Report reveals £8bn windfall for Government
A report by the Ernst & Young Item Club has suggested the Government could be in line for an £8 billion windfall this year due to a rebound in tax revenues and a cut in public spending.
The Item Club is estimating public borrowing for the financial year to the end of March to be £140.2 billion – £8.3 billion lower than the £148.5 billion forecast by the Office of Budget Responsibility.
Andrew Goodwin, senior economic advisor to the Item Club, explains: “So far, the fiscal plan is on track, which is good news for Chancellor George Osborne.
“But the Treasury needs to resist the temptation to utilise the windfall to provide a little sweetener to the bitter pill of fiscal retrenchment – it is still very early days on the long and challenging road to fiscal balance,” added Mr Goodwin.
Yesterday, the Chancellor told the BBC it would be “a huge mistake” for the Government to water down its spending cuts and the planned measures have already helped to “rescue” the UK economy.
The cuts, which are designed to bring down the spiralling budget, have received mixed responses.
Many believe they pose a threat to the economic recovery and could push the UK back into a recession, while others believe they are necessary but the Government should still focus on growth.
In the fourth quarter of last year, the economy suffered a shock contraction but this was attributed to the coldest December for more than a century.