The Institute for Fiscal Studies (IFS) says there is a 25 per cent chance that the Chancellor of the Exchequer will not be able to meet his own budget targets by the end of the decade.
The annual 'Green Budget' report ahead of the March statement from the leading think tank says that George Osborne's policies so far have only cut the national deficit by 20 per cent, rather than 35 per cent, as the Treasury claims, and his goal of a budget surplus by 2019-20 is looking increasingly unlikely.
The IFS said Osborne has become “boxed in by his own rule”, and is going to have to either raise taxes or impose more spending cuts to meet it.
The chancellor has promised the government will run a surplus every year from 2019–20 in “normal times” - although, like many developed economies, the UK has only run a budget surplus eight times since the 1960s.
The IFS report comes as turmoil on global stock markets has pulled down the FTSE 100, jeopardising another £2bn in lower capital gains tax receipts that would have otherwise gone towards reducing the deficit.
Paul Johnson, director of the institute, said in a statement:
With public spending reaching historically low levels relative to national income, promises on tax cuts to keep and pay for, and pressure on revenues from a number of taxes, there may be more tough decisions to come.
How [Osborne] responds to any further unpleasant fiscal surprises may, more than anything we have seen so far, come to define his period as chancellor.
And of course - Osborne is pinning his chances of becoming Conservative leader on his record as chancellor...