George Osborne said the UK would be a country that “lives within its means” as he stuck by his target to move the public finances into surplus by 2020 and unveiled an upgraded growth forecast for the next two years.
The Chancellor said new independent forecasts from the Office for Budget Responsibility (OBR) showed the UK would narrowly beat its borrowing goal this year and move “out of the red and into the black” in 2019-20 with a slightly higher-than-expected £10.1 billion surplus.
But he revealed that previous forecasts from the OBR given at the time of the summer Budget in July have been revised up, helping him meet the target for borrowing in 2015-16.
And while growth forecasts were maintained for 2015 at 2.4 per cent and nudged higher to 2.4 per cent in 2016 and 2.5 per cent in 2017, Osborne said the outlook has been trimmed in 2019 and 2020.
The OBR forecasts have delivered a £27bn boost to the public finances over the forecast period thanks to £8bn less of borrowing and higher tax receipts, according to Osborne.
He said: “Since 2010, no economy in the G7 has grown faster than Britain. We are growing three times faster than Japan, twice as fast as France, faster than Germany and the same as the United States.”
He added: “We are borrowing £8 billion less than we expected overall and we will reach a bigger surplus while at the same time helping working families. We have the economic security of knowing our country is paying its way in the world.”
The latest forecasts will confound many experts, who had predicted the Chancellor would have to push back his target to move into surplus.
New forecasts show that public sector net borrowing is set to fall to £73.5bn this year, despite a grim set of figures last week showing borrowing increased to £8.2bn last month – the worst deficit for any October since 2009.
The 2015 borrowing forecast is more than the £69.5bn target outlined in July, but Osborne said the OBR has revised its previous predictions to £74.1bn after a statistical change means housing association debt is now accounted for in overall UK public finances.
Borrowing is set to fall to £49.9bn in 2016-17, £24.8bn in 2017-18 and £4.6bn in 2018-19, before reaching a £10.1bn surplus in 2019-20, remaining in the black the following year with a £14.7bn surplus.
This is better than the £10bn and £11.6bn forecasts previously given by the OBR in July.
Britain’s growth outlook is also looking rosier, with the OBR forecasting that growth will be 2.4 per cent in 2016, rising to 2.5 per cent in 2017, up from previous predictions of 2.3 per cent and 2.4 per cent respectively.
But growth is set to ease back to 2.4 per cent in 2018 before edging lower again to 2.3 per cent in 2019 and 2020 – this is less than the OBR’s July forecast for growth of 2.4 per cent in each of those years.
Osborne also said the world growth outlook had worsened.
Shadow chancellor John McDonnell said Britons would feel “betrayed” as Osborne failed on his promises made five years ago.
He said: “We were promised that by today the deficit would be eliminated and debts would be under control and falling dramatically. People put their trust in that commitment.”
He added: “After five years the deficit has not been eliminated and this year it’s predicted to be over £70bn. Instead of taking five years, it’s going to take ten.”