OBR warns UK debt on unsustainable path without policy action
7 reported
The Office for Budget Responsibility (OBR) has warned that UK public debt will move onto an unsustainable upward path from around the 2040s unless policymakers act to address rising costs from an aging population and increased defence spending. The independent forecaster’s latest fiscal risks and sustainability report projects that state pension spending could rise from 5% to 9% of GDP over the next 50 years under current policy, with health spending expected to increase from 8% to 13% of GDP by 2075. The OBR also stated that defence spending would need to increase by an additional £28bn a year to meet the government’s promise to spend 3.5% of GDP. While the chancellor’s fiscal plans are expected to stabilise the debt-to-GDP ratio at about 95% by 2030-31, the OBR’s baseline projection shows it accelerating again from the mid-2030s. Tom Josephs of the OBR emphasised that earlier action to repair public finances would require a less dramatic adjustment, and that delaying until mid-century would double the required shift. The OBR has been without a permanent director since last December, when Richard Hughes resigned, and the nominee Jonathan Haskel is yet to be confirmed.
What’s reported
The OBR said without government action, debt would move onto an unsustainable, ever-upward path from around the 2040s.
Defence spending must increase by an additional £28bn a year to meet the 3.5% of GDP pledge.
State pension spending could rise from 5% to 9% of GDP over 50 years under current policy; a third of that shift is due to the triple lock.
Health spending is expected to increase from 8% to 13% of GDP by 2075.
The chancellor’s fiscal plans are expected to stabilise the debt-to-GDP ratio at about 95% by 2030-31, but it accelerates again from the mid-2030s.
Tom Josephs said earlier action would be less costly than delaying the required fiscal adjustment.
The OBR has been without a permanent director since Richard Hughes resigned last December; Jonathan Haskel is yet to be confirmed.
Key figures
Andy Burnham (prime minister in waiting, mentioned as facing challenges)
Tom Josephs (member of the OBR’s budget responsibility committee)
Rachel Reeves (chancellor)
Richard Hughes (previous OBR director, resigned last December)
Jonathan Haskel (economist, nominee as OBR director, not yet confirmed)
Sources: The Guardian
