LONDON - Chancellor George Osborne is unlikely to meet his target of running a budget surplus by the end of the decade, according to a Reuters poll ahead of his annual budget statement on Wednesday.
Seventeen of 28 economists polled in the last few days said Osborne would miss the goal he set in law last year to turn Britain’s budget deficit into a surplus by the 2019/20 fiscal year and then run one every year in ‘normal times’ thereafter.
“Tax forecasts based on an altogether too optimistic view of UK productivity will ultimately undermine tax receipts in the medium term, making it increasingly difficult to reach his target,” said Oliver Jones, an economist at independent consultancy Fathom.
The Chancellor has chosen to spend rather than save the surprise windfall handed to him by the Office for Budget Responsibility, an independent government watchdog, which upped the amount it expected to be raised from existing taxes in the November budget.
Britain’s economy will grow 2.2 percent this year and next, a Reuters poll found last month, weaker than the OBR’s November projections, which pegged GDP expansion at 2.4 percent in 2016 and 2.5 percent in 2017. [ECILT/GB]
In Friday’s poll, economists were almost unanimous in saying this year’s growth forecast would be revised down but were almost evenly split on whether the 2017 figure would be left unchanged or revised down by the OBR, on March 16.
Osborne faces a difficult task next week as a worsening economic backdrop gives him little room to offer sweeteners to voters ahead of a referendum on Britain’s European Union membership.
Excluding financial interventions he will borrow 56 billion pounds next year, 35 billion pounds the year after and 13 billion pounds in the 2018/19 fiscal year, still a fair way from his goal, the Reuters poll showed.
The OBR forecast shortfalls of 50, 25 and 5 billion pounds respectively in November.
One option for raising revenue - reforming the pension system - has been abandoned by Osborne in the face of opposition from within the Conservative Party.
And revenue-raising sales of government-held shares in Lloyds Banking Group and the Royal Bank of Scotland have also been put on hold due to the turmoil in global financial markets.
He might instead accelerate plans to ease the income tax burden on people on lower and higher incomes.
“With the Chancellor constrained by both the public finances and a desire not to rock the boat ahead of the EU referendum, this budget is unlikely to be a radical affair,” economists at Capital Economics said.
Britons go to the ballot box on June 23 to decide whether to stay in the EU and opinion polls suggest a narrow lead for the "In" camp. tmsnrt.rs/1Ke31HF
If they vote to leave, Britain’s economy will suffer, nearly all the foreign exchange strategists and economists polled by Reuters over the last month said. [GBP/POLL]
Slower economic growth would make Osborne’s goal even more unattainable.
Polling by Aara Ramesh, Vartika Sahu, Sujith Pai, Kailash Bathija