The UK’s public debt could soar as the population ages and tax receipts fall, the government’s independent forecaster has warned.
The Office for Budget Responsibility (OBR) said debt could rise to more than 300% of the size of the economy by 2070, up from around 100% currently.
Climate change and geopolitical tensions also posed “significant” risks to government finances, it added.
But it called current government plans to reduce debt “relatively modest”.
The OBR said the 2020s were turning out to be a “very risky era for the public finances”.
It said the pandemic, cost-of-living crisis and recent interest rate rises had hit the economy and driven up government borrowing costs.
As a result, it said:
- government borrowing was now at its highest level since the mid-1940s
- the stock of government debt at its highest level since the early 1960s
- and the cost of servicing that debt the highest since the late 1980s.
From this “vulnerable position”, it said, the government now faced growing costs from an ageing society.
This will drive up pension spending in the short term, and by 2070 shrink the ratio of working age people to retired people.
“This puts downward pressure on tax receipts, upward pressure on primary spending, and leaves a growing gap between the two,” the OBR said.