GOVERNMENT borrowing will overshoot its target by £8bn this financial year, according to new predictions published today by PwC, and it will take until 2018 before the deficit is finally eliminated.
That means George Osborne has no room for a spending splurge and should instead cut tax and improve transport to make the UK more competitive, the report said.
The deficit will come in at £117bn for the year or 7.4 per cent of GDP, the economists predict, well above the £109bn and 6.9 per cent predicted by the Office for Budget Responsibility (OBR) in December and far greater than 5.8 per cent the OBR forecast in March 2012.
“The chancellor still faces a very tough challenge in getting the public finances back under control in the medium term and will have little room for manoeuvre in his budget,” said PwC’s John Hawksworth. “He should focus what firepower he has on measures to boost infrastructure investment, while also laying the groundwork for longer term supply side reform.”
But the forecast also expects an economic recovery, predicting growth of one per cent this year and 2.1 per cent in 2014, supported by falling unemployment and rising consumer spending as households pay down debts.