OBR warns of 'significant' risks to public finances

investmentweek.co.uk:

The OBR has warned that the UK’s national debt could hit 300% of GDP by the 2070s.

In a report published today (13 July), the UK's fiscal watchdog said the 2020s were «turning out to be a very risky era for the public finances», highlighting the coronavirus pandemic, the energy and cost-of-living crisis and the sudden interest rate hikes as events that have already hit the economy severely this decade.

«This rapid succession of shocks has delivered the deepest recession in three centuries, the sharpest rise in energy prices since the 1970s, and the steepest sustained rise in borrowing costs since the 1990s,» it said.

«And they have pushed government borrowing to its highest level since the mid-1940s, the stock of government debt to its highest level since the early 1960s, and the cost of servicing that debt to its highest since the late 1980s.»

OBR confirms UK recession and weakest public finances 'for many decades'

As a result, the OBR warned that the UK's national debt could hit 300% of GDP by the 2070s. 

National debt hit a 60-year high of £2.6trn in May — equal to 100% of national GDP for a year. Meanwhile, the government faces, among other challenges, a £23bn increase in state pension spending by 2027-28 compared with the start of the decade, the OBR said.

But while other governments also face rising interest rates on debts close to or in excess of 100% of GDP, the UK's public debt position is more vulnerable to some shocks than in the past or in other advanced economies thanks to several other factors, it explained.

This includes having the shortest average maturity on its public liabilities on record, the highest proportion of inflation-linked debt of any major advanced economy and because increasing amounts