Britain's debt mountain will almost triple over the next 50 years to more than 270% of national income under pressure from an ageing population, the climate crisis and security risks, the public finance watchdog has warned.
In a report outlining the main risks to government tax and spending in the second half of the century, the Office for Budget Responsibility (OBR) said the national debt has tripled since the beginning of the millennium and is set to triple again by 2070.
The report noted that rising debt levels are affecting all advanced economies as countries struggle to manage conflicting demands on their finances amid frequent global shocks.
“It is hard to escape the conclusion that the world is becoming a riskier place,” the OBR said, “and for fiscal policymakers the costs associated with those risks also appear to be rising.”
The report said domestic pressures were increasing the costs faced by governments, saying: “Public finances are now under increasing pressure due to ageing populations, slowing economic growth, global warming and rising geopolitical tensions.”
“Amid these pressures, many governments are struggling to rebuild fiscal resilience during the increasingly short pauses between global crises.
“In practice, if these pressures and shocks materialize as we expect, governments will need to take accommodative policy measures to prevent a debt spiral.”
But the OBR said personal tax increases imposed by both the Conservative and Labour governments would limit the scale of public sector borrowing over the next 50 years, lowering the estimated debt-to-GDP ratio from last year's forecast of 320%.
Slower increases in life expectancy over the projection period are expected to reduce the costs of caring for the elderly compared with previous estimates, and a sharp decline in fertility rates will ease the costs of providing child welfare services.
But in less favorable scenarios, including the risk of further pandemics and failure to tackle the climate crisis, debt could still accelerate to 385% of GDP.
After newsletter promotion
Darren Jones, Chancellor of the Treasury, said: “The OBR has revealed the shocking state in which our finances were left by the previous administration, with the highest debt since the 1960s, the highest tax rates since the 1940s and debt on track to reach almost three times GDP.”
“That's why this Government has started work immediately to address our legacy by making tough choices on spending, alongside ambitious action to drive growth. By repairing our foundations, we can rebuild Britain and make every part of the country better.”
