(qlmbusinessnews.com Fri. 13th Sept, 2024) London, UK —
“Ageing Population and Climate Costs to Drive UK Debt to Historic Highs”
The United Kingdom's national debt is projected to triple over the next 50 years, driven by a range of economic pressures, according to the Office for Budget Responsibility (OBR), the government's official financial watchdog.
The OBR's report highlights several contributing factors, including an ageing population, the financial impact of climate change, and escalating geopolitical tensions. Without additional tax revenues or a significant improvement in productivity akin to post-war levels, the report warns that the UK's public finances are on an unsustainable trajectory, declaring that “something has got to give”.
Darren Jones, Chief Secretary to the Treasury, responded to the report by stating: “The OBR has laid bare the shocking state that our public finances were left in by the previous government.” He further noted that the UK is now facing “the highest debt since the 1960s, the highest taxes since the 1940s, and debt on track to be nearly three times our GDP.”
A request for comment from the Conservative Party remains unanswered.
National debt refers to the cumulative amount of money owed by the government, which accumulates over time. Debt increases when there is a deficit, meaning the government spends more than it earns, and decreases when there is a surplus.
Currently, the UK’s national debt stands at nearly 100% of its Gross Domestic Product (GDP). The OBR's central scenario suggests that this figure could rise to 274% of GDP by 2071, with further risks posed by factors such as global conflict, pandemics, cyber threats, and trade disputes.
Public spending is expected to grow from 45% of GDP to over 60% over the next five decades. However, income generated is predicted to remain around 40% of GDP, leading to a widening gap between what the government spends and what it receives.
By 2071, the OBR forecasts an additional £200 billion per year in public spending, primarily on health, social care, pensions, and related benefits. The report also notes that ambitions to increase defence spending to 2.5% of GDP will further strain public finances. Additionally, the costs of transitioning to a net-zero economy, managing extreme weather events, and coping with a declining birth rate are likely to lead to higher spending and lower revenues.
While certain pressures, such as reduced spending on education and benefits for working-age individuals, may partially offset these costs, the overall outlook remains bleak. The public finances are already strained by a series of “extraordinary shocks” over the past 20 years, including the global financial crisis, the pandemic, and the energy crisis.
Based on current policies set from March 2024, the analysis warns that public finances are on an “unsustainable path”. A spokesperson for the Prime Minister confirmed that the government is working to “restore economic stability” and is focusing efforts on supporting the economy and businesses.
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