National debt due to triple, say independent budget forecasters
The gap between how much money the state takes in and its spending will triple in the next 50 years, according to independent forecasters.
Public debt will rise due to an ageing and ill population as well as climate change, the fiscal watchdog the Office for Budget Responsibility (OBR) has said.
The ratio between debt and everything produced in the economy as measured by gross domestic product (GDP) will reach 270%.
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Latest figures show debt is nearly 100% of GDP.
Why?
The effects of climate change are estimated to damage the economy and public finances by adding between sums equivalent to 20% and 30% of GDP to the debt pile.
But there could be an improvement in the estimates by making everyone healthier, the OBR said.
Improved population health could reduce national debt expectations by more than 40% by the mid-2070s.
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As the population gets older fewer people are paying tax and more needs to be spent on health and care services, costing the state and raising debt levels.
It’s been described by the body as “unsustainable”.
As the combustion engine is phased out and motorists turn to electric vehicles revenue will be lost from fuel duty, cutting a key source of state revenue.
A carbon tax does not replace lost motoring taxes as fuel duty declines, the OBR’s report said.
What’s the OBR?
OBR debt report ‘not a forecast’ but warning
The office was established to crunch the public finance numbers, provide forecasts and analyse government budgets.
Its assessment of the long-term fiscal risks facing the economy was published on Thursday – a report which is typically published in July but was moved due to the UK general election.
The same warning was also made when last year’s report was issued.
Reaction
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In response, the chief secretary to the Treasury said: “The OBR has laid bare the shocking state that our public finances were left in by the previous government.
“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.”