Budget: Osborne may struggle to reach his own fiscal targets

Chancellor George Osborne
Chancellor George Osborne
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BRITAIN'S resilience against a stormy financial outlook was at the heart of the Chancellor's eighth budget, but he failed to deliver against the potential 'cocktail of risks', critics have warned.

George Osborne strode confidently over glaring detail of the country's slow down in growth and productivity and said Britain was 'well-prepared' to cope with turbulent financial markets.

Rishi Sunak, MP for Richmond, North Yorkshire

Rishi Sunak, MP for Richmond, North Yorkshire

Yet Labour claim he has broken his own self-imposed rules that were enshrined in law in the Fiscal Charter voted in 2015.

One rule was that Government's should return a surplus to the Treasury coffers, and there is uncertainty whether this will now happen and borrowing levels have increased.

The Government also been forced to revise down productivity forecasts for the Parliament following Office for Budget Responsibility.

They also predicted the UK economy would grow by 2.4% at November's Autumn statement, but this turned out to be a 'false dawn' has now been revised down to 2%.

Labour critics say the enticing Budget give-aways such as raising raising the higher rate tax threshold to £45,000 and slashing capital gains tax can only be funded because of borrowing levels.

The Chancellor during the Budget said that the outlook for the global economy is weak and it makes for a dangerous cocktail of risks.

Speaking on Radio 4's Today programme this morning, he avoided questions on whether he had broken his three fiscal rules.

He said: "People will look at what we've achieved. We said we'd turn the country around and it's a much stronger place than it was.

"I'm not pretending that we have abolished boom and bust. What I'm saying is we can respond to these events. Our borrowing is coming down, our deficit is coming down."

When told he had missed his target of debt declining every year as a proportion of GDP, he responded with 'I said that in the budget'.

He said: "I make these very public commitments to what the Government is aiming to achieve and in the space of four of five months things have got materially worse in the global economy.

"People have looked at productivity and growth and as a result I've made an adjustment to my plans. Adjustment to our plans to make sure we are going to live within our means and get that surplus."

Debt was expected to be 82.6% of GDP in 2016/17 rather than 81.7% - breaking another of his fiscal rules - and the deficit is also forecast to fall next year to 2.9%, rather than the 2.5% anticipated before.

Paul Johnson, director of the Institute for Fiscal Studies, also told Radio 4’s Today Programme that the Chancellor now had a 50/50 chance of meeting this surplus target.

However Rishi Sunak MP who worked in global finance before taking his seat at the May General Election said he was confident the Chancellor will reach his own targets on the debt and deficit and achieving a surplus by 2020.

He also praised the Chancellor for being so open about the country's financial picture and allowing the Treasury to be subjected to the independent assessment of the Office for Budget Responsibility.

He said: "In spite of a difficult economic climate the UK economy is strong and growing, and I am glad we are still committed to a path whereby our country lives between its means. We are the fastest growing developed country in the world, employment is at a record high. These are achievements to be proud of.

"It's right that the Office for Budget Responsibility is independent so that the Chancellor can't fudge the numbers and make his sums up, which is what we had in the past.

"I think George Osborne rose to the occasion. He has committed himself to the goals he set himself to ensure the next generation find a better economy than when we started.

"You have to remember where we started from. The budget deficit was the largest in the world pretty much so the fact that we have made progress is to his credit."

John McDonnell MP, Labour’s Shadow Chancellor responding to the IFS briefing on the Budget, said: “George Osborne's failures have been further exposed today. His fiscal rule lies in tatters as the IFS expose his shifty accounting.

"As the IFS have said today the shuffling of money from one year to the next by the Chancellor has been clearly engineered simply so he can claim a surplus and not break the only rule he has left. If the Chancellor has to go to such lengths then even this rule is null and void."