London Daily

Focus on the big picture.
Tuesday, Jul 28, 2026

Tax rises or spending cuts needed to avoid 'unsustainable' public debt, watchdog warns

Tax rises or spending cuts needed to avoid 'unsustainable' public debt, watchdog warns

The Office for Budget Responsibility said the UK is facing a public debt burden at three times more than its current level, as it warned that inflation could lead to a recession in the UK.
Tax rises or spending cuts are needed to avoid an "unsustainable" public debt burden, the UK's fiscal watchdog has warned.

The Office for Budget Responsibility (OBR) said the government faces a debt burden three times more than its current level due to increasing costs from an ageing population and falling future tax revenues from motor fuel.

Debt is on course to reach almost 320% of GDP in 50 years' time - up from 96% currently - if successive governments do not tighten fiscal policy, the agency said in its annual health check of public finances.

It is forecast to rise to more than 100% of GDP in 30 years.

Bringing debt back to 75% of GDP - the level in the government's pre-pandemic budget - "would need taxes to rise, spending to fall, or a combination of both", the OBR said.

This would require curbs of 1.5% of GDP - £37bn a year in today's terms - at the beginning of each decade over the next 50 years, it added.

Public debt is now at levels not seen since the early 1960s, having risen by 2.3 percentage points of GDP in the past year.

"The pressures of an ageing population on spending and the loss of existing motoring taxes in a decarbonising economy leaves public debt on an unsustainable path in the long term," the OBR said.

The government is set to lose a huge source of tax revenue as it moves to ban the sale of new petrol and diesel-powered cars from 2030. Electricity is taxed less heavily.

The UK's ageing population brings with it added healthcare, pensions, and social care costs.

The OBR also said the government has so far spent as much this year to help households with the cost of living crisis - 1.25% of GDP - as it did to support the economy during the financial crisis.

Public debt is now more than double the amount the OBR had expected it to be 20 years ago.

The OBR said risks to public finances include rising inflation, which could tip the economy into recession, "continued uncertainty about our future trading relationship with the EU" and a resurgence of COVID cases.

Other factors are rising interest rates and growing geopolitical tensions, which are exemplified by Russia's war in Ukraine and have manifested in trade barriers between countries.

The government spent £7.6bn on interest payments to service its debt in May, far above the £5.1bn predicted by the OBR.
Newsletter

Related Articles

0:00
0:00
Close
Badenoch Offers Tory Votes to Keep Serious Offenders in Prison
Why Americans Queue for $15 Ice Cream and a $100 Caviar Pint
Another AI Genius Left the United States — and Silicon Valley Is Starting to Worry
Shein Reports $99mn Loss as Trade Barriers Test Low-Cost Model
CXMT Gains 466% in China’s Biggest IPO Since 2010
Amazon Seeks Approval for 5,105-Satellite Mobile Network
Burnham Puts School-to-Work Reform at Centre of Welfare Strategy
Johnson & Johnson Agrees to $5.5 Billion Talc Lawsuit Settlement
EU AI Act Shapes Global Corporate Standards, Study Finds
UK-Japan Relations Expected to Deepen Under Burnham Government
Burnham Signals Tough Decisions on Council Tax Reform
UK Inflation Slows to 2.6% in June
Bank of England Holds Interest Rates at 3.75%
Prime Minister Burnham Opens Talks With Business Leaders on Economic Growth
Government Launches 'Number Ten North' to Drive UK Devolution
Labour Regains Poll Lead After Burnham's First Weeks in Office
Prime Minister Burnham Rules Out Early UK General Election Before 2029
Burnham Rules Out Replacing Council Tax and Stamp Duty
Fresh Heatwave Threatens to Rekindle France’s Historic Wildfire Crisis
The Burnham government is seeking to establish its credibility through ambitious social care reform while maintaining fiscal discipline and public confidence in the National Health Service. Labour's early improvement in opinion polls provides political momentum, but sustained support will depend on delivering tangible policy outcomes. Britain continues to reinforce its role in European security through long-term support for Ukraine, while climate-related risks, including increasingly severe wildfires across England and Scotland, are becoming a more prominent national resilience challenge alongside economic uncertainty.
United Kingdom Economy Remains Exposed to Global Energy Risks
Prime Minister Dismisses Calls for an Early General Election
Scottish Wildfires Continue to Stretch Emergency Services
United Kingdom Faces Rising Wildfire Risk as Heatwave Continues
Lower Oil Prices Ease Inflation Concerns and Support Financial Markets
Financial Conduct Authority Launches Consumer Campaign on Car Finance Compensation
Government Prioritises Employment Over Benefit Cuts in Welfare Reform Plans
Prime Minister Rules Out Sweeping Property Tax Changes Before Autumn Budget
AstraZeneca Beats Expectations as Cancer Medicines Drive Strong Profit Growth
Labour Regains Narrow Polling Lead After Burnham's First Week in Office
United Kingdom Reaffirms Long-Term Commitment to Ukraine Under Burnham Government
Prime Minister Andy Burnham Makes Social Care Reform the First Major Test of His Government
Following OpenAI's Cyberattack: 'Most Companies Still Do Not Understand What Is Coming'
Autopsy Finds No Violence in Death of Epstein-Linked Model Scout
Indian Education Minister Resigns After Cockroach Youth Protests
California Desert Data-Centre Plan Stalls as Water and Power Disputes Mount
Northern Ireland Border Security Tightened After Military-Grade Explosive Interception
British Hospitality Sector Targets Summer Visitors Through Regional Promotions
England River Access Debate Intensifies After New Data Shows Limited Public Access
Royal Navy Strengthens Maritime Vigilance Amid Rising Security Concerns
UK Education Department Expands Mental Health Support for Young People Entering Work
UK Tourism Industry Launches Summer Campaigns to Boost Domestic Travel
North England Transport Plans Advance to Support Industrial Growth
Financial Markets Watch New Government’s Economic Strategy as Investors Assess Fiscal Risks
Royal Navy Continues Monitoring Russian Naval Activity Near UK Waters
UK Care Workers May Receive Immigration Exemptions Under Proposed Visa Changes
Health Secretary Yvette Cooper Begins Emergency Talks to Address NHS Staffing Shortages
UK Banks Launch High-Interest Savings Offers to Attract Household Deposits
North Sea Oil Drilling Projects Face Delays After Offshore Equipment Accident
Cairngorms Wildfire Highlights Growing Pressure on UK Emergency Services
×