CHANCELLOR George Osborne’s deficit reduction plan hangs in the balance, according to official government forecasts released yesterday.
The Office for Budget Responsibility (OBR) – the new independent fiscal watchdog – revised up its forecasts for public sector borrowing by “around £10bn a year in the medium term.”
Meanwhile the growth forecast for this year dropped to 1.7 per cent, from November’s prediction of 2.1 per cent.
The OBR expects growth of 2.5 per cent in 2012, and 2.9 per cent in the following two years -- so that the government’s targets should still be hit. Yet the GDP forecasts were described “overoptimistic” by the Centre of Economic and Business Research.
Interest on government debts will hit £48.6bn in the next fiscal year, it predicts -- up from £43.1bn this fiscal year, and set to jump to £66.8bn by 2015-16.
The chancellor attacked the previous Labour administration for the UK government’s annual deficit. “We have a higher deficit than Portugal, Greece and Spain,” Osborne said.
Debt is again expected to exceed 70 per cent of GDP, the OBR revealed. Total net debt will hit 70.9 per cent of GDP in 2013-14, it predicts.