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Budget 2012: Government is "on course", says Chancellor

Date: 21 March 2012   |   Author: Rupert Saunders

The Government's current tight economic planning is bringing the country's finances back on course, according to the Chancellor of the Exchequer.

He said borrowing levels were being reduced and both inflation and unemployment are slowly being brought under control.

The official forecast for GDP growth this year, produced by the Office for Budget Responsibility (OBR), is now 0.8% - slightly up on the 0.7% forecast at the time of the autumn statement in November 2011.

However, the forecast for 2013 is slightly down - to 2.0% from 2.1% last autumn.

The OBR has cautioned that further problems in the Eurozone remain a major risk factor for the UK economy along with any spike in oil prices. It has suggested that the Eurozone will slip into recession in 2013 with minus 0.3% growth.

Looking further ahead, the OBR is predicting a 2.7% growth rate by 2014 and then 3.0% over the period 2015/16.

Inflation is expected to be 2.8% this year but fall to 1.9% in 2013 and then settle at around 2.0%, which is also the target rate for the Bank of England.

The Chancellor was able to announce that the Government is borrowing less money than it had predicted.

The net deficit (the difference between Government spending and income) will be £126bn this year, which is £1bn lower than previously suggested, and £120bn in 2013. By 2016/17, the government will have borrowed £11bn less than was being forecast four months ago.

The unemployment rate is expected to fall from around 8.7% currently to 6.3% by 2015/16 with over a million new jobs created.

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