Pounds 8bn Hole in Public Finances to Embarrass Osborne
Lynch, Russell, The Independent (London, England)
Low tax receipts blamed as forecasts made in December fall badly short in Budget week
George Osborne, the Chancellor, faces political humiliation this week with public borrowing figures in the Budget expected to be 8bn higher than official estimates made just three months ago, a leading economic forecaster has warned.
The Ernst & Young Item Club says the UK's borrowing bill - stripping out one-offs such as the transfer of 28bn in Royal Mail pension fund assets to the public coffers - could jump to 88bn for the current financial year, up from the 80bn forecast by the independent Office for Budget Responsibility in December.
The forecaster pins the blame on lower tax receipts and disappointing revenues from the sale of the 4G spectrum, which raised 2.3bn instead of the 3.5bn pencilled in three months ago by the OBR. A limit imposed by the Office of National Statistics on the accumulated interest payments racked up by the Bank of England on its holdings of government gilts under quantitative easing has also created another black hole in the accounts.
Andrew Goodwin, the Ernst & Young Item Club's senior economic adviser, said: "Yet again borrowing is going to come in higher than forecast. The Chancellor is faced with having to backtrack on his earlier claim that borrowing will fall between 2011-12 and 2012-13 if the statistical fudges are excluded. Economically this is of little importance, but politically it will prove to be very embarrassing. …