Osborne on brink of missing borrowing targets for year


George Osborne has been dealt a further post-Budget blow after official figures showed the Chancellor on the brink of missing his borrowing targets for the year.

The Office for National Statistics (ONS) said the year-to-date budget deficit stood at £70.7 billion in February after borrowing fell by less than expected, leaving Mr Osborne perilously close to his £72.2 billion target for the full year.

It means that this month, the UK would have to borrow substantially less than the £7.4 billion seen a year earlier to keep the Chancellor on track with last week's Budget forecasts from the Office for Budget Responsibility (OBR).

The figures heap further pressure on Mr Osborne after the resignation of work and pensions secretary Iain Duncan Smith in protest over his economic strategy and cuts to welfare over the past six years.

Mr Osborne's Budget last week revealed another £3.5 billion of spending cuts to help balance Britain's books by 2020.

But he has since abandoned planned cuts to disability benefits in the face of accusations he was putting the better-off before the most vulnerable.

The ONS figures showed borrowing fell by £0.5 billion year on year to £7.1 billion in February.

Public sector net debt stood at £1.58 trillion - or 83.1% of gross domestic product (GDP) - which is up £46.3 billion on a year earlier.

Mr Osborne last week pledged to return the UK to a surplus by 2020, with the latest independent forecasts from the OBR revealing that the UK would have a budget surplus of £10.4 billion in 2019/20 and £11 billion the following year.

In a hearing with MPs on the Treasury Select Committee following the Budget, OBR chairman Robert Chote said there was still a 55% chance that Mr Osborne would hit his surplus target despite the U-turn on disability payment cuts.

He confirmed the OBR would consider the impact of the changes to disability payment savings and welfare pledge when it publishes its next economic outlook.

The ONS said borrowing fell last month as the Government received £53.6 billion in income, up around 5% on a year earlier thanks to higher income tax and stamp duty receipts.

It also spent around 1% less, at £57.1 billion.

The ONS said just below two-thirds was spent by central government departments, around a third went on social benefits such as pensions, unemployment payments, child benefit and maternity pay, with the remainder being spent on capital investment and interest on the Government's outstanding debt.

The Centre for Economics and Business Research said it was "highly unlikely" Mr Osborne will meet his borrowing targets and aim to get Britain back in the black by 2020.

It is predicting a deficit of around £30 billion in 2019/20 - a far cry from the OBR's surplus forecast.

David Kern, chief economist at the British Chambers of Commerce, said: "While there is gradual progress in reducing the deficit, the timetables outlined in the Budget last week remain too ambitious, and the return to surplus may take a bit longer than the Chancellor hopes.

"The difficulties in implementing some of the planned budget cuts will increase the problem."