Government 'not on course' to clear deficit in public finances by 2025

The Government may struggle to meet its target of clearing the deficit in the public finances by the end of the next parliament, the head of the official spending watchdog has warned.

Robert Chote, chairman of the Office for Budget Responsibility, said ministers had still to explain how they expected to balance the books and start paying down the debt by the time of the 2025 general election.

Giving evidence to the Commons Treasury Committee, he said that even if they succeeded in holding down benefits, they would face pressure on spending to meet the demands of an ageing population.

The previous coalition government, which came into office in 2010, originally set a target of clearing the deficit by the time of the 2015 general election.

After that failed, then chancellor George Osborne set a further target to reach a surplus by the time of the next election in 2020, only to abandon it as unachievable.

Chancellor Philip Hammond is now committed to balancing the books "at the earliest possible date" in the next parliament, set to run from 2020 to 2025.

But with the deficit still forecast to account for 0.7% by 2021/22, Mr Chote said ministers faced a "lot of challenges" if they were to clear it by the end of the parliament.

"On the face of it, it doesn't look to us that they are on course to achieve that yet," he said.

"If you were to assume that the Government increased tax allowances and benefits in line with inflation rather than with earnings, then you would get a further fiscal tightening.

"You'd be reducing the generosity of working age benefits by about 10% relative to earnings. That would probably be sufficient, all other things being equal, to get you to the surplus by the end of 2025 or thereabouts.

"But at the same time, there is also evidence that you would have upward pressure on health costs, pressure on spending from an ageing population.

"It is obviously for the Government to decide whether to accommodate those, but that could be an equal pressure in the other direction.

"All we can say at this stage is that the Government has not made it clear what policies would be in place over the course of the next parliament to make you confident that they are on course to achieve that."