Two stark reports in the past week have reignited concern over the UK’s economic future—one showing a dip in monthly GDP, the other forecasting a potentially explosive rise in government debt. Together, they paint a sobering picture for Chancellor Rachel Reeves as she prepares for her first autumn Budget.
Friday’s growth figures revealed a further dip in GDP for May, reinforcing fears of a sluggish economy. But it was the Office for Budget Responsibility’s (OBR) long-term fiscal sustainability report that rang the loudest alarm bells. It warned of “daunting” risks to the UK’s public finances and projected that, without urgent action, government debt could triple the size of the economy by 2075.
While such distant forecasts often attract scepticism, the tone of OBR chairman Richard Hughes was unusually forthright. “The UK cannot afford the array of promises displayed to the public,” he said, citing persistent patterns of U-turns on tax and spending from successive governments.
The OBR’s findings are stark: among 36 advanced economies, the UK ranks sixth for national debt, fifth for annual borrowing, and third for borrowing costs. The implication is clear—relying on ever-increasing borrowing to fund rising public services is not a viable long-term strategy.
Yet the pressures to spend more are growing, driven by rising social care costs, increased disability claims post-pandemic, and escalating defence commitments. Local councils are already spending nearly 60% of their budgets on social care, with some exceeding 80%. A temporary £4.6 billion package to plug funding holes in special educational needs risks leaving many local authorities on the brink of bankruptcy.
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