Autumn Statement: Borrowing to be £8 billion less than forecast

Chancellor George Osborne sprung a huge surprise in the Autumn Statement as he avoided a new borrowing avalanche in his bid to tackle the deficit.

The independent Office for Budget Responsibility confounded the expectations of a raft of City experts as Osborne said borrowing would be £8 billion lower than forecast over the course of the parliament, while the watchdog also lifted growth forecasts for next year and 2017.

The figures come days after the latest dire public finance figures put the Chancellor on course to bust the OBR’s £69.5 billion deficit target for the current financial year set in July’s Budget by as much as £10 billion.

One City economist called the fall in borrowing as “quite amazing” and “suspicious”.

Richard Murphy - an economic adviser to Labour leader Jeremy Corbyn - called the numbers “pure fantasy”, tweeting: “Borrowing way above expectation this year so far but OBR says will fall for year as a whole. Nonsense.”

The Chancellor said the OBR had revised up its estimates of the tax take over the course of the parliament while the cost of servicing UK’s debt burden had fallen.

This is most likely because of the impact of lower inflation on index-linked gilts, as well as expectations that interest rates will stay lower for longer.

Osborne is committed by law to eliminate the deficit completely by the end of the parliament in 2019/20 and had been expected to have less breathing space to act due to the weaker recent trends in the public finance figure.

But the OBR maintains that the UK accounts will deliver a £10.1 billion surplus in 2019/20 - in fact marginally higher than the £10 billion forecasted in July.