THE national debt will hit a staggering £1.4 trillion by 2014-15, equivalent to £23,000 for every man, woman and child.
The revelation came in Britain’s first official but independent set of fiscal forecasts, released by the newly-created Office for Budget Responsibility yesterday.
Interest payments on the massive debt pile are set to soar to £67bn a year by 2014-15 – more than the amount the government currently spends on state schools.
Yesterday, some economists said the daunting figure underestimated the true scale of Britain’s debt because it did not take into account the spiralling cost of state pensions.
The Institute of Economic Affairs (IEA) said Britain’s real debt was already £4.8 trillion by the end of 2009-10 – six times higher than the official figure of £772bn.
Nick Silver, an IEA fellow, welcomed the OBR’s first set of forecasts but said it had failed to present “a true picture of the nation’s debt”.
He added: “It is time that the government properly accounted for pension debt, as any company does.”
The shock figures came as the OBR slashed former chancellor Alistair Darling’s growth forecasts.
The body, led by economist Sir Alan Budd, predicts GDP will grow by 1.3 per cent this financial year; 2.6 per cent in 2011-12; 2.8 per cent in 2012-13 and 2013-14; and 2.6 per cent in 2014-15.
Darling had predicted growth of between 3 and 3.5 per cent in 2011-12, and for 2012-13 he predicted growth between 3.25 and 3.75 per cent.
The OBR also cut the forecast for trend growth from 2.75 per cent to 2.25 per cent over the next three years and to two per cent from 2014 onwards.
However, Budd said Britain was unlikely to slip back into recession: “There will be no double dip – the overall environment is slowly improving.”
The recently-installed coalition government seized on the findings as proof of Labour’s economic mismanagement.
Deputy Prime Minister Nick Clegg described the OBR’s forecasts as “alarming” and said the country faced “acute dangers” unless the government took decisive action.
There was some good news in the form of lower budget deficit projections. Net borrowing in 2010-11 will be £155bn, lower than the £163bn Darling predicted in March, and £23bn lower than initially thought over the five years to 2014-15.
Sterling extended gains on the numbers, climbing 1.5 per cent to $1.4763. But the yield on the 10-year-gilt, which moves inversely to prices, was up four basis points to 3.5 per cent, after reaching a session-high 3.52 per cent.
And the structural deficit – the portion that will not be eliminated as Britain recovers – was higher than previously thought due to the lower growth forecasts.
This financial year’s structural deficit will be eight per cent of GDP, 0.6 per cent or £9bn higher than Darling predicted, while next year it will be 6.1 per cent of GDP – 0.8 per cent or £12bn higher.