The Office of Budgetary Responsibility has undermined the hopes of candidates for tax cuts to the Conservative leadership by saying the UK’s public finances are already “on an unsustainable path in the long run”.
In a long-planned report, the government’s independent tax agency said on Thursday that geopolitical tensions and the energy crisis highlighted emerging risks to public finances, as well as existing pressures on aging. of the population.
The watchdog’s message will be a concern for many of the challengers to become the next prime minister and Conservative leader, who have called for a tax cut to boost the UK’s economic growth rate.
The OBR praised the tax increase overseen by former Chancellor Rishi Sunak because it has allowed the UK’s fiscal position for the next 20 years not to be affected by the Covid-19 pandemic.
He also noted that demographic pressures were more benign than was thought for public finances. But the report on tax risks and sustainability contained a warning for MPs calling for lower taxes.
The OBR said existing demographic pressures and new fiscal risks “add to a challenging outlook for this and future governments as they drive public finances through inevitable future shocks, while managing multiple construction pressures. slow “.
In its projections, the watchdog showed that public debt persistently increased above 100 percent of gross domestic product by the middle of the century and then increased even more to reach twice the level of GDP in the middle of the 2060s.
The OBR said some £ 37bn in tax increases or public spending cuts were needed every decade to stabilize long-term public finances.
“To bring debt back to 75 percent of GDP, the level at which it stabilized in the March 2020 budget prior to the government pandemic, taxes would have to rise, spending would go down, or a combination of both, which amount to an additional 1.5 percent Hardening of GDP at the beginning of each decade over the next 50 years, ”he said.
If geopolitical pressures increased, these tax increases would have to be larger, the watchdog added, as they would if energy prices rose further or remained persistently at current high levels.
In a more dangerous global political environment, the OBR said government action to support vulnerable households at the cost of living would further harm public finances.
“Additional tax support for households of the type seen this year would curb the short-term impact of household income, but only at the expense of passing on a greater public debt burden to future households,” he warned.