Budget 2015: Background briefing
This note sets out the background to the 2015 Budget, the last of the current Parliament.
The 2015 Budget, the last of the current Parliament, comes at a time when the UK economy continues to perform strongly. GDP growth in 2014 was at its highest since before the recession, the number and proportion of people in work have reached record levels, and by the end of 2015 unemployment looks set to return to its pre-crisis level. Economic growth is expected to remain healthy in 2015.
The combination of low inflation, driven by the fall in oil prices, and improvements in earnings has recently led to average earnings growing in real terms for the first time since the start of the recession. However real earnings are not expected to return to pre-crisis levels before 2020.
The Eurozone, where Greece’s debt woes persist, continues to be a risk to economic growth. At home, the sustainability of growth is dependent on productivity improving from its current period of stagnation.
Government borrowing has fallen by over £50 billion since 2009/10 to £97 billion in 2013/14. The Office for Budget Responsibility (OBR) has forecast a further fall of £6 billion in 2014/15, bringing borrowing to £91 billion. Speculation in the media is that the OBR may reduce their forecasts of the deficit in the Budget due to lower than expected oil prices and inflation.
Debt continues to rise. Public Sector Net Debt reached 79% of GDP in 2013/14; the OBR expects it to peak at 81% in 2015/16 and start falling in 2016/17.