The Office for Budget Responsibility (OBR) has warned incoming Prime Minister Andy Burnham that the UK faces an “explosive” rise in national debt, with public finances on an “unsustainable and ever-rising path.” The UK’s national debt, already nearly £3 trillion (almost 100% of GDP), could surge to 300% of GDP over the next 50 years—equivalent to about £9 trillion in today’s money.
OBR Report Highlights Unsustainable Debt Trajectory
In a new report, the OBR states that almost all its scenarios show public finances moving onto an unsustainable path, with debt ultimately growing explosively. The warning comes as Burnham prepares to replace Sir Keir Starmer as prime minister, with tackling ballooning debt and public sector borrowing among his key economic challenges.
The OBR said: “The UK’s public finances are currently in a challenging position relative to history and to other similar countries, with government debt having increased by one of the largest shares of GDP of any advanced economy over the past two decades.”
Ageing Population and Healthcare Costs Driving Debt
The OBR singled out an ageing population and a surge in healthcare spending as piling pressure on the UK’s strained public finances over the next 50 years. The UK population is projected to peak at around 73 million by 2050 before starting to fall. Healthcare spending alone is forecast to rise from 8% of the economy in 2030/31 to 13% by 2075.
Another costly policy is the triple lock pledge on state pensions, which Burnham has committed to maintaining. The triple lock increases the state pension by the highest of average earnings, inflation, or 2.5%. The OBR estimates the triple lock has cost around three times more than initially envisaged due to volatile inflation over the past two decades.
Social Care Costs and Falling Fuel Duty Revenue
Adult social care costs are forecast to jump from 1.2% of GDP in 2030/31 to 1.8% by 2075/76, a similar growth rate to health spending. Other welfare spending is projected to remain relatively stable at around 6% of GDP.
Meanwhile, a key tax-raising measure is set to decline. The planned ban on new petrol and diesel car sales and the switch to electric vehicles will reduce fuel duty income from 1.6% of GDP to just 0.5% over the next five decades.
Expert Calls for Long-Term Fiscal Strategy
William Ellis, senior economist at IPPR, said: “It’s right that the government – and Andy Burnham as the prospective new prime minister – have committed to the fiscal rules. With markets unstable and borrowing costs high, responsible borrowing gives markets the certainty they need. But the OBR’s report shows that sound public finances mean taking sustainability seriously over the next fifty years, not just until the next election. Ageing, climate change and weak productivity will pile pressure on the public finances for decades – and the current rules reward short-term headroom whilst penalising the very investment that would ease those pressures. The government should consider rethinking the fiscal rules in the years ahead to meet the long-term challenges we face.”
