London Daily

Focus on the big picture.
Friday, Jul 03, 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
Luxury bags take over the World Cup: style, status symbol, or just showing off?
National Productivity Institute Highlights Weak Business Investment Outside Southern England
UK High Court Orders Reassessment of Environmental Impact in Major Highway Project
UK Cyber Security Centre Warns of Rising Threat From State-Sponsored Digital Espionage
UK Education Secretary Launches National Reform of Apprenticeships and Vocational Training
Financial Conduct Authority Tightens Climate Risk Disclosure Requirements for Listed Firms
Rail Union Suspends Planned Strike Action to Enter Formal Negotiations With Operators
Northern Ireland Businesses Seek Clarity Over Post-Brexit Trade Rules
Welsh Government Launches Regional Growth Plan Targeting Transport and Digital Infrastructure
North Sea Wind Sector Attracts £5 Billion Investment Amid Expansion of Offshore Capacity
Scotland and UK Governments Establish New Framework for Coordinated Investment in Energy and Infrastructure
UK Government Launches Major Immigration and Border Policy Overhaul Review
Bank of England Signals Interest Rates to Remain Elevated Despite Easing Inflation Pressures
National Health Service Warns of Severe Winter Capacity Strain Across Hospital Trusts
Chancellor Orders Urgent Treasury Review Amid Concerns Over Structural Public Finance Gap
Prime Minister Unveils Sweeping Legislative Programme Focused on Housing, Health Service Reform and State Energy Plan
UK Parliamentary Committee Launches Inquiry Into Falling Primary School Rolls and Public Service Impact
UK House of Lords Debates Electoral Commission Powers and Political Finance Reform
UK Parliament Considers Expanding Carbon Rules to International Aviation and Shipping Emissions
UK Traffic Commissioner Revokes Hampshire Haulage Operator Licence Over Regulatory Failures
UK Parliament Examines Risks in Public Contracts Awarded to Technology Firm Palantir
UK Competition Watchdog Moves Toward More Flexible Merger Rules to Support Efficiency and Growth
UK Government Seeks Approval for £1.15 Trillion Public Spending Plan Amid Scrutiny Over Department Budgets
UK Parliament Debates Sweeping National Security and Steel Industry Nationalisation Bills
UK Government Issues Formal Apology for Historic Forced Adoption Practices and Announces £4 Million Support Scheme
UK DEFENCE AND TECHNOLOGY STRATEGY TILTS TOWARD SOVEREIGN CAPABILITY AND INDUSTRIAL INVESTMENT
UK ECONOMIC POLICY OUTLOOK SHAPED BY LEADERSHIP TRANSITION AND FISCAL SIGNALS
STERLING STRENGTHENS AMID SHIFTING MONETARY OUTLOOK AND GLOBAL LABOUR MARKET SIGNALS
UK HPV VACCINATION PROGRAM NEARLY ELIMINATES CERVICAL CANCER DEATH RISK IN YOUNG WOMEN
UK EXPANDS PRISON SAFETY REVIEW AS GOVERNMENT SEEKS WIDER SYSTEM REFORM
UK DRIVES DIGITAL ASSETS STRATEGY WITH NEW STABLECOIN REGULATORY MODEL
UK TO EXPAND AI INFRASTRUCTURE THROUGH NEW EUROPEAN TECHNOLOGY PARTNERSHIP
UK LAUNCHES £15 BILLION DEFENCE TECH SHIFT TOWARD ADVANCED MILITARY SYSTEMS
CIVIL SERVICE FACES SHIFT IN POWER STRUCTURE AS REGIONAL GOVERNANCE PLANS EXPAND
WHITEHALL CONSIDERS MAJOR DECENTRALISATION PLAN WITH SECOND GOVERNMENT HUB IN MANCHESTER
UK TARGETS SERVICES EXPORT GROWTH IN TRADE TALKS WITH CHINA AMID GEOPOLITICAL TENSIONS
POLICE WATCHDOG PROBES OFFICERS OVER HANDCUFFING OF DYING TEENAGER IN HAMPSHIRE CASE
UK REGULATORS UNVEIL DUAL OVERSIGHT FRAMEWORK FOR STABLECOINS AND DIGITAL ASSETS
KEIR STARMER ANNOUNCES £15 BILLION DEFENCE TECHNOLOGY BOOST IN FINAL MAJOR POLICY MOVE
ANDY BURNHAM SIGNALS STRICT FISCAL RULES AS LABOUR LEADERSHIP RACE SHAPES MARKET OUTLOOK
POUND STERLING HITS ONE-YEAR HIGH AS BANK OF ENGLAND SIGNALS NO IMMINENT RATE CUTS
UK Government Confirms Rejected Asylum Seekers to Remain Amid Enforcement Challenges
UK-China Economic Talks Focus on Services Trade and High-Value Sectors
Buckingham Palace Revamp Plans Unveiled to Modernise Royal and Public Facilities
Two Dead After Light Aircraft Crash in Essex Field, Investigation Underway
Princess Diana Marked at 65 With UK Tributes Reflecting on Her Public Legacy
England Teachers Face New Pay Cap Rules for Academy School Leaders Under Education Reform
Dublin Security Alert Escalates After Stabbing and Reports of Transport Disruption
UK Government Faces Scrutiny Over £10,000 Asylum Living Cost Contribution Requirement
England Prepares World Cup Knockout Match Against Democratic Republic of Congo
×