Key facts
- UK public debt is forecast to reach 300% of GDP by 2075, up from a previous estimate of 270%.
- Current UK public debt is around 95% of GDP, totaling just under £3 trillion.
- Rising state pension costs, particularly due to the triple lock policy, are a major contributor to the debt forecast.
- Healthcare spending is also projected to significantly increase as a percentage of GDP.
- The OBR advises early action to address the "unsustainable and ever-rising path" of public debt.
The United Kingdom's public debt is projected to surge to three times the size of its economy by 2075, primarily driven by the escalating costs associated with state pensions and healthcare, according to a stark warning from the Office for Budget Responsibility (OBR).
The independent fiscal watchdog revised its forecast for public debt in 2075 upwards to 300% of GDP, from a previous estimate of 270%. This represents a significant increase from the current debt level of approximately 95% of GDP, amounting to nearly £3 trillion.
Economists at the OBR emphasized the need for "early action" to prevent the deficit from widening and to curb debt that is on an "unsustainable and ever-rising path." The state pension is identified as a key driver, with expenditure expected to grow from 5% of GDP to around 9% over the next 50 years.
The triple lock policy, which guarantees that state pensions rise by the highest of average earnings growth, inflation, or 2.5%, is highlighted as a major fiscal burden. The OBR's assumptions suggest that scrapping this policy and replacing it with inflation-only uprating could save the government approximately 5% of GDP on state pension spending.
Despite the ballooning costs, Andy Burnham, a potential future leader, has pledged to retain the triple lock. This policy has been maintained by successive governments to avoid alienating older voters. Reform UK has also committed to supporting it.
Further financial pressure is anticipated from a potential six-year delay in raising the state pension age to 68, which would cost taxpayers an additional £6 billion in today's terms. Spending on the National Health Service (NHS) and broader health services is also set to increase substantially, from 8% of GDP to 13%.
Conversely, welfare spending on children and working-age adults is projected to remain stable at around 6% of GDP. Education spending, however, may decline as a proportion of GDP due to demographic shifts and falling birth rates.
While tax receipts are on track to reach a record high by the end of the decade, partly due to increased inheritance tax revenue, the OBR notes that receipts from energy-related taxes may decrease as the UK moves towards net-zero emissions.
Shadow business secretary Andrew Griffith criticized Chancellor Rachel Reeves, stating that her legacy will be higher debt and deteriorating public finances, and urged for decisive action to manage the country's finances.