Public borrowing overshoot suggests another tough Budget

New projections by PwC suggest that public borrowing could be revised up by the Office for Budget Responsibility (OBR) throughout the next five years. PwC projects that the budget may be close to balance by the end of the Parliament in 2019/20, rather than building up a £10 billion surplus as the OBR forecast in November (see table below).

In cumulative terms, the PwC projections also suggest that the stock of public sector net debt in March 2020 could be around £50 billion higher than the OBR projected in November.

 

John Hawksworth, chief economist at PwC, said:

“The UK budget deficit stood at around £67 billion in the first ten months of the 2015/16 fiscal year. This was around £10 billion lower than in the same months in 2014/15. But the budget deficit still appears to run a risk of overshooting slightly the OBR’s November 2015 forecast of a £73.5 billion deficit in 2015/16 as a whole, given that there was a combined £15 billion net deficit in February and March last year.

“More significant, however, is the medium term outlook for public borrowing. Our projection is that this should fall over time but somewhat less rapidly than the OBR projected in November (see above table). This is partly because we expect slightly lower nominal GDP growth and partly as we are slightly less optimistic than the OBR about the ratio of tax revenues to GDP going forward.

“These differences suggest that the Chancellor may only broadly meet his balanced budget objective by the end of the Parliament, rather than building up a £10 billion surplus as the last OBR forecasts suggest. By March 2020, the cumulative stock of public debt could be around £50 billion higher than the OBR estimated in November.

“Given this somewhat less favourable fiscal outlook, we expect the Chancellor to deliver another tough Budget on 16^th March. This may involve some further net fiscal tightening, although we would not expect him to wield the axe too fiercely given the current fragile state of the global economy and uncertainty as to the EU referendum outcome.”

To see the latest PwC UK Economic Outlook click here

Ends

For further information please contact Tilly Parke: [email protected] / +44 20 7804 8761