The independent forecaster for the UK government has expressed concern that the country’s growing elderly population could significantly increase the country’s overall debt level.
The Office for Budget Responsibility predicted that by 2070, the country’s debt might reach more than 300% of the size of the GDP, up from the current level of roughly 100%.
According to the report, the government finances were also exposed to “significant” dangers from climate change and geopolitical instability.
However, it described the present government’s measures to cut debt as “relatively modest.”
Separate numbers show that the economy of the UK has scarcely expanded since 2019, before the pandemic. This news comes as a result of those figures.
Chancellor Jeremy Hunt, in response to the report from the OBR, stated that the government would make “difficult but responsible” decisions on the state of the public finances.
The accumulation of money that the government has had to borrow over the course of many years in order to finance its spending is referred to as the public debt.
Mr. Hunt has assigned himself the task of bringing the total underlying debt to a lower level during the next five years.
It was stated that the cost of borrowing money for the government has increased as a result of the epidemic, the crisis in the cost of living, and the recent spikes in interest rates.
As a result, it said: The stock of government debt was at its greatest level since the early 1960s, and the cost of repaying that debt was at its highest level since the late 1980s. The average amount of money the government borrowed was also at its highest level since the middle of the 1940s.
It was stated that the government was now in a “vulnerable position” because of the mounting costs associated with an ageing society.
This will lead to an increase in pension spending in the short term, and by 2070, the ratio of persons in their working years to those in their retirement years will have decreased.
“This puts downward pressure on tax receipts, upward pressure on primary spending, and leaves a growing gap between the two,” the Office of Budget and Research (OBR) noted.
According to the organization that makes projections, the interest costs associated with the government’s debt are also expected to rise. In addition, it stated that the level of debt will increase as a result of an increase in the amount of money spent by the government on defence in order to address “growing security threats in Europe and Asia.”
According to the report, the government would have to spend an additional billions of dollars in order to finance the decarbonization of the economy in order to reach target of net zero emissions by 2050.
According to Office for Budget Responsibility, all of these variables might lead to a tripling of the size of the UK’s debt in comparison to the size of the economy during the next 50 years. This is quantified by the debt-to-GDP ratio. It went on to say that unanticipated shocks or measures that were not funded could drive it further higher.
According to Office for Budget Responsibility, the present strategy of the government to first stabilize the debt and then reduce it as a percentage of GDP by 2027-28 is “relatively modest by historical and international standards.”
Commenting on the matter, Mr Hunt stated that the government would make “difficult but responsible decisions on the public finances, including decisions regarding the pay of public sector employees,” due to the fact that additional borrowing would contribute to inflation.
However, Rachel Reeves, the shadow chancellor for Labour, stated that the report from the OBR demonstrated “just how far behind our peers we are falling.”
“This Conservative government needs to make some tough choices in order to bring back some sense of stability in our economy, to get a handle on inflation, and to prevent people’s bills from continuing to go up,”
The OBR report also included a caution that it is anticipated that the price of gasoline would continue to be high until at least 2025.
The quick pace of general price increases has been added to by the soaring prices of oil and gas, which has put additional strain on households that are already having difficulty making ends meet.
The price of gasoline has decreased since the invasion of Ukraine by Russia, but it is still significantly more than it was before the invasion. The price increase was caused by the invasion of Ukraine by Russia.
According to the OBR, the recent spike in the price of gas has finally rendered renewable energy less expensive than gas over the course of its lifetime.
According to the OBR’s analysis, planned government investments in environmentally friendly technologies will not enable the United Kingdom to achieve its goal of reaching net zero carbon emissions by the year 2050.