1. The Chancellor usually has a lot of explaining to do in his Pre-Budget Report. However, last year he was able to use to his accuracy in predicting the economy to deflect attention from his difficulties in forecasting the public finances. This year he will have to find excuses for large errors on both counts. 2. It is now clear that this year's public borrowing figures will be little better than last year's, despite the strength of the stock market and oil prices, and the delayed effects of the strong economy last year. Our forecast is for a deficit on the government's current budget of £14 billion in 2005-06, more than double the FSBR projection. With this year's slowdown hitting tax revenues in 2006-07 and little prospect of a fiscal tightening, the deficit will narrow only gradually in the next two financial years.
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