Public finances on 'unsustainable path' amid rising healthcare costs, OBR warns
Britain's public finances are on an "unsustainable path" and the Chancellor will need to hike taxes and cut spending to balance the books in the years ahead, according to official economic forecasters.
The Office for Budget Responsibility (OBR) warned that ballooning healthcare costs pose the biggest threat to the UK's creaking public finances, with spending on the NHS as well as the state pension rising faster than economic growth.
Its 50-year forecast estimates that without policy action, public sector net debt would surge from 82% of gross domestic product (GDP) to 234% by 2066-67 as government borrowing rises to 16.6% of GDP.
Instead of moving into a surplus, the budget deficit would widen from 0.7% of GDP in 2021-22 to 1.8% by the end of the next Parliament in 2025-26.
"Rising healthcare costs could make it harder for the Chancellor to balance the budget in the next Parliament and put the public finances on an unsustainable path over the longer term in the absence of further tax increases or cuts in other public spending," the OBR said.
The report forecasts the Government would need to inflict tax increases and spending cuts of £30 billion a year to return borrowing back to levels seen before the 2008 financial crisis and offset soaring healthcare and pension costs.
Speaking in the House of Commons, Chancellor Philip Hammond said the OBR's latest 50-year forecast "sets out a possible outcome if the Government takes no action, and, as I made very clear in the Autumn Statement, we are acutely aware that action will be required in order to return the public finances to balance".
Former Chancellor George Osborne had planned to balance the books by the end of this parliament, but Mr Hammond has already ditched this plan.
He said in November's Autumn Statement the Government would put the public finances back in the black "as early as possible" in the next Parliament.
OBR chairman Robert Chote cautioned at the time this would prove "quite a challenge".