Halister News

(Bloomberg) -- Chancellor of the Exchequer George Osborne presents his budget amid doubts his full-year fiscal forecast will be met, and question marks over the feasibility of his plan to achieve a surplus by the end of his government’s term.

• For a roundup of views related to the pound, see here; for equities that may be affected by today’s announcement, see here
• These are the key themes to keep an eye on as Osborne speaks:

GROWTH, INFLATION

• The Office for Budget Responsibility raised 2016 and 2017 growth estimates in November, projecting 2.4% and 2.5% respectively; 2015 projection was unchanged at 2.4%
• But growth has been slower than was projected at the time, so a number of analysts expect downgrades today
• Inflation was expected at 1% y/y in 2016, accelerating to 1.8% and 1.9% in the subsequent two years

BORROWING/SURPLUS

• Osborne has introduced new fiscal rules stating the country must run a budget surplus from 2019/20, as long as the economy is growing, and that public sector net debt as a percentage of GDP falls each year
• At the time of the Autumn Statement, the OBR’s deficit forecast was GBP73.5b for the current year, GBP49.9b for 2016/17, and a surplus of GBP10.1b for 2019/2020
• The weaker economic backdrop and muted rate of wage growth has meant a smaller tax take, casting doubt on the forecasts; Osborne said this weekend a further GBP4b of spending cuts are needed

ASSET SALES

• In November, Osborne announced GBP5b of state-asset sales; Sky News reports he’ll call for a sale of Bradford & Bingley assets today
• Meanwhile, stake sales in RBS, Lloyds will probably continue to be delayed amid market volatility and ahead of the summer vote on Britain’s EU membership

GILT, T-BILLS REMIT

• The delays to some of the planned asset sales is one reason many analysts expect a sharp jump in issuance for the next financial year
• The median of 15 estimates from gilt primary dealers is for the DMO to sell GBP137b of securities for the year beginning in April, compared with GBP127.4b for the current year

ACHIEVABILITY

• Splits within the ruling party in the run-up to the ’Brexit’ vote, the government’s slim majority and years of austerity measures add to concerns Osborne has few options left to keep the U.K. on track to meet his targets
• Some observers suggest measures on tax avoidance, insurance premiums and fuel duty could be included to try and boost the coffers

BREXIT

• The chancellor is expected to make the case for staying in the EU as part of his speech, given an exit would probably have significant implications for the U.K. economy and BOE policy