A new forecast from the UK government’s official forecaster warns that the national debt is expected to triple over the next 50 years due to mounting pressures. The Office for Budget Responsibility (OBR) attributes this looming rise to factors such as an ageing population, climate change, and increasing geopolitical tensions.
In its report, the OBR stated that without significant increases in tax revenues or a return to the high productivity seen after World War II, the UK’s public finances will become unsustainable in the long run, saying “something has got to give.”
Darren Jones, Chief Secretary to the Treasury, commented on the findings, blaming the previous government for the state of the country’s finances. He noted that the UK is currently facing its “highest debt levels since the 1960s, highest taxes since the 1940s, and debt on track to reach nearly three times our GDP.”
National debt refers to the total amount owed by the government, which accumulates when spending exceeds income, creating a deficit.
The debt-to-GDP ratio indicates a country’s ability to repay its debt, and with the UK’s debt nearing 100% of GDP, concerns are growing. The OBR projects that by 2071, the national debt could soar to 274% of GDP, driven higher by global risks such as wars, pandemics, cyber threats, and trade disputes.
Government spending is projected to rise sharply, from 45% to over 60% of GDP, over the next five decades. Meanwhile, revenues are forecast to stay around 40% of GDP, leaving a significant gap. The OBR also predicts that annual public spending on healthcare, social care, pensions, and related benefits could rise by over £200 billion by 2071.
The OBR report also highlights potential further pressures on public finances, including plans to increase defence spending to 2.5% of GDP, the costs of achieving net-zero emissions, and the economic impacts of climate change and a declining birth rate.
While spending on education and working-age benefits may decrease, the rising costs of state pensions and social care will add substantial strain.
The UK’s public finances have already been strained by a series of major shocks over the past two decades, including the global financial crisis, the COVID-19 pandemic, and the energy crisis. The OBR analysis, based on current policies as of March 2024, warns that public finances are on an “unsustainable path.”
