Government spending figures released by the Office for National Statistics and the Treasury suggest Gordon Brown's budget is on track to marginally beat the deficit target announced at the time of the Pre-Budget Report, the Institute for Fiscal Studies says.
The latest monthly figures suggest central government receipts were 5.3% higher in February than in the same month last year, while the improvement over the full year and the four months between December-March stands at 7.4% compared to the similar year-earlier periods.
Government spending and investment continue to increase, but the IFS says the latest receipts figures should enable the Treasury to stay within its spending targets.
A lot will be riding on the size of the deficit for the full year set to be announced by Brown in Wednesday’s Budget speech.
Currently on track for a £9bn deficit this would beat the chancellor’s best guess of £10.6bn announced in December last year in the Pre-Budget Report (PBR).
However, this would still be more than the full tax-year deficit predicted in the last Budget of £5.7bn.
“A smaller deficit would be good news for the chancellor in the run up to Wednesday’s Budget with regards to his progress in meeting the golden rule” the IFS states.
The golden rule means that over the economic cycle, the government will run an accumulative surplus, which was estimated at the time of the last PBR at about £15bn.
There are three years of the cycle remaining, but that size of surplus is “extremely small relative to the uncertainties inherent in any public finance forecast,” the IFS adds.
Public sector net borrowing is no track to exceed the £37bn forecast in the PBR, but mainly because of last month’s Office for National Statistics’ decision to reclassify London and Continental Railways from the private sector to the public sector, the IFS states.
“This increases the level of net investment recorded by the public sector and brings public sector net debt closer to but still below the sustainable investment rule’s 40% of national income ceiling.”
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