Prime Minister 'was aware figures had been massaged'

JOHN MAJOR, the Prime Minister, was aware that the projections for public borrowing published in this year's Budget had been massaged, giving the impression that the Government was on course to balance its books when economic recovery got underway, official sources said yesterday, writes Robert Chote.

One source said the massaging was 'spectacular', although Norman Lamont, the Chancellor, told the Treasury Select Committee yesterday that it was 'not correct' that ministers had tried to put a favourable gloss on the numbers in the run- up to the general election.

'The changes were made when it was clear the Government's policy of balancing the Budget was coming under challenge. The projections were given for a year longer than normal in order to try to show the deficit coming back to balance,' another official said.

The Budget projected that the public sector borrowing requirement would peak in 1993-4 at pounds 32bn, before falling to pounds 6bn by 1996-7 and then to zero as economic recovery boosted tax revenues and cut spending on unemployment benefit.

But Treasury officials privately believed the Government would still face a deficit of more than pounds 5bn when the recovery effect had fed through.

Official projections for Government borrowing more than two years in advance are always regarded as largely illustrative. But the pounds 28bn PSBR forecast for the current financial year in the Budget was also pounds 4bn lower than the Treasury's unpublished forecast made just two months earlier, revealed in the Independent on Sunday on 23 February.

Budget forecasts are officially those of ministers, not Treasury officials, and it has long been accepted in the City that a favourable gloss is applied. Officials were particularly worried about how to reveal the true state of the public finances to an incoming Labour government.