The UK’s public debt could swell to three times its GDP within 50 years, the Office for Budget Responsibility has warned.
The OBR said public finances are in a “very risky” condition, adding the UK was “more vulnerable” than in the past or than other advanced economies when it came to public debt. In May, debt surpassed 100% of GDP for the first time since 1961.
The OBR said the government would need to impose permanent tax rises and spending cuts equivalent to 4.4% of GDP in 2028-29 if it was to prevent debt from surpassing 100% of GDP in the long term.
Unless action is taken swiftly, the watchdog warned that debt was on “an unsustainable path” and would reach 310% of GDP by the mid-2070s on its baseline projections.
But while this is “alarming in itself”, the prediction “ignores potential future shocks to the public finances”. a future Covid-type event or tackling climate change could propel debt to 435% of GDP in the 2070s, it warned.
“The 2020s are turning out to be a very risky era for the public finances,” the OBR said.
It added that targets set by chancellor Jeremy Hunt, for underlying debt as a share of GDP to have fallen to 94.6% in 2027-28, were “relatively modest by historical and international standards”.
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