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
News
people
News
John Rees-Evans is standing for Ukip in Cardiff South and Penarth
news
Arts and Entertainment
Bianca Miller and Katie Bulmer-Cooke are scrutinised by Lord Sugar's aide Nick Hewer on The Apprentice final
tvBut Bianca Miller has taken on board his comments over pricing
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
PROMOTED VIDEO
News
Elton John and David Furnish exchange marriage vows
peopleSinger posts pictures of nuptials throughout the day
News
in picturesWounded and mangy husky puppy rescued from dump
Sport
David Silva, Andy Carroll, Arsene Wenger and Radamel Falcao
football
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K - £45K: SThree: SThree Group have been we...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'