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UK public debt could be set to almost triple by the mid 2070s, according to a new report, mounting from less than 100% of gross domestic product (GDP) to around 270% over the next 50 years.
The Office for Budget Responsibility’s (OBR) fiscal risks and sustainability report charted the hill the new Labour government has to climb as it tries to build a more sustainable economy following the shock of Covid-19 to public coffers.
It said that UK debt could be knocked into a “permanent upward trajectory” following 25 years defined by multiple economic shocks.
The regulator said that over the next 50 years, public spending is projected to rise from 45% to over 60% of GDP, while revenues remain at around 40% of GDP. As a result, debt would rise rapidly from the late 2030s to 274% of GDP.
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Debt is projected to rise further to over 300% of GDP, when further shocks and pressures are taken into account.
“The OBR has laid bare the shocking state that our public finances were left in by the previous government,” said Darren Jones, chief secretary to the Treasury. “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.”
The OBR said that a few factors could alleviate the upward pressure on debt. These included focusing on limiting global warming from 3% to 2%, which it said could alleviate around 10 percentage points of upward pressure on the debt-to-GDP ratio.
The costs associated with mitigating global warming are one thread of this, while the damage global warming might wreak is another.
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This OBR also cited improving the health of the population as a factor that could reduce the rise in debt by a further 40% of GDP. Looking ahead, rising health spending is the single most important driver of the projected increase in government debt over the next 50 years,.
Meanwhile, making the country more productive would alleviate the debt burden. But this is tied into the health issue — healthier populations are more productive ones.
The economic forecaster is set to go into more detail in a press conference later on Thursday.
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