Chancellor George Osborne today told Parliament the deficit had been halved since 2010 and is falling, despite recent concerns the Treasury’s grip on retrenching public finances had been loosened.
‘The deficit is falling this year and every year and borrowing is lower than predicted in the Budget,’ Mr Osborne said.
The chancellor said the Office for National Statistics had revised the way in which national accounts were measured, having resolved the status of Network Rail.
Public finances were forecast to end the decade ‘in a marginally stronger position than when we started,’ with a forecast £23bn surplus by 2019/20 Mr Osborne claimed,
'So we end in a marginally stronger position than when we started in the Budget,' he said.
Mr Osborne reeled off figures suggesting public borrowing would be higher than planned in the first two years of the next Parliament, before falling ‘slightly more than expected in the four years after that’- eventually returning a £4bn surplus by 2018/19 and a £23bn surplus the following year.
He claimed the deficit as a proportion of GDP had decreased 0.6% in the current year, bringing the total down to 5%, which he said meant the deficit was now cut in half compared with the 10.2% deficit share the Coalition inherited.
‘It is still too high, but with our plan it falls again to 4% next year,’ Mr Osborne continued.
He said it would then decrease to a 2.1% share of GDP by 2017, then 0.7% in 2018, before returning 0.2% and 1% GDP surpluses by the end of the decade.
This meant, Mr Osborne explained, that the fiscal mandate would be met two years early, but the debt mandate would be reached one year later than planned.
The chancellor said the public finances would be better even though tax receipts have deteriorated and would be £23bn lower by 2017 than planned.
‘You can’t look at tax receipts alone, you have to look at spending too,’ Mr Osborne said.
Lower tax receipts would be offset by £16bn lower debt interest repayments and spending cuts on the same rate as currently would mean £4bn less spending in first two years of next parliament, he explained.
He also said welfare expenditure would be lower due to higher employment and money on public service pensions would be reduced due to lower inflation and the final implementation of Lord Hutton’s reforms, which itself would save £1.3bn.
Mr Osborne also confirmed Parliament would vote in the New Year on a charter for Budget Responsibility, which would be published next week.
Current spending plans would see Whitehall department budgets lowered by £13.6bn in 2015/16 and he said decisions on this scale would be required in the two succeeding years, with further expenditure controls needed after this period.
He said minister for the Cabinet Office, Francis Maude, would today outline a programme to drive further £10bn efficiency savings across Whitehall
But Mr Osborne pledged the NHS would receive £2bn annual extra funding from Whitehall underspends and a further £1.2bn investment would be allocated to boosting GPs services from fines levied on City financiers.
'We’ve shown in this Parliament that we can deliver spending reductions without damaging frontline public services if you’re prepared to undertake reform,' said Mr Osborne. He also noted public satisfaction levels with local government had increased.
In addition to squeezing Whitehall budgets, the chancellor suggested a continued freeze on public sector pay ‘would deliver commensurate savings in the next Parliament’.
