Rob Wood at Berenberg Bank expects him to say that net borrowing this year will be around £98bn, £11bn higher than the OBR predicted in March. The overshoot is because of weak income tax revenues; the OBR had expected them to rise 7 per cent this year but they are in fact lower than a year ago.
With the OBR likely to say that much of this extra deficit is structural, and so cannot be eliminated by economic growth alone, economists expect even more fiscal restraint than is already planned. And plenty is planned. The OBR currently expects departmental spending to fall by 9 per cent in nominal terms between 2014-15 and 2018-19, and cyclically-adjusted net borrowing (a measure of the fiscal stance) to fall by 3.1 percentage points of GDP in the next three years; this year, it fell only half a per cent of GDP.
"There is a good chance that extra austerity will be needed," says Mr Wood. The Resolution Foundation and Social Market Foundation, two think tanks, both predicted this week that whichever party wins the general election will cut spending.
Economists believe this threatens to depress growth. Fiscal multipliers, says Russell Jones at Llewellyn Consulting, "have proved to be positive and large". Unless this changes, the Bank of England will have to keep interest rates low to offset the adverse impact of fiscal policy upon the economy.
