Autumn Statement: Zero borrowing forecast for 2018-19

Chart showing borrowing forecasts

The independent Office for Budget Responsibility (OBR) has forecast that, under the government's current plans, there will be no borrowing in 2018-19.

The prediction of "a small surplus" was announced at the start of Chancellor George Osborne's Autumn Statement.

The OBR also raised its forecast for growth in the UK economy.

The forecast for this year has gone up to 1.4% from the 0.6% it predicted in March. Next year's growth is now expected at 2.4%, up from 1.8%.

The raised forecasts bring the OBR into line with other forecasters. The average independent forecast is also 1.4% for this year and 2.4% for 2014.

Chart showing growth forecasts

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But while the forecasts for economic growth this year and next year have risen, the predictions for the following three years have all fallen slightly.

The chancellor said at the Conservative Party conference in September that he would balance the budget by the end of the next parliament if the Conservatives got back into office. The new forecasts suggest he could do that a year earlier than promised.

He also told the conference that he could run the government at a surplus without raising taxes, which analysts have said would mean making extensive spending cuts after the next general election.

Analysis

For George Osborne this was always going to be the most enjoyable set piece occasion since he became chancellor in May 2010.

Key indicators have moved in his favour and the outlook is much brighter than at the time of the Budget in March, when a triple dip recession seemed on the cards.

The key fact that he could trumpet in the Commons was that there will be no new annual borrowing in 2018-19 - in fact there will be a small surplus.

His party conference pledge to balance the books by the end of the next parliament will be achieved a year earlier than expected, according to the OBR's forecast.

But recording a small surplus will not wipe out the historic stock of government debt - still at nearly 80% of economic output in 2017-18.

The structural deficit, which is what's left after the effects of economic recovery are accounted for, will not fall any more rapidly than previously predicted.

Unveiling the Autumn Statement, he told the House of Commons: "Britain's economic plan is working, but the job is not done." He promised, "a government that lives within its means".

The last time the government ran an absolute budget surplus - meaning that it generated more in revenues, including tax yields, than it spent - was in 2001.

The OBR predicted government borrowing of £111bn this year, which is down from the £120bn that it had forecast in March, but not as big a fall as had been expected.

It is also considerably above the borrowing of £60bn that the government was expecting when it came to power in 2010.

In its own report, the OBR said: "We do not expect the quarterly growth rates seen during 2013 to be sustained in 2014. While consumer confidence, credit conditions and the housing market have improved, productivity and real earnings growth have remained weak."

Its documents show that the "small surplus" it is predicting for 2018-19 is £2.2bn.

It predicts that government spending will fall from 21.8% of the output of the economy in 2012 to 16.1% in 2018-19, which is the lowest proportion since records began in 1948.

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Autumn Statement 2013

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