Ahead of the upcoming 2014 Budget in under two weeks, the paper said models it had created which replicate the Office for Budget Responsibility’s own forecasts showed a huge gap in the public finances.
The Chancellor of the Exchequer could now face a difficult challenge to cut back on spending – having already reduced welfare allowances sharply – and may have to announce spending cuts or tax rises to tackle the overspend.
The FT said the black hole it had found stems from the difference between the actual deficit – expected to be close to £111bn in 2013-14 – and the cyclically adjusted deficit estimated to be £85bn this financial year.
So far politicians have assumed that they only need to look at the lower figure, but this could change in the coming weeks.
The upshot is that it could cause austerity – which has already been extended – to remain in place for longer.
Changes in the OBR’s cyclically adjusted estimates have already been the primary cause of the government’s extension of austerity policies from the five years planned in 2010 to the nine years currently thought needed.