A Conservative government would miss its own target to run a surplus by 2018/19 under new projections out today, which show the deficit is much higher than originally thought.
The news will come as a heavy blow to both David Cameron and George Osborne just a week ahead of the Autumn Statement.
Independent think tank the Social Market Foundation (SMF) has calculated that borrowing in 2018/19 will be £14bn, £15bn higher than the Office of Budget Responsibility’s (OBR) current projection. This means the next government will inherit a tougher task than first thought to get the deficit down and control public spending.
One of the biggest concerns, according to economists at the SMF, is that the deficit will persist for much longer than originally thought, meaning cutbacks and austerity will also continue for some time to come.
The SMF used OBR figures for 2014 and matched them up with current economic forecasts to calculate the new deficit figure. A number of similar studies, including one by the Institute for Fiscal Studies, have come up with similar results.
The report calculated how each of the party’s policies on deficit reduction will fare if its projections are correct, with worrying results. A Conservative government would completely miss its target for 2018/19: “The only way to hit the target would be to rely on surprise over-heating of the economy that temporarily reduces borrowing, or to pencil in further cuts on top of the £38bn already planned. Based on our estimates of borrowing, this would take the total cuts required to £52bn after 2015-16,” the report’s author, Nida Broughton, warned.
Labour could meet its target if it stuck to current government spending plans, something Ed Miliband’s party has indicated it was unlikely to do. The Liberal Democrats would also need to find extra cash, but much less than the Tories at £5bn, in order to meet their 2017/18 deficit elimination plan.