A POPULATION time-bomb will see UK national debt total more than 100 per cent of GDP if future governments do not go beyond current efforts to eliminate the annual deficit.
Despite the national debt being expected to drop to around 60 per cent of GDP by the mid-2020s, it could hit 107 per cent by 2060-61 as people live for longer, the government’s fiscal watchdog announced yesterday.
“These authoritative forecasts reinforce the necessity for the government to stick to the current fiscal consolidation programme,” responded Citigroup’s Michael Saunders, “especially measures such as public sector pensions and the retirement age that have large effects in the longer term.”
“Further long-term fiscal consolidation measures may also be needed,” Saunders added.
Spending cuts or tax rises equivalent to 0.5 per cent of GDP every decade could be required to avert the debt build-up, the Office for Budget Responsibility (OBR) calculated.
“There is considerable uncertainty surrounding the scale of the fiscal challenge that confronts future governments,” the OBR said in its report, “but the fact there is such a challenge is not in doubt.”
The announcement coincided with the Treasury publishing government accounts to private sector standards for the first ever time.
As revealed in City A.M. earlier in the week, the Treasury declared that public sector pension liabilities hit £1.1 trillion in the fiscal year 2009-10.