The deficit now won’t be cut by the end of the Parliament says chancellor Philip Hammond
The UK government will cut the deficit at a slower rate than previously forecast, according to the Office for Budget Responsibility (OBR). The government's fiscal outlook has been significantly damaged by the cut in GDP growth forecasts.
Public sector net borrowing will be £68.2bn in 2016-17, before falling to £20.7bn by 2020-21. During this Parliament the government will therefore borrow £122bn more than had been previously forecast.
Read more: The OBR just cut forecasts of UK growth as Brexit takes its toll
The new forecasts mean that the government is predicted to be worse off than was thought at the pre-Brexit Budget in March.
In March the OBR had predicted the deficit between government spending and income from tax to be £55.5bn in 2016-17, before being eliminated by 2019-20 to leave a £10.4bn surplus by the end of the Parliament.
The pace of deficit reduction has been slowed significantly
The figures confirm that the fiscal targets of former chancellor George Osborne will not be achieved. Philip Hammond had already publicly abandoned the plan in the aftermath of the UK’s June vote to leave the European Union.
The OBR's analysis said: "The Government is no longer on course to balance the budget during the current Parliament and has formally dropped this ambition in a significant loosening of its fiscal targets."
The revision was less harsh than analysts had expected. An average of independent expectations predicted a deficit of £72.6bn in 2016-17, falling to £42.0bn by 2019-20 – the end of the current Parliament – and £38.7bn the next year.