The OBR has published a new report looking at the sustainability of the public finances via scenarios for tax, spending, and debt over 50 years. It’s not pretty…
It runs scenarios for state finances. Some key findings:
- Debt hits 300% of GDP by the 2070s on current policy. In the OBR’s baseline, public sector net debt climbs from 95% of GDP today to around 300% by 2075-76. Total public spending rises from 44% to 62% of GDP and annual borrowing goes from under 2% to nearly 20% of GDP…
- Spending to blame: Primary spending rises from 40% to 49% of GDP while receipts stay flat at around 41%. Health and the state pension alone account for most of the problem…
- Borrowing mostly to pay interest: Debt interest reaches 12% of GDP long-term and becomes the single biggest driver of borrowing, accounting for more than half the total increase. It has already more than doubled as a share of GDP since before the pandemic and, at £110 billion in 2025-26, is now the third-largest area of public spending after health and welfare.
- Well is running dry for tax: Receipts are forecast to reach 42.7% of GDP by 2030-31, an historic peak, up from 37% before Covid. The OBR warns that more hikes would carry “increasing risks and worsening trade-offs” and a “large negative labour supply effect.” Laffer curve…
- Stealth-tax will drag a minimum-wage worker into the higher rate. If tax thresholds keep rising only with inflation, by the late 2060s a full-time worker on the National Living Wage would be a higher-rate taxpayer, with two-thirds of all earners paying 40% or more. The threshold freezes of the 2020s are already set to raise over £60 billion a year by 2030-31…
- Only counts 3.5% of the government’s 5% defence pledge. The headline commitment is 5% of GDP on defence by 2035, but the OBR models only the 3.5% “core” portion. Confidence in Labour proposals there…
- Debt doom loop: In the OBR’s worst modelled scenario, higher debt forces gilt yields up to 9.6%, debt reaches 540% of GDP, private investment is crowded out, and GDP per person ends up 14% lower than in a stable-debt world. The report warns that real markets can turn suddenly, with a flight from gilts its models cannot fully capture.
- The one “sustainable” scenario: Massive productivity rises and a reduction in spending. Who can deliver that?
A warning to Burnham that his tax and spend plans will make things worse…
Read the full report below:
