- OBR warns UK debt could become unsustainable without policy action.
- Ageing population and rising public spending expected to add pressure.
- Treasury says its fiscal plan will keep borrowing under control.
The UK's national debt could rise to unsustainable levels unless governments act sooner rather than later, according to the Office for Budget Responsibility (OBR). In its latest Fiscal Risks and Sustainability Report, the UK's independent fiscal watchdog warned that delaying action would make it harder and more expensive to bring public finances back under control.
The report suggests that long-term pressures, including an ageing population, higher spending on healthcare, pensions, defence and the transition to net zero, could steadily increase government borrowing over the coming decades. While the OBR stressed that its projections are not forecasts and assume no major policy changes, it said they highlight the scale of the challenge facing future governments.
A growing bill for future generations
Under the OBR's baseline scenario, UK public debt would increase from around 95 per cent of GDP in 2030-31 to roughly 300 per cent of GDP by 2075-76 if borrowing continues to rise unchecked.
The watchdog said that in almost every scenario it examined, public debt eventually follows what it described as an "unsustainable and ever-rising path". It added that such outcomes are unlikely to be allowed to happen because governments would almost certainly step in with policy changes before debt reached those levels.
However, the report warned that postponing those decisions would only increase the size of the adjustments required later, placing a greater financial burden on future generations.
The OBR also noted that the UK has experienced one of the biggest increases in government debt among advanced economies over the past two decades.
More spending, less tax revenue
The report identifies demographic change as one of the biggest long-term pressures on public finances, with healthcare, adult social care and the state pension expected to account for a growing share of government spending.
Primary government spending, excluding debt interest, is projected to increase from 40 per cent of GDP in 2030-31 to 49 per cent by 2075-76 under the baseline scenario.
At the same time, the OBR said government revenues could come under pressure as income from emissions-related taxes, particularly fuel duty, gradually declines with the shift towards cleaner transport.
Responding to the report, a Treasury spokesperson said the government has the right economic plan to deal with future shocks. The spokesperson added, as quoted in a statement, that the UK's deficit is expected to fall throughout this Parliament and borrowing will remain below the average for G7 economies, while the government continues to support households, businesses and long-term investment through its fiscal rules.
