Source: Sharecast
In its latest Fiscal Risks and Sustainability report, published on Tuesday, the non-departmental public body said that public finances have emerged from a series of global economic shocks with the sixth-highest debt, fifth-highest deficit, and third-highest borrowing costs among 36 advanced economies.
The OBR said that efforts to put public finances on a sustainable footing "have met with only limited and temporary success in recent years", meaning that the fiscal outlook is now facing "mounting risks".
At the end of 2024, the UK government's deficit stood at 5.7% of GDP, around 4 percentage points higher than the average for advanced economies.
Despite measures to lower the deficit featuring in eight out of nine UK fiscal frameworks announced since 2010, underlying debt has risen by 24% of GDP over the past 15 years, and by 60% of GDP over the past 20 years.
Now, at 95% of GDP, public debt is now at its highest level since the early 1960s, with projections pointing to further growth in the medium term.
While the OBR acknowledged the significant impact that the Covid pandemic and subsequent energy crisis had on debt levels, borrowing remains elevated and debt has also continued to rise, it said.
"Against this more vulnerable backdrop, the risks to the fiscal outlook are mounting, including: the sustainability of state and private pensions and the sector’s demand for government debt; risks to assets and liabilities on the public balance sheet and the Government’s new net financial liabilities target; and the combined costs of climate damage and the net zero transition," the OBR said.