Britains last government is running out of time to balance its mounting public finances, adding to signs that the prolonged deficit-reduction program may extend its deadline by another year to 2018, and a target to slice off debt may also be missed!
George Osborne, the Chancellor of the Exchequer, delivers updated economic and fiscal forecasts, alongside a dramatic change, which is likely to be an essential reform of the heavily-maligned Private Finance Initiative in bid to boost taxpayer confidentiality.
Mr. Osborne is set to deliver his Autumn Statement before parliament on Wednesday, alongside the latest forecasts from Britains fiscal Watch dog, the Office for Budget Responsibility (OBR), which is expected to cut its growth projections.
The Chancellor will unroll a revamped version of the Private Finance Initiative (PFI), which will be probably called Private Finance 2 (PF2). The debatable reform will involve a faster and transparent system of private funding for public infrastructure projects.
Developed initially by the Australian and U.K. governments, the PFI is a program under which private firms agree to build, run and maintain a project or service, from a school, hospital, court, even a prison, which will then repay the cost over a long period.
Existing PFI schemes have been attacked for their generosity to private contractors. However, Mr. Osborne must promise that the PF2 will offer extra confidentiality and transparency over future liabilities facing the taxpayer.
PFI was first introduced by John Majors government in 1992, expanded dramatically under Labour and has been continued under the present coalition administration. However, it has been facing heavy disputes over painful costs and inefficiency.
Mr. Osbornes independent fiscal watchdog, the OBR, is expected to shave its growth projections, with the countrys economy choked by austerity, inflationary pressures and a three-year-old debt crisis in the eurozone, Britains largest trading partner.
In March, Mr. Osborne had seen the economy would grow by an anemic 0.8 percent in 2012, followed by 2.0 percent in 2013 and 2.7 percent in 2014. Economics believe it will be difficult to justify growth forecast much above 5 percent next year.
The OBR is likely to say Osborne will trail his target to begin cutting his governments debt pile in 2015, after peaking at 76.3 percent of the gross domestic product in 2014, forcing Osborne to likely stretch his budget-cutting program to 2018.
According to the British Chambers of Commerce, growth remains too weak and Britains recovery will be slower than previously forecast and the economy needs additional support from the government through a program of business investment.
A weaker global backdrop and growing odds of excessive belt tightening by the government are delaying Britains recovery, thus Mr. Osborne must take a pledge to his fiscal squeeze alongside a risk that further fiscal tightening will harm the recovery.