50 more years of austerity to '˜rescue UK finances'
Tax hikes and spending cuts worth an extra Â£39 billion every decade for the next 50 years would be needed to prevent ballooning national debt levels, the UK's fiscal watchdog has warned.
The Office for Budget Responsibility’s latest Fiscal Sustainability Report makes for grim reading as it warns over the outlook for government borrowing and debt levels following the recent NHS spending pledge.
Unless the Government takes action, the OBR estimates the main budget deficit would rise from 0.3% in 2022-23 to 8.6% of gross domestic product (GDP) by 2067-68 - a rise equivalent to £176.5bn a year.
This would mean public sector net debt would jump from 80% of gross domestic product (GDP) in 2022-23 to 282.8% by 2067-68 and continue rising after that, according to the OBR.
The OBR calculates that the Government’s promise to spend £20.5bn extra on the NHS is alone responsible for pushing up government borrowing forecasts by 1.5% of GDP and net debt by 57.9% of GDP in 2067-68.
Its solution to address the funding gap is a mix of higher taxes and less spending, signalling no end yet for the Government’s austerity drive.
It suggests so-called policy tightening every decade for the next 50 years would be needed to get borrowing under control, predicting this would be needed at a scale of 1.9% of GDP - equivalent to £39bn each decade. Around a quarter of this is down to the June NHS announcement, it said.
While the OBR said a one-off hit of 5.2% of GDP - £111bn in today’s money - in 2023/24 could get public sector debt down to around 40% of GDP in 2067/68, it would start to rise after that date.
“Tightening policy by 1.9% of GDP a decade would see the debt ratio fall more slowly to begin with, but the overall tightening would be large enough to stabilise the debt ratio at around the target level and prevent it from taking off again.”