The Office for Budget Responsibility (OBR) has sounded the alarm on the UK's public debt trajectory, warning that it could triple in size by 2075, reaching a staggering 300% of GDP – an unsustainable level that eclipses its current mark of around 95%. This revised forecast represents a significant increase from the OBR's previous projection of 270%, which translates to just under £3 trillion. The primary driver behind this alarming trend is the escalating costs associated with state pensions, which are set to rise from 5% of GDP currently to approximately 9% in 50 years.
The 'triple lock' mechanism, which ensures the state pension increases by the highest of annual earnings growth, inflation, or 2.5%, has emerged as one of the heaviest burdens on UK taxpayers. Under the central scenario where this policy remains intact, it alone is expected to account for a significant 1.2% of the overall 3.6% long-term rise in state pension spending – equivalent to £35 billion annually. Conversely, if the triple lock were abolished and replaced with an inflation-only uprating, the government could potentially save around 5% of GDP on state pension expenditure.
Other factors are also set to exacerbate debt pressures, including increased spending on the NHS and health services, projected to rise from 8% of GDP to 13%, as well as a potential six-year delay in raising the state pension age to 68. This latter scenario could cost taxpayers an additional £6 billion in today's terms. Meanwhile, welfare spending on children and working-age adults is expected to remain stable at around 6% of GDP, while education spending might even decline due to changing demographics and falling birth rates.
While tax receipts are on track to reach a record high by the end of the decade, driven largely by increasing inheritance tax receipts, these are unlikely to offset the long-term spending pressures. Shadow business secretary Andrew Griffith has attributed the revised public sector debt forecast to Chancellor Rachel Reeves, criticising what he perceives as a lack of long-term policies to protect UK taxpayers and calling for "hard truths" to address the unsustainable public finances.