George Osborne's pledge to cut deficit this year set to fail, warns OBR

Watchdog says only implausibly large surge in tax revenues or a significant drop in state spending could help Chancellor's boast be lived up to

George Osborne’s hopes of cutting the deficit in 2012/13 are fading fast, the Chancellor’s own watchdog has conceded.

After digesting January’s disappointing public finances, the Office for Budget Responsibility said that there would need to be an implausibly large surge in tax revenues into Government coffers or a significant drop in state spending over the final two months of the financial year for Mr Osborne to live up to his boast made in December that the deficit would still fall in cash terms in 2012/13.

In December the OBR predicted that even excluding one-off accounting changes that will flatter the public borrowing figures this year the deficit would decline from £121.5bn in 2011/12 to £119.8bn in 2012/13. This forecast came as a major surprise to most economists because the public finances had been deteriorating for the first half of the year as the economy slipped into a double dip recession.

But the OBR now appears to have accepted that its December public borrowing forecast was over-optimistic. The watchdog, led by Robert Chote, says that in order to hit the £119.8bn target, borrowing will need to be £6.4bn lower in February in March than it was in the same months of 2012. “To meet our autumn forecast would now require much stronger growth in tax receipts in the last two months of the year than we have seen since December or much lower-than-forecast expenditure by central or local government” the independent watchdog said in a statement.

The verdict follows a blow for the Chancellor earlier this week when Ofcom revealed that auction of the 4G mobile phone spectrum had raised just £2.3bn, rather than the £3.5bn than the Treasury had pencilled in, pushing Mr Osborne further from his deficit reduction target.

Most City and academic economists expect public borrowing for the full year to come in between £5 and £10bn higher the £121bn deficit recorded in 2011/12. If the OBR moves into line with this analysis at the time of the Budget, scheduled for 20 March, the Chancellor will be forced to admit in the House of Commons that he has, despite his December boast, presided over a rise, not a fall, in the deficit.

There was a £11.4bn surplus in the public finances in January, according to the Office for National Statistics. Though this was an improvement on the £5bn surplus recorded in January 2012 this figure was flattered by a transfer of £3.8bn from the Bank of England to the Treasury.

Excluding this windfall, tax revenues increased by just 1.1 per cent which is a considerably smaller improvement than the OBR anticipated in December. January is traditionally a strong month for tax receipts because companies hand over their quarterly Corporation Tax returns in the month. But last month the value of Corporation Tax receipts were 13.5 per cent lower than in January 2012. However, VAT and income tax receipts were up 4 per cent on a year earlier. Total public borrowing for the financial year to January, excluding one-offs, was £97.6bn, £5.3bn more than the same period in 2011/12.

Treasury sources refused to concede that the Chancellor’s deficit reduction pledge would now be missed. A spokesman said: “[The figures] underline what the Governor of the Bank of England said last week: the road ahead will be difficult, but the economy is on the right track.”

But Labour’s Chris Leslie said: “David Cameron and George Osborne are failing on the one test they set themselves – to get the deficit and debt down”.

Voices
Mosul dam was retaken with the help of the US
voicesRobert Fisk: Barack Obama is following the jihadists’ script
Arts and Entertainment
Loaded weapon: drugs have surprise side effects for Scarlett Johansson in Luc Besson’s ‘Lucy’
filmReview: Lucy, Luc Besson's complex thriller
News
peoplePamela Anderson rejects ice bucket challenge because of ALS experiments on animals
Arts and Entertainment
tvExecutive says content is not 'without any purpose'
PROMOTED VIDEO
News
A cleaner prepares the red carpet for the opening night during the 59th International Cannes Film Festival May 17, 2006 in Cannes, France.
newsPowerful vacuum cleaners to be banned under EU regulations
Sport
sportLeague Managers' Association had described Malky Mackay texts as 'friendly banter'
News
A polar bear’s diet is rich in seal blubber and half of its own body weight is composed of fat
i100
News
peopleCareer spanned 70 years, including work with Holocaust survivors
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
people
Travel
Flocking round: Beyoncé, Madame Tussauds' latest waxwork, looking fierce in the park
travelIn a digital age when we have more access than ever to the stars, why are waxworks still pulling in crowds?
News
London is the most expensive city in Europe for cultural activities such as ballet
arts
Arts and Entertainment
Jeremy Clarkson has rejected criticisms of his language, according to BBC director of television Danny Cohen
tv
Extras
indybest
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

Application Support - Enterprise Java, SQL, Oracle, SQL Server

£45000 - £55000 per annum: Harrington Starr: A well-established financial soft...

Service Desk Analyst (Graduate, Helpdesk, Desktop, Surrey)

Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...

Service Desk Analyst (Graduate, Helpdesk, Desktop, Surrey)

Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...

Junior Quant Analyst - C++, Boost, Data Mining

£25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

Waxing lyrical

Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
From slow-roasted to sugar-cured: how to make the most of the British tomato season

Make the most of British tomatoes

The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

Mackay, Moody and another grim day for English football

The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
La Liga analysis: Will Barcelona's hopes go out of the window?

Will Barcelona's hopes go out of the window?

Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape