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OBR warns UK debt could rise on unsustainable path from the 2040s

The OBR projects defense spending would need to rise by an extra £28bn a year to meet a 3.5% of GDP pledge, while health and pensions pressures climb over coming decades.

Reported · Written up by our desk · North America

The UK Office for Budget Responsibility (OBR) warned that public debt could move onto an “unsustainable, ever-upward path” from around the 2040s unless policymakers act, as the population ages and defense spending rises, according to the Guardian Economics.

In its latest fiscal risks and sustainability report, the OBR said meeting the government’s promise to spend 3.5% of GDP on defense would require defense spending to increase by an additional £28bn per year, despite more funding outlined in last week’s investment plan.

The OBR also flagged rising health and pension costs as key pressures. It projects state pension spending could rise from 5% of GDP to 9% over the next 50 years if policy remains unchanged, with a third of that increase tied to the triple lock, and it expects health spending to grow from 8% of GDP to 13% by 2075.

While the OBR said the government’s fiscal plans are expected to stabilize the debt-to-GDP ratio at about 95% by 2030-31, its baseline shows debt accelerating again from the mid-2030s, with the pace potentially worsening if deficit-narrowing plans are not followed or if the economy underperforms.

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