–Borrowing forecasts revised higher
–2010-11 PSNB Stg146bn vs Stg148.5bn
–2011-12 PSNB Stg122bn vs Stg117bn
–2012-13 PSNB Stg101bn vs Stg91bn
–2013-14 PSNB Stg70bn vs Stg60bn
–2014-15 PSNB Stg46bn vs Stg35bn

LONDON (MNI) – The planned fiscal tightening over the next few
years is going to be marginally less than forecast in November according
to the latest projections from the Office for Budget Responsibility
released Wednesday.

The pace at which the budget deficit shrinks is a shade slower than
forecast in November, with the OBR lowering its near term growth
projections.

The unadjusted current budget deficit as a percentage of GDP is
forecast to stand at 7.1% in 2010-11 before falling to 5.8% in 2011/12,
4.5% in 2012/13 and gradually to 0.2% in 2015/16.

In November the planned cuts in spending were expected to cut the
budget deficit more sharply from 7.2% in 2010/11 to 5.6% in 2011/12,
3.9% in 2012/13 and 2.1% in 2013/14 before showing a surplus of 0.3% in
2015/6.

The reduction on the cyclically adjusted measure – the measure used
to judge progress against the Government’s fiscal targets – is, however,
close to that forecast in November.

On a cyclically adjusted basis the current budget deficit is set to
fall from 4.6% of GDP in 2010/11 to 3.2% in 2011/12 before moving into a
small surplus in 2014/15. The Government fiscal target is to eliminate
the structural budget deficit by the end of this parliament, by 2015 at
latest, which these latest forecasts suggest it is on track to achieve.

The OBR said that on current policies the government has a better
than 50% of achieving the mandate in fiscal year 2015/16.

The slightly less sharp near term fiscal squeeze is mainly due to a
higher spending forecast over the coming years, reflecting the higher
recent level of inflation. Also the weaker profile for GDP over the next
two years will hit receipts forecasts.

The difference compared to November, however, should not be
overstated with both the OBR and the Institute for Fiscal Studies
saying the Budget measures are fiscally neutral.

Public Sector Net Borrowing is forecast for 2011-12 to stand at
Stg122 billion, up from the Stg117 billion set out in November 2010.

In November, the OBR forecast Public Sector Net Borrowing excluding
financial sector interventions for 2010-11 at stg148.5 billion, which
has now been revised down to Stg146 billion.

“Borrowing to fund the deficit this year is now set to come in at
stg146 billion, below target. Then fall to stg122 billion next year,”
Osborne said.

The OBR had previously forecast that borrowing in 2011/12 would
come in at Stg117 billion.

“Inflation has had its impact but crucially the OBR assess that
next year’s structural deficit remains the same as forecast last
November. In other words, the size of the task of repairing Britain’s
finances is unchanged,” Osborne said.

Osborne said that national debt as a percentage of GDP is forecast
to come in at 60% in 2010/11 before peaking at 71% and then falling to
69% by the end of the forecast horizon.

–London newsroom: 4420 7862 7492; email: ukeditorial@marketnews.com

[TOPICS: M$B$$$,MFB$$$,MABDS$,MT$$$$,MFBBU$]