The Office for Budget Responsibility has published its most alarming fiscal risks and sustainability report to date, painting a deeply troubling picture of Britain’s long-term finances.
The annual review, which examines dangers facing the UK economy over the next half-century, warns that public finances are deteriorating at a rapid and accelerating pace.
“In nearly all of the scenarios we explore, debt eventually moves onto an unsustainable and ever-rising path,” the OBR writes, delivering one of dozens of damning verdicts on how successive governments have managed the economy.
Based on current trends, public sector net debt is projected to swell from roughly 100 per cent of GDP today to as much as 300 per cent by 2075, a figure that would severely threaten the government’s ability to borrow.
Should productivity fail to improve in line with OBR assumptions, that figure could balloon to an eyewatering 700 per cent of GDP, a scenario that would represent a complete collapse of fiscal sustainability.
Even in the best-case scenario, where productivity gains exceed OBR predictions, debt would still rise to 180 per cent of GDP, underscoring the scale of the challenge facing any future government.
The report also highlights the growing impact of the net-zero transition on the tax base, with revenue from fuel duty and environmental taxes projected to fall from 1.6 per cent of GDP today to just 0.5 per cent by 2075.
As electric vehicles and renewable energy become dominant, these longstanding revenue streams will steadily evaporate, helping explain why governments have increasingly scrambled to raise tax rates and identify new sources of income.
The OBR identifies the triple lock as the single biggest policy burden on public finances, a commitment ensuring the state pension rises in line with inflation, wages, or 2.5 per cent each year, whichever is highest.
Under the triple lock, spending on the state pension is set to almost double as a share of GDP, rising from five per cent to nine per cent over the next 50 years, effectively guaranteeing welfare spending grows faster than the economy indefinitely.
By contrast, transitioning to an inflation-linked pension policy would bring that spending down to a more manageable three per cent of GDP, representing a significant long-term saving for the public purse.
Underpinning all of these pressures is a rapidly ageing population, driven not only by longer life expectancy but increasingly by falling birth rates, with couples having fewer children than in previous generations.
This demographic shift creates a double pressure on public finances, as older citizens consume more state resources while a shrinking young workforce means fewer taxpayers to fund growing demand.
The OBR does offer a cautious note of reassurance, stating that immediate action to reduce the deficit would make future demographic and economic pressures far more manageable, cutting the cost of debt servicing significantly.
Andy Burnham has already recommitted Labour to the triple lock, a pledge that critics argue signals a troubling unwillingness to confront the structural reforms the OBR’s findings make increasingly difficult to avoid.