The Office for Budgetary Responsibility (OBR) has released a report forecasting that the UK’s national debt is set to treble over the next 50 years. The Fiscal Risks and Sustainability Report claims factors such as climate change, an aging population, and global political tensions are sent to see the national deficit steadily rise over the next half century. Based on policy settings from March 2024,  the OBR claims that without some relief from either extra tax revenues or productivity returning to post war levels, public finances were not sustainable in the long run.

The OBR predicts that by 2071, public spending on health, social care, pensions, and related benefits will have increased by over £200 billion. The report also states that the current government’s plan to raise defence spending to 2.5% of GDP is going to cause more strain on public finances. As well as the plans to transition to net zero, the effects of dealing with more extreme weather changes (due to climate change), they predict expensive changes in infrastructure to come. The report also cites a falling birth rate increases in state pensions and the need for social care as damaging the long-term stability of the public coffers.

Currently, UK National Debt is at almost 100% Gross Domestic Product (GDP). The OBR’s base scenario predicts a national debt of 274% in 2071, set to go higher with factors such as war, disease, cyber-conflict, and trade tensions. Public spending is projected to rise from 45% to over 60% of GDP, while income generated from GDP is expected to remain steady at 40%.

Darren Jones, Chief Secretary to the Treasury, said the report reveals the ‘shocking state’ the public purse was left in by the Conservative Government. Since taking office, Chancellor Rachel Reeves has accused the Tories of leaving a £22 billion ‘black hole’ in the public finances and warned that tough measures are to come in October’s budget. Today Jones said that the UK was facing the ‘highest debt since the 1960s, highest taxes since the 1940s, and debt on track to be almost three times our GDP’

The Conservative Party has yet to respond to these fresh criticisms. The OBR does accept that public finances were already under unexpected strain due to ‘a succession of extraordinary shocks’ such as the pandemic, the energy crisis, the Russia/Ukraine war, and the global financial crisis. Some of their report could be relieved by lower education and working-age benefit spending. However overall, the report makes grim reading. Already facing criticism for the decision to cut the Winter Fuel payments, the stage is for the Chancellor to follow through with more tax rises to come.

(Sources: bbc,co.ukj)