Announcing the Autumn Statement and spending review today (November 25), Mr Osborne said Office for Budget Responsibility (OBR) had revised its forecasts due to better than expected tax receipts and the impact of lower inflation and interest rates.
Borrowing in 2015/16 was expected to be £74.1bn but will now fall to £73.5bn, the chancellor said. Borrowing then falls to £49.9bn in 2016/17 and £24.8bn in 2016/17.
By 2017/18 it is down to £4.6bn, with the OBR predicting a £10.1bn surplus by 2018/19 - up from the £10bn forecast in the Summer Budget - and a £14.7bn surplus a year later, up from a previous forecast of £12bn.
The chancellor said he would spend £12bn more on infrastructure as a result, as well as scrapping his plan to curb tax credits.
The forecasts also mean the UK’s debt to GDP ratio is now expected to be 82.5 per cent for the 2015/16 tax year, revised down from a previous forecast of 83.6 per cent. The figures now take into account the recent inclusion of housing associations on the government’s books.
Estimates thereafter are 81.7 per cent for 2016/17, 79.9 per cent, 77.3 per cent in 2018/19, 74.3 per cent and 71.3 per cent in 2020/21, Mr Osborne said.
The structural deficit for 2015/16 is now expected to be 3.9 per cent, falling to 2.5 per cent, 1.2 per cent and 0.2 per cent by 2018/19. The following two years the OBR expects a surplus of 0.5 per cent and 0.6 per cent.
The chancellor also announced the OBR’s latest UK GDP growth expectations, which saw near-term predictions revised up but long-term figures revised down.
The chancellor highlighted weakening expectations for world growth and world trade and said concerns remained over weakness in the eurozone and concerns in emerging markets.
GDP growth in 2015 is expected to be 2.4 per cent, the same as the Summer Budget, with growth in 2016 and 2017 revised up 0.1 percentage point to 2.4 percent and 2.5 per cent, respectively.
For 2018 the forecast remains 2.4 per cent but 2019 and 2010 are now expected to see new 2.3 per cent growth in either year, both revised down 0.1 percentage point.