The UK’s debt mountain will almost triple to more than 270% of national income over the next 50 years because of pressures from an ageing population, the climate crisis and security risks, the public finances watchdog has warned.
In a report that lays out the main risks to government tax and spending into the second half of the century, the Office for Budget Responsibility (OBR) said the size of the national debt had tripled since the turn of the millennium and would rise threefold again up to 2070.
The report said rising debt levels affected all developed economies as they struggled to cope with competing demands on the public purse in a time of 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 seem to be rising, too.”
The report said domestic pressures were adding to the costs faced by governments: “Public finances are now under growing pressure from ageing populations, disappointing economic growth, a warming planet, and rising geopolitical tensions.
“Amid these pressures, many governments have struggled to rebuild their fiscal resilience during the increasingly brief interludes between global crises.
“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.”
However, the OBR said higher personal taxes imposed by Conservative and Labour governments would limit the size of public sector borrowing over the next 50 years, bringing down the estimated ratio of debt to gross domestic product from last year’s projection of 320%.
More modest increases in life expectancy over the forecast period were expected to reduce the costs of looking after older people, compared with previous estimates, and a sharp decline in the fertility rate would ease the cost of providing children’s services.
However, under a less benign scenario that included the risk of further pandemics and a failure to tackle the climate crisis, debt could still accelerate to 385% of GDP.
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The chief secretary to the Treasury, Darren Jones, said: “The OBR has laid bare the shocking state that our public finances were left in by the previous government. Highest debt since the 1960s, highest taxes since the 1940s, and debt on track to be almost three times our GDP.
“That’s why this government began work immediately to address the inheritance with tough choices on spending alongside ambitious action to drive growth. By fixing the foundations, we will rebuild Britain and make every part of the country better off.”