OBR says Government’s tax and spending plans could see borrowing rise by extra £100billion over the next five years
- Borrowing for the 2019/20 fiscal year will be £47billion instead of £28.7billion
- The OBR had initially planned to deliver its revised forecast in November
- The student loan changes added £12.4billion to the deficit in 2018/19
The Office for Budget Responsibility (OBR) has said borrowing could go up by an extra £20billion per year over the course of the next parliament in a revision to its March forecast.
The OBR says the expected borrowing increase is mainly due to the changes in the way student loans are calculated and to correcting the level of corporation tax receipts.
Borrowing for the 2019/20 fiscal year will be £47billion instead of £28.7billion, £37.9billion the following year and £35.8billion in 2020/21.
The newly-elected Conservative government proposes to increase the threshold at which wage earners start paying national insurance from 8,632 to £9,500 from the start of the 2020-21 tax year. It is estimated would cost the Treasury £3billion per annum
The figures could put a dent in the Conservative government’s promise not to raise rates of VAT, National Insurance (NI) and income tax during the general election, and to cut national insurance for 31 million workers.
The proposal to increase the threshold at which wage earners start paying national insurance from 8,632 to £9,500 from the start of the 2020-21 tax year is estimated to cost £3billion per annum if employers contribution thresholds increase as well.
In the report, the OBR says it has factored in a number of economic and political factors into the forecast.
It stated: ‘As regards new policies, setting aside anything that might have been announced in the Budget, we would have expected to reflect the Chancellor’s announcement of a higher National Living Wage by 2024, the additional departmental spending for 2020-21 announced in the Spending Round and various other smaller measures announced since March.
‘It is unlikely that the new Brexit Withdrawal Agreement and Political Declaration would have had material quantitative effects on our forecast.’
The OBR had initially planned to deliver its revised forecast during on November 7, but delayed publication until after the general election on the advice of the Cabinet Secretary.
Chancellor of the Exchequer Sajid Javid is set to hold his budget in either February or March next year. He has pledged to balance day-to-day spending by 2022-23
The student loan changes added £12.4billion to the government’s deficit in 2018/19, rising by another billion for this financial year and to £15.7billion by 2022-23.
The Chancellor of the Exchequer, Sajid Javid is set to hold his budget in either February or March next year. He has pledged to balance day-to-day spending by 2022-23, undoing his predecessor’s rule that both day-to-day spending and investment cannot go above two per cent of GDP by the end of the next fiscal year.
Jack Leslie, a Resolution Foundation research and policy analyst wrote in response to the new figures:
‘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.
‘Looking ahead, tax rises rather than tax cuts will be needed if those fiscal rules are to be combined with rolling back the impact of austerity over the course of the new parliament.’