Budget watchdog doubles borrowing forecast
The UK’s budget watchdog has warned the government that borrowing will double over the next five years.
The Office for Budget Responsibility (OBR) has changed how it accounts for student loans, pensions and corporation tax. However, its latest figures don’t factor in pre-election spending promises or a weaker economy.
According to the new forecasts from the OBR, the UK will borrow £47.6 billion in the current financial year. Up from £29.3 billion predicted at the time of the 2019 Spring Statement. The OBR was due to publish the figures last month; however, were delayed by the government because of the General Election.
The OBR said its new forecasts no longer include ‘fiscal illusions’ about student loans, fully incorporating them on the government’s balance sheet. The changes include interest no longer accruing on loans that are not expected to be repaid, as a significant proportion of graduates never repay their loans in full.
The revised student loan figures add £13.4 billion to public sector net borrowing in 2019/20.
Other changes to accounting mean corporation tax receipts are also lower than previously thought, while government pension liabilities for council staff and insolvent firms have been included for the first time.
Combined, the changes add £18.3 billion to government borrowing this financial year, taking the total to £47.6 billion.