The Office for Budget Responsibility projects the economy will grow by 1.7% in 2011, down from 2.1% estimate

George Osborne was forced to make an embarrassing admission in his Budget speech, after the Office of Budget Responsibility cut its growth forecasts for 2011 and 2012.

The OBR said the economy will growth by 1.7% in 2011, down from its earlier forecast of 2.1% growth.

Its forecasts for 2012 were also cut from 2.6% to 2.5%. Growth in 2013 is forecast to be 2.9%, 2014 is forecast at 2.9% and 2015 at 2.8%.

There was also worse news than expected on the budget deficit, which will be £146bn this year.

Though earlier expectations were for this to be £149bn, more recently it had been suggested the deficit could fall to £140bn.

The deficit for 2012 will be £122bn, 2013 is forecast at £101bn, 2014 at £70bn, 2015 at £46bn and the deficit is forecast to be £29bn at the end of the 2016 tax year.

At the end of the current forecast period, in April 2016, the government will be presiding over a total public sector net debt of £1.36 trillion.

Public sector net debt will peak at 71% of GDP in the 2013/14 tax year.

There was better news for companies after corporation tax, which was expected to fall by 1% from its current rate of 28%, will actually fall by 2% next month, to 26%.

By 2014, corporation tax will be 23% as the government pushes to become “the most competitive tax regime in the G20”.

There was also some potential relief for higher rate tax payers, as the chancellor reiterated previous comments that the 50% tax rate for earners above £150,000 will only be a temporary measure.