FORECASTERS have painted a grim picture of the state of the UK public finances under Labour’s watch.
The Office for Budget Responsibility (OBR) has warned that state finances were facing “mounting risks” amid pressure from recent U-turns on planned spending cuts.
The public purse is in a “relatively vulnerable position”, the official forecaster said, adding that recent governments have had only limited success in improving the fiscal outlook.
Reversals of planned tax increases and spending reductions, such as the recently proposed welfare bill and winter fuel allowance cuts, contributed to a continued rise in Government debt, it said.
The report said: “Efforts to put the UK’s public finances on a more sustainable footing have been met with only limited and temporary success in recent years in the aftermath of the shocks, debt has also continued to rise and borrowing remained elevated because governments have reversed plans to consolidate the public finances.
“Planned tax rises have been reversed, and, more significantly, planned spending reductions have been abandoned.”
Chancellor Rachel Reeves has pledged to get debt falling as a percentage of gross domestic product as part of her package of self-imposed fiscal rules adopted before the election to paint Labour as fiscally competent.
But UK public sector debt stood at 96.4% of GDP (gross domestic product) in May, according to latest figures from the Office for National Statistics (ONS).
Now the OBR has said its annual fiscal risks and sustainability report that debt is projected to be “above 270% of GDP by the early 2070s”.
The forecaster added that recent rises in debts have led to “a substantial erosion of the UK’s capacity to respond to future shocks and growing pressures on the public finances”.
The report also indicated that the state finances are likely to come under pressure in the longer-term from issues including significant growth in the cost of state pensions and climate-related factors.
