Government faces uphill battle to balance books by 2025, says OBR
The Office for Budget Responsibility said the objective of securing a balanced budget by the middle of the next decade was challenging.
Britain’s fiscal watchdog said the Government will struggle to hit its target of balancing the books by 2025 despite the Chancellor enjoying a brighter economic outlook.
The Office for Budget Responsibility (OBR) said Philip Hammond’s objective of securing a balanced budget by the middle of the next decade was challenging due to the growing financial pressures from an ageing population.
It said the Government was on course to record a budget deficit of £21.4 billion by 2022/23 – the time in which its current forecast ends.
The gloomy outlook provides 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.
Releasing its economic and fiscal outlook report, the watchdog said: “Achieving the broader fiscal objective of a balanced budget, interpreted as applying to 2025-26, looks challenging (although it lies beyond our formal forecasting horizon).
“In particular, this is a period in which population ageing will continue to exert upward pressure on spending, and more so than in recent years when the State Pension age has been rising.
“Interpreted as applying to 2022-23, the objective would be missed. That year lies within our forecast horizon, at which point we forecast a headline deficit of 0.9% of GDP.”
Mr Hammond said in his Spring Statement that 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.
OBR chairman Robert Chote said in November that the Government may not eradicate the deficit before 2031 if it continues falling “at the average rate expected beyond the end of this spending review.”