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Table 1.2: Total consolidation plans over the forecast period 2011-12 Policy inherited by the Government 25 1 Spending 14 Tax2 11 Spending share of consolidation (per cent) 57 Total discretionary consolidation 41 Spending1,3,4 23 Tax2,3 18 Spending share of consolidation (per cent) 56 1

2012-13 39 24 15 63 59 37 22 62

£ billion 2013-14 55 37 17 68 82 57 25 69

2014-15 68 49 19 72 106 79 27 74

2015-16

2016-17

134 106 28 79

155 126 29 81

Spending consolidation is attributable to three factors: (a) reductions in DEL are calculated by assessing nominal DEL totals against a counterfactual of

growing DELs from 2010–11 in line with general inflation in the economy, as set out in Table 4.8 of the OBR’s pre-Budget forecast (June 2010); (b) reductions in welfare AME due to the net effect of policy changes announced since the June Budget 2010; and (c) estimated debt interest savings, updated for market interest rates consistent with the OBR’s March 2012 Economic and fiscal outlook. 2

This takes account of the latest costings, including the additional rate of income tax.

3

For outer years that have now come into the forecast period, the impacts of tax and welfare AME measures announced previously are grown in line

with general inflation in the economy. 4

The Government has not set DELs for 2015–16 and 2016–17. Figures shown above are based on plans for public spending beyond the Spending

Review 2010 period as set out in Table 2.3. Source: Office for Budget Responsibility and HM Treasury.

1.33 Implementation of the Government’s fiscal consolidation plan is on course: the OBR forecasts that departments will exceed savings targets and deliver underspends of around £6 billion in 2011–12; by the end of 2011–12, almost 40 per cent of the annual fiscal consolidation planned for the Spending Review 2010 period will have been achieved, with almost 30 per cent of the spending and two-thirds of the tax consolidation in place; by the end of April 2012, the Government will have implemented measures to deliver almost three-quarters of the total savings expected from reforms to the welfare system;11 and the vast majority of tax consolidation measures will have been legislated by 6 April 2012. 1.34 The Government has made significant progress in reducing the deficit and reversing the unprecedented increase in borrowing between 2008 and 2010: the deficit in the cyclically-adjusted primary balance, a measure of the structural deficit excluding debt interest payments, has been halved over the last two years, falling from -7.0 per cent of GDP in 2009–10 to -3.4 per cent of GDP in 2011–12. The OBR forecasts that this measure of the deficit will approach balance in 2014–15; borrowing in 2010–11 was £137 billion, £9 billion lower than forecast in Budget 2011; borrowing in 2011–12 is forecast to be £126 billion, £1 billion lower than forecast at Autumn Statement 2011; and as shown in Chart 1.5, the rolling 12-month total of public sector net borrowing has fallen from a peak of £157 billion in May 2010 to £120 billion in the twelve months to January 2012.

11

Based on net savings in 2014–15. This estimate is consistent with Table 1.2. Budget 2012

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Budget 2012  

Budget 2012