UK fiscal watchdog warns of soaring debt over coming decades
It predicts that public spending would need to rise to more than 60% of GDP from the current 45%, which is already the highest sustained level since the 1970s
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BRITISH public debt is likely to soar to triple its current level over the next 50 years if future governments do not take action, due to pressures from an ageing population, climate change and security risks, a watchdog warned on Thursday (Sep 12).
The UK’s Office for Budget Responsibility (OBR) said debt was on course to rise from nearly 100 per cent of annual gross domestic product now to 274 per cent of GDP by the mid 2070s, and could top 300 per cent of GDP due to other risks – similar to the forecast it gave last year.
“In practice, 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,” the OBR said.
Under the OBR projections, public spending would need to rise to more than 60 per cent of GDP, from the current 45 per cent, which is already the highest sustained level since the 1970s.
Public spending needs would be reduced if there was global action to limit climate change – which might trim debt levels by 10 percentage points -– or if there was improved public health, which might lower debt levels by 40 percentage points.
However, the biggest gains would come if Britain could restore its economic productivity growth rates to the level before the financial crisis, which would enable debt to stay below 100 per cent of GDP over the next 50 years.
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The OBR will publish a more detailed outlook for Britain’s public finances over the next five years on Oct 30, alongside new Finance Minister Rachel Reeves’ first budget since the Labour Party came to power at the July election.
Reeves has said tax rises are likely and blamed the previous Conservative government for leaving a £22 billion (S$37.5 billion) hole in the public finances.
“The OBR has laid bare the shocking state that our public finances were left in by the previous government,” said Reeves’ deputy, Chief Secretary to the Treasury Darren Jones.
“This government began work immediately to address the inheritance with tough choices on spending alongside ambitious action to drive growth.” REUTERS
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