Economists fear £45bn will be added to deficit by 2017

The UK's debt burden is likely to swell by an extra £45bn over the next five years as the spluttering economy fails to grow as fast as expected, experts warned today.

Chancellor George Osborne is set to undershoot the Office for Budget Responsibility's borrowing target of £127bn for the current year, due to a tighter than expected clampdown on spending and higher public-sector job losses. But the good news will probably end there for the Chancellor, as growth fails to match the optimistic 3 per cent a year pencilled in by the independent watchdog for 2015 and 2016.

David Page, the chief UK economist at Lloyds Bank Corporate Markets, warned that a banking system clawing its way back to health and facing regulator demands to hold more capital would act as a handbrake on the economy. "We remain sceptical of the longer-term forecasts that envisage economic activity accelerating in excess of 3 per cent," he said. "Structural changes to the banking system could see credit conditions remain tight, reducing the likely trend level of output in the UK economy.

"Such a shortfall in growth would leave the headline Budget deficit higher than projected – our own estimates suggest by around £45bn over the coming five years."

The OBR is likely to leave its near-term forecasts unchanged after sharply slashing its forecasts for 2012 to just 0.7 per cent last November. But HSBC's chief UK economist, Simon Wells, also accused the OBR of over-optimism which could put borrowing forecasts in later years under pressure, because its assessment of the UK's potential "trend" growth is too high.

This judgement is crucial because if the UK has lower long-term growth prospects Mr Osborne will have to cut the deficit with deeper spending cuts or tax rises rather than relying on growth to get the economy out of its current malaise.

Mr Wells warned: "The OBR assumes trend productivity growth of 2.2 per cent but this seems on the high side. We think growth in the region of 1.5 to 2 per cent is more plausible."

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Recruitment Genius: Business Development Executive - Affiliates & Partnerships

£20000 - £35000 per annum: Recruitment Genius: This multi-award winning foreig...

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor