Daily Times

LONDON: Chancellor Philip Hammond is likely to hit his 2016/17 deficit reduction target with 3 billion pounds to spare, due to recent better-than-expected growth, economists working for accountants EY said on Monday.

Hammond will present his first annual budget on March 8 and aims to reduce the budget deficit to 68.2 billion pounds, after government forecasters said in November that June’s Brexit vote had made his predecessor George Osborne’s 55.5 billion pound goal unrealistic.

Economists at EY ITEM Club said a new deficit forecast from the Office for Budget Responsibility of 65 billion pounds for 2016/17 now looked plausible, even if the longer-run budget outlook remained sombre.

“The OBR will paint a marginally better picture of the UK economy and public finances in the short term, but fiscal policy faces major challenges on both the revenue and spending sides in the longer term,” said Martin Beck of EY ITEM Club said.

Britain’s budget deficit last year was one of the largest among big advanced economies at 4 percent of gross domestic product, and the OBR does not currently forecast it to drop to 1 percent until 2019/20.

Beck added that he expected the OBR to revise up its forecast for 2017 growth to 1.6 percent from 1.4 percent. Economists polled by Reuters last week on average forecast 1.5 percent for this year, while the Bank of England sees 2 percent.

Almost all forecasters expect inflation to rise sharply to towards 3 percent by the end of 2017, and EY said Hammond might cut fuel tax or defer a tax rise on airfares to ease concerns about the rising cost of living.

Britain’s statistics agency is due to release January data on the public finances on Tuesday, which economists expect to show a large seasonal surplus due to annual income tax payments falling due at the end of last month.