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The UK’s public finances are in a ‘very risky’ period after a series of shocks left it in a ‘vulnerable position’ to tackle challenges such as an ageing population, the UK fiscal watchdog has warned.
In its latest fiscal risks report, the Office for Budget Responsibility said state finances have been shaken and public debt increased by a triple shock from the pandemic, the war in Ukraine and the cost-of-living crisis.
As a result, the UK government’s debt pile grew to more than 100% of annual gross domestic product for the first time since 1961 in May.
The government has committed to bring debt down as one of its five pledges and the watchdog has said this debt is set to decline by 2027-28 as a result.
However, the OBR has cautioned that pressures from the ageing population, climate change and geopolitical issues are likely to reverse this trend dramatically in the longer-term.
It said public debt could surge to more than 300% of economic output by the 2070s due to these challenges.
The OBR also said that long-term sickness will cost the state a further £6.8 billion this year as the number of Britons unable to work due to illness surged after the pandemic.
The forecaster said there was a 440,000 increase in those unable to work and a 490,000 rise in workers with ill-health but in work claiming health-related benefits.
The OBR added: ‘While the disruption to and difficulties in accessing NHS services may have played a role in the worsening physical and mental health of the working-age population during this period, tackling the NHS waiting list alone is likely to make only a modest difference in the number of people out of work.’
source: PA
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