Budget 2016: Economic growth down and government borrowing up, OBR forecasts

George Osborne said he stood by the OBR's forecasts

The British economy will grow slower than had been previously thought, the Office for Budget Responsibility has said.

The fiscal watchdog, which is in charge of official economic forecasts, said GDP would actually only grow by 2 per cent instead of 2.4 per cent in 2016.

As a result, it also increased the Chancellor's forecast borrowing in 2018-19 by £16 billion – a significant set-back in his drive to cut debt.

Osborne announces £3.5 billion cuts before 2020

Growth rates were downgraded in each of the next four years after that, with 2017 growth down from 2.5 per cent to 2.2 per cent and 2018 growth at 2.1 per cent from 2.4 per cent .

The OBR said productivity growth had not recovered from the economic crisis at the rate it had previously expected it to. 

It also warned that the world economic outlook was slowing.

George Osborne described the outlook as “solid, steady growth”. He said he fully backed the OBR’s forecasts.

Figures announced by the Chancellor show he has missed his debt and deficit targets as a percentage of GDP. 

Borrowing was forecast to be up from £4.6 billion to £21.4 billion in 2018-19 – almost £16 billion off-target.

He said the economy was heading towards a surplus eventually and that he would try to cut an extra £3.5 billion before 2020. 

This would result in the public sector share of GDP falling to 36 per cent by 2020, he said.

 “The British economy will stay on course and we will not burden out children and grandchildren. This is a budget for the next generation,” the Chancellor said.

The Chancellor delivered his annual Budget in the House of Commons on Wednesday afternoon.