- OBR warns UK public debt faces an unsustainable upward trajectory driven by higher borrowing, ageing population, and increased defence spending.
- Net debt has nearly tripled since 2005; public debt is almost £3 trillion, about 95 percent of GDP, could reach 300 percent by 2075.
- OBR says future governments must tighten fiscal policy or act early; delaying increases costs more and burdens future generations.
Britain’s public debt risks reaching an “unsustainable upward” path owing to higher government borrowing and spending, the nation’s fiscal watchdog warned Tuesday as the UK awaits a new prime minister.
The Office for Budget Responsibility, producing its latest “Fiscal risk and sustainability” report, gave its assessment against the backdrop of an ageing population and increased spending on defence.
The OBR’s update comes also as Andy Burnham is widely expected to become Britain’s prime minister and leader of the centre-left Labour party as soon as this month, replacing Keir Starmer who resigned in June.
“In nearly all of the scenarios we explore, debt eventually moves onto an unsustainable and ever-rising path” in the coming years and decades, the OBR said Tuesday.
“It is almost certain that future governments would have to take action before this happens to adjust the fiscal stance to keep debt at sustainable levels,” it added.
The OBR said that as a result of the global financial crisis in 2008 and the Covid pandemic, “the UK has experienced one of the largest increases in government debt of any advanced economy over the past two decades”.
The watchdog added that UK net debt on an internationally comparable basis has nearly tripled as a share of gross domestic product since 2005.
Official UK data shows the nation’s public debt at almost £3 trillion ($4 trillion), or 95 percent of GDP.
The OBR said Britain’s debt-to-GDP ratio could hit as much as 300 percent in 2075.
“In practice, this ever-upward trajectory of debt would be unsustainable and so, if this baseline scenario began to materialise, it is almost certain that future governments would have to take policy action to stop it.”
Burnham has pledged to stick by the government’s strict fiscal rule dictating that day-to-day state spending be balanced against tax revenues.
This does not mean that debt will not rise, however, while the OBR on Tuesday warned that “the degree of tightening required to prevent debt from following an unsustainable path increases if it is delayed to future years.
“This would make it more costly and place more of a burden on future generations,” it stressed.
Under Starmer and finance minister Rachel Reeves, the Labour government has hiked taxes in order to increase spending on welfare — a controversial move that contributed to the PM’s resignation.
In a recent speech, Burnham vowed “to raise living standards of every single person” in the country.
