UK deficit set to fall faster than expected

BRITAIN’S mammoth deficit is set to fall faster than expected in a boost for George Osborne ahead of the first Conservative Budget for nearly 20 years.

Higher tax receipts and deeper cuts to public spending will shave an extra £12bn off borrowing this year, City experts predicted.

The Government would still borrow an enormous £63bn as it continues to live beyond its means. But that is down from £89.2bn last year and the £75bn the Chancellor pencilled in at the Budget in March – the last of the Coalition before the election.

The shortfall is also well below the record £153.5bn deficit racked up by Labour in 2009-10 when borrowing spiralled out of control.

Mr Osborne has pledged to return Britain to the black in 2018-19 – running the first surplus since the turn of the century. The Chancellor has also proposed a new law that forces the Treasury to run a surplus in ‘normal times’.

A report by investment bank RBC Capital Markets yesterday said borrowing this year will be lower than expected thanks to ‘the policies of Conservative majority government’.

Sam Hill, senior UK economist at RBC, said the higher deficit projections in the March Budget were the result of an ‘awkwardawkward compromise compromised settlement between the coalition parties’. Higher wages and a busier housing market are set to boost taxes, says the report. RBC also expects an extra £7bn of spending cuts to unprotected Whitehall departments on top of those outlined in the last Budget, as well as another £3bn off the welfare bill.

Earlier this month, Osborne said: ‘With our national debt unsustainably high, and with the uncertainly about what the world economy will throw at us in the coming years, we must act now to fix the roof while the sun is shining.’

The national debt topped £1.5trillion for the first time last month.