LONDON (Reuters) - Britain’s budget forecasters doubled their estimate on Monday of how much the government is likely to borrow over the next five years, even before accounting for pre-election spending promises or a weaker economy.
The figures, which reflect new accounting standards, underscore how Prime Minister Boris Johnson and his finance minister Sajid Javid might find it hard to relax their grip on the public finances significantly.
According to the new forecasts from the Office for Budget Responsibility (OBR), Britain will borrow 47.6 billion pounds ($61.1 billion) in the current financial year, up from 29.3 billion at the time of the government’s March budget statement.
Britain’s budget deficit last year was the smallest as a share of economic output since 2001/02 following a decade-long squeeze on spending that hit many public services.
Johnson’s Conservative Party pledged ahead of last week’s election to borrow more money to fund public investment but the figures show Javid will have little room for manoeuvre after promising to balance day-to-day spending within three years.
“Even a small deterioration to the economic outlook, or plans to cut taxes, would see the Chancellor at serious risk of breaking his brand new fiscal rules,” Jack Leslie, an economic analyst at the Resolution Foundation think-tank, said.
By 2023/24, annual borrowing is forecast at 33.3 billion pounds, up from 13.5 billion pounds projected in March - when then finance minister Philip Hammond was aiming to balance the budget, including investment spending, by the mid-2020s.
The revisions were a foretaste of higher budget deficit estimates that are likely when the OBR fully updates its forecasts alongside Javid’s first budget in February.
During the Conservative Party’s election campaign, Javid said would aim to keep debt interest payments below 6% of tax revenue even after boosting borrowing.
The revisions bring the OBR forecasts in line with accounting changes made by Britain’s statistics office and, as such, were no surprise for experts in Britain’s public finances.
The main change is that a proportion of the value of the government’s student tuition fee loans is now written off each year to reflect expected defaults, rather than waiting until the loans expire.
This will add 11 billion pounds a year to public borrowing this year, rising to 14 billion pounds by 2023/24.
Corporation tax revenue had also been overestimated by the Office for National Statistics and Britain’s tax authorities, which meant future revenue forecasts had to be cut by more 4 billion pounds a year while the cost of public-sector pensions would be 700 million pounds higher, the OBR said.
The estimates published on Monday had been due to be released before last week’s election but were blocked by Britain’s top government official, who feared publication might breach civil service impartiality rules.
Additional reporting by William Schomberg; Editing by David Clarke
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