NAO revises forecasts

A study of the Treasury's economic forecasts, due to be published in advance of the Budget, is expected to show public borrowing several billion pounds a year higher than predicted in last November's Budget.

The report is likely to recommend two changes to the forecast for growth and the public finances, both of which would push up the expected level of government borrowing.

The unprecedented public audit was announced nearly two weeks ago. Treasury sources said the comptroller and auditor general, Sir John Bourne, had been asked to look at a number of "rosy" assumptions made by the former chancellor, Kenneth Clarke.

One of the likely changes is a reduction in the estimate for the economy's long-term growth potential from 2.5 to 2.25 per cent a year. This would reverse the quarter-point increase in potential growth introduced into the forecast last year.

The other is a reduction in the estimated savings from the "spend to save" crackdown on tax evasion and social security fraud announced last November. The last Budget Red Book predicted savings of pounds 6.7bn over three years for expenditure of only pounds 800m.

A National Audit Office report in January implied that savings from the tax crackdown would be lower than assumed.

The changed growth assumption would increase the borrowing requirement by about pounds 5bn after four years, equivalent to 3p on the basic rate of income tax, because of lower tax revenues and higher government expenditure, according to Martin Weale, director of the National Institute of Economic and Social Research.

David Walton, a senior economist at investment bank Goldman Sachs, said: "I think the purpose of this audit is to get a more pessimistic forecast for the PSBR." It would help dampen any pressure from the Government backbenches for increased public expenditure, he argued. "If it turns out to be too pessimistic, it would in a sense have hidden some of the tax revenue for a couple of years," he said.

Most economists think the decision to opt for an audit by the NAO, which has no expertise in economic forecasting, is a device to validate changes in the predictions the new Treasury team wants to make anyway.

Some would even argue that 2.5 per cent is too low as a forecast for the economy's long- term growth. Sir Alan Budd, the Treasury's chief economic adviser, is said to believe the UK's potential growth has increased to more like 3 per cent, mainly because of favourable trends in the age structure of the population.

The date for the Budget is also expected to be announced today. Speculation is now centred on 2 or 3 July.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Chris Martin of Coldplay performs live for fans at Enmore Theatre on June 19, 2014 in Sydney, Australia. (Photo by Mark Metcalfe/Getty Images)
music
Sport
Dave Mackay lifts the FA Cup in 1967 having skippered Spurs to victory
football
Life and Style
Marie had fake ID, in the name of Johanna Koch, after she evaded capture by the Nazis in wartime Berlin
historyOne woman's secret life as a Jew in wartime Berlin
News
Jihadi John
newsMonikers like 'Jihadi John' make the grim sound glamorous
Arts and Entertainment
As depicted in Disney's Robin Hood, King John was cowardly, cruel, avaricious and incompetent
film
Life and Style
Travis Kalanick, the co-founder of Uber, is now worth $5.3bn
tech
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn