as possible in the next parliament, and when that target was set that would have been 2025/26.
“This lies beyond our five-year forecast horizon so we cannot judge the prospect definitively, but it does look unlikely that the Government would achieve this on current policy settings, although it looks slightly less of a stretch than it did back in November.
“Our central forecast ends with the Government still running an overall budget deficit of 0.9% of GDP in 2022/23, down from 1.1% in November.
“If the deficit was to continue falling at the average rate expected beyond the Spending Review then it wouldn’t disappear until 2027/28 – 2030/31 in November.
“Over this period there is likely to be upward pressure on spending from the ageing population and other cost pressures in the health service.”
The outlook puts a dampener to Mr Hammond’s Spring Statement, which saw the OBR hike its outlook for economic growth and reveal lower Government borrowing figures thanks to a rosier performance from the global economy and tax receipts.
Mr Hammond said borrowing was due to fall in every year of the forecast and would come in at £45.2 billion this year – £4.7 billion lower than forecast in November.
Economic growth for 2018 has been revised up from 1.4% to 1.5% and is then unchanged at 1.3% in 2019 and 2020, before picking up to 1.4% in 2021 and 1.5% in 2022.