Chancellor Philip Hammond today unveiled lower government borrowing forecasts as slightly stronger growth and higher tax receipts boosted the public finances.
The government will borrow £45.2bn in the 2017-18 fiscal year, £4.7bn lower than previously thought, he told Parliament during his Spring Statement, according to forecasts from the Office for Budget Responsibility (OBR). Borrowing will eventually fall to £21.4bn in 2022-23.
He said the predicted falling debt load as a percentage of GDP in the 2018-19 fiscal year marked a "turning point in this nation's recovery", although a big question mark remains over the effects of Brexit. The OBR said it still is relying on "provisional broad-brush adjustments" made in November 2016 in the absence of an update on the government's aims.
The OBR's forecast for GDP growth was raised slightly in 2018 to 1.5 per cent, from 1.4 per cent, but growth is still forecast to fall to 1.3 per cent in 2019 and 2020, and only bumping up slightly to 1.5 per cent in the final year of the forecast – well below the two per cent level long seen as the UK's potential.
In spite of the weakening growth outlook, Hammond described himself as "positively Tigger-like" in his optimism, and said he "would have capacity for further spending" if the economy continues to grow.
Labour's shadow chancellor John McDonnell accused Hammond of "complacency" and said public services are still facing a "crisis".
Hammond's statement was pared back – rather than a full-blown Budget announcement – after the UK faced criticism from international bodies for having two big "fiscal events" per year.
The OBR has already upgraded its fiscal forecasts twice over the last year, in March 2017 and November, as tax receipts have come in stronger than previously expected.
At the Autumn Statement the OBR predicted public sector net borrowing of £49.9bn for the 2017-18 fiscal year, significantly lower than the £58.3bn borrowing for the year to April expected only a year ago.
While the borrowing figures are significantly better than previously expected, the government's deficit remains far higher than the Conservative government promised only two years ago: former chancellor George Osborne committed to an overall budget surplus in 2019-20.
Hammond relaxed his fiscal targets on assuming the chancellorship, promising to balance the books by the mid-2020s. However, the respected Institute for Fiscal Studies has said this task will remain "far from easy".
The OBR today said the government will not meet his fiscal objective of balancing the budget by the middle of next decade.