UK government announces $32bn bank asset sale

Pound Coin

U.K. Chancellor of the Exchequer, George Osborne, has unveiled a £22 billion ($32 billion) sale of U.K. bank assets owned by the government.

The government is aiming to sell off £13 billion worth of mortgage assets it took over from Northern Rock and Bradford & Bingley, two U.K. lenders which collapsed during the credit crisis, and £9 billion worth of its stake in Lloyds Banking Group .

Osborne kicked off Wednesday's Budget pledging to cut the deficit and warning of the danger of a Greek exit from the euro zone.

He also revealed more optimistic forecasts by the independent government forecaster, the Office for Budget Responsibility, which now expects the U.K.'s gross domestic product (GDP) to expand by 2.3 percent next year, up from the 2.2 percent forecast in December. However, these revisions are not as high as some economists had hoped for.

This Budget is particularly important as it is just seven weeks before the most difficult-to-call U.K. election for close-to a century.

The Chancellor also defended the U.K.'s participation in the China-backed Asian Infrastructure Investment Bank, a potential rival to the World Bank, which has been criticized by the U.S.

It came after the Organisation for Economic Co-operation and Development (OECD) lowered its forecast for U.K. growth in 2015 by 0.1 percentage point to 2.6 percent on Wednesday morning.

"Economics were left at the door a few weeks ago-this will now be a political bunfight until the May 7," Digby Jones, City grandee and a former trade minister, told CNBC.

In the five years since Osborne's Conservative Party entered a coalition government with the Liberal Democrats, the U.K. has undergone one of the best economic recoveries in Europe, but there are still many who doubt the strength of that revival.

"We've got a great big deficit, debts at levels that are historically remarkable-but since we've had quantitative easing and low interest rates, somehow that seems not to matter," Jon Moulton, chairman of private equity firm Better Capital, told CNBC.

The U.K. government's borrowing in 2015-Osborne's key focus for the past five years-came in lower than earlier forecasts, at £75.3 billion.

However, lower-than-expected borrowing doesn't mean that the Chancellor will want to spend the extra cash on giveaways. After all, it doesn't mean that there is more actual money, just that borrowing is less than previously forecast.

- By CNBC's Catherine Boyle

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