As widely predicted, the Chancellor of the Exchequer told parliament that the government is going to have to borrow more money over the next two years than had previously been forecast.
The government’s net deficit in this financial year is now expected to be £91.3bn, as opposed to £86.4bn, and in the 2015/16 financial year it is forecast to be £75.9bn (previously £68.3bn). However, he predicted net borrowing would fall faster in subsequent years and the country would record a small surplus in 2018/19.
The latest official growth forecast for the UK economy in 2014 is up, to 3.0% from 2.7%, and slightly up also in 2015, to 2.4% from 2.3%. However economic growth is then predicted to slow again, to 2.2% in 2016 and 2.4% in 2017.
The government is able to afford its spending plans because of the low interest rates it pays on public debt and also by continuing to make ‘substantial savings’ in public spending. The Chancellor said the government would continue to restrain public sector pay, cap welfare spending and clamp down on tax avoidance.
Unemployment is predicted to fall to 5.4% of the population next year and 5.3% in 2016 with wages rising faster than inflation. The inflation rate is forecast to be 1.5% this year, 1.2% in 2015 and then start to rise again at 1.7% in 2016.
