UK's 'unsustainable' debt could reach 320% of GDP in 50 years: OBR

Public debt now is more than double the around 40 per cent of GDP projected by the Treasury in the UK’s first pioneering long-term public finance report published two decades ago.

In its latest Fiscal Risks and Sustainability Report (FRS), OBR focuses on three more significant threats to the public finances: rising geopolitical tensions, higher energy prices and long-term fiscal pressures.

Apart from the Russia-Ukraine war, rising geopolitical tensions have also manifested themselves in the economic sphere with the breakdown of multilateral trade negotiations, the US-China tariff war and a slowdown, and partial reversal, in international trade and investment flows potentially auguring a retreat from the global economic integration that has brought significant economic gains over the past 70 years.

The recent more than doubling of gas and oil prices and the rise in inflation to rates not seen since the energy crises of the 1970s have underscored the economic and fiscal risks associated with the UK’s continued dependence on fossil fuel imports. It has also brought into sharper focus the fiscal choices and trade-offs involved in shifting the UK’s energy mix to one that is compatible with getting to net zero emissions by 2050.

In the long run, the pressures of an aging population on spending and the loss of existing motoring taxes in a decarbonising economy leaves public debt on an unsustainable path in the long term, OBR said.

ALCHEMPro News Desk (DS)