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UK national debt on track to triple over next 50 years warns OBR
12/09/2024
Government action will be needed to stop the UK national debt spiralling amid pressure from an ageing population and climate change, the fiscal watchdog has warned.
The Office for Budget Responsibility (OBR) said national debt is on an “unsustainable path” and on track to triple against the size of the economy over the next 50 years without “mitigating policy action”.
The latest OBR Fiscal Risks and Sustainability report said the public debt is set to jump to over 270% of gross domestic product (GDP) by the mid-2070s.
UK national debt currently stands at around £2.7 trillion, or 99.4% of GDP, according to estimates from the Office for National Statistics for July.
This sits around the highest levels the UK has seen since the early 1960s.
The latest report highlighted that an ageing population linked to the falling birth rate, fiscal costs from climate change and rising geopolitical tensions are all expected to put increased pressure on Treasury budgets.
Currently, public spending is at almost 45% of GDP for the past fiscal year – its highest sustained level for almost 50 years.
The OBR said these potential pressures could push public spending to over 60% of GDP over the next 50 years.
However, it projected that state revenues – money brought in, predominantly through taxes – are expected to remain at around 40% of GDP.
The report said: “If these pressures and shocks were to materialise as we project, then governments would need to take mitigating policy action to prevent this debt spiral from occurring.”
It comes amid warnings from Chancellor Rachel Reeves that the public finances already face a “£22 billion black hole”.
The new Labour Government has said some tax increases and public spending cuts, such as the move to strip winter fuel payments from millions of pensioners, are needed as a result.
The latest projection showed that health spending is particularly likely to soar over the coming decades, with projections it will grow from 7.6% of GDP to 14.5% over the next 50 years.
Spending on state pensions is on track to rise from 5.2% to 7.9% of GDP, while net interest spending is estimated to quadruple from 2.8% to 11.3% of GDP as the stock of debt increases.
Chief Secretary to the Treasury Darren Jones said: “The OBR has laid bare the shocking state that our public finances were left in by the previous government.
“That’s why this Government began work immediately to address the inheritance with tough choices on spending alongside ambitious action to drive growth.”
Published: by Radio NewsHub