The UK faces its most severe budget squeeze since the 1980s amid a “budget emergency” caused by the “biggest economic crisis since the Great Depression,” the Office for Budget Responsibility (OBR) said.
“The Government’s current forecast for net borrowing will be £5.4bn in 2021-22, which is £2bn higher than the previous year’s forecast,” the OBR said in a report.
“This is due to the combination of higher public sector borrowing, higher public debt, and higher inflation and wage growth.”
The Budget Emergency Act 2016 is also likely to increase public debt to £3.9tn by 2023-24, which will be higher than at any time since the recession,” the report added.
The OBR report came as a report from the UK’s independent think-tank, the Resolution Foundation, said a further £1.5bn would be needed to cover public sector spending and other spending cuts to reduce the deficit to 2.9 per cent of GDP by 2021-21.
The OBR’s forecasts have been in place since the start of the year and show that the UK is set to miss its inflation target for 2019-20 by 2.3 per cent, despite the fact that inflation has fallen by 2 per cent. “
It is essential that we remain focused on our primary fiscal objectives of reducing the budget deficit and improving the finances of the UK Government,” said OBR chief economist Martin Beck.
The OBR’s forecasts have been in place since the start of the year and show that the UK is set to miss its inflation target for 2019-20 by 2.3 per cent, despite the fact that inflation has fallen by 2 per cent.
According to the latest OBR forecasts, public sector public debt will rise to £29.4tn by 2021 and is expected to rise to over £31 trillion by 2026-27.
“The economic crisis has had an adverse impact on the UK economy,” said Tim Bale, chief executive of the Resolution Trust, which campaigns for the economic wellbeing of people in the UK.
He said: “We have seen the biggest rise in the deficit in history.”
This is the third year in a row where we have a budget deficit.
“It has been exacerbated by a sharp increase in public debt in the past three years.”
Our economic situation is getting worse by the day and it will only get worse in the coming years.
This has led to the worst recession since the 1930s.
“Bale added: “It has become increasingly difficult for governments to balance the books without making deep cuts to public services.
“We have now been forced to rely on the generosity of the public purse and a reduction in public spending to keep the economy ticking over.”
With the budget emergency in place, it is impossible for the UK to get its finances in order, let alone be able to deliver on its growth targets.
“The Government is currently in the midst of a “big budget” meeting with a “smaller and smaller budget”.
Under the Budget Emergency Plan 2016, public spending was set to increase by £8.7bn over the next five years to £42.8bn, the biggest increase in five years.
The OMB’s latest forecast shows that spending will continue to fall, with public sector debt set to reach £27.6tn by 2025-26, the lowest in five decades.