According to calculations based on forecasts by independent economists, UK is likely to incur an annual deficit of 5% national income by the time of the next election in 2024, as the coronavirus impact will continue to weigh on the public finances.
Key takeaways
“While the Office for Budget Responsibility, the independent fiscal watchdog, and the Bank of England has predicted rapid recoveries from the current deep recession, a Treasury survey of independent economists suggests that the pandemic will leave lasting scars on the UK’s prosperity and public finances.
The forecasts expect a reasonable recovery but predict that gross domestic product will be 4 percent lower in 2024 than they had expected back in February.
Using the OBR’s ready reckoner tool with the independent forecasts, each 1 percent drop in GDP raises the deficit by 0.7 percent of national income, implying that borrowing will still be £134bn by 2024-25, the highest figure since 2011.
Using its own calculations, the Financial Times estimates that the deficiency of economic growth would leave annual borrowing at £134bn for 2024-25. Independent economists are generally more optimistic about the deficit, but still think that annual borrowing would be £99bn.”
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