It is now quite widely accepted that come the Autumn Statement on December the 5th the Office for Budget Responsibility will once again be forced to revise down its growth projections and revise up its borrowing forecasts. Today the Treasury published its latest round-up of the views of independent economists. Today’s release is contains forecasts all the way out to 2016, whihc give some indication of the scale of the likely revisions.
The table below compares the most recent growth forecasts of independent economists to the most recent forecasts of the OBR – which were made back in March alongside the budget
The new OBR forecasts are likely to be in line with the consensus (they usually are).
Those numbers make for grim reading – growth of just 1.1% in 2013 and 1.7% in 2014 would be a disaster. It would mean GDP wouldn’t reach it’s 2008 level until early 2015.
Early this year the OBR hoped that growth would accelerate to 3% by 2015, independent economists now expect growth of just 2% that year. Cumulatively the new forecasts would represent an undershoot of 4.7% of GDP by 2016. And this would be an undershoot on growth projections that were already regarded as weak.
Weaker growth has serious implications for the government’s borrowing targets, as the table below makes clear.
On the current independent consensus the government is set to borrow almost £80bn more than they intended at the time of the budget by 2016.
Given that the current OBR projections are already more than £150bn higher than at the time of the Comprehensive Spending Review of 2010, the Government now looks set to miss its initial borrowing targets by something in the order of a quarter of a trillion pounds.
Plan A has failed.
The June 2010 Budget had borrowing in 2015/16 of just £20bn, £83.5bn would be a quite miss.