UK national debt is on course to treble over the next half a century due to several pressures, according to the Office for Budget Responsibility (OBR).
Those pressures include an ageing population, hotter temperatures due to climate change, and rising geopolitical tensions, the OBR’s new Fiscal Risks and Sustainability Report revealed.
“The OBR has laid bare the shocking state that our public finances were left in by the previous government,” said Chief Secretary to the Treasury Darren Jones.
“Highest debt since the 1960s, highest taxes since the 1940s, and debt on track to be almost three times our GDP.”
The OBR said without extra tax revenues or a return to post-war productivity levels, the public finances were not sustainable over the long term. “Something has got to give,” said OBR member Sir David Miles.
The government’s official forecaster says its base scenario is a national debt of 267% of GDP in 2071, with risks from war, disease, cyber-conflict and trade tensions pushing that even higher.
By 2071, the OBR projects the equivalent of a £250bn per year increase in public spending on health, social care, pensions and related benefits.
The report claims the previous and current UK government’s aspirations to raise defence spending to 2.5% of GDP could add pressure to the public finances.
In addition, the cost of transitioning to net zero, battling extreme weather linked to climate change, and a falling birth rate could also lead to more spending and less revenue, it said.
The bill for state pensions and social care is set to rise substantially.
Some of this would be mitigated by lower education and working-age benefit spending, reflecting a new assumption that the population will fall after 2044, as birth rates remain low and net migration falls.
The public finances are already under pressure due to “a succession of extraordinary shocks” over the past two decades, the report notes.
This includes the global financial crisis, the pandemic and the energy crisis.
Based on policy settings from March 2024, the analysis warns that public finances will be put on “an unsustainable path”.
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