UK 'must save £50bn a year or face a similar crisis to Greece'

Total liabilities including future pension and health commitments exceed £2trn, or roughly £80,000 per household

A further austerity programme half as large again as the current package of tax hikes and public-spending cuts will be required to prevent a Greek-style debt crisis from overtaking Britain in the coming years, according to the Office for Budget Responsibility (OBR), the independent body set up by the Government last year to oversee public finances.

Britain's ageing population – and especially the demands placed on the National Heath Service – is the biggest driver of the coming crisis, the OBR says. In its first report on the long-term (50 year) horizon for the national debt, the OBR says that Britain's public-sector net debt, more colloquially known as the national debt, stands at £906bn, some 60 per cent of national income, or £35,000 per household.

But the Government's total liabilities – including future commitments for pensions, health and social care, PFI projects, the nationalised banks and nuclear decommissioning – exceed £2trn, or about £80,000 per family.

On one of the OBR's more pessimistic projections, spending cuts and tax rises of about £50bn a year would be required to return the national debt to the levels prevailing before the financial crash in 2007-08. That compares with the £116bn fiscal squeeze the Government is planning to implement by the end of this Parliament and suggests further pain in the next parliament. If action is not taken, it says, the national debt is predicted to rise to 200 per cent of GDP, unsustainable on any assumption, and the fear of it would be sufficient to provoke a sovereign debt crisis.

If health-service spending is controlled through higher productivity, the planned squeeze on the rest of public spending will be less severe, but the OBR still has a central projection that implies a further £22bn of cuts and tax rises during the next parliament, suggesting little let-up in what promises to be a decade of austerity.

On public-sector pensions, the OBR says that the bill now stands at £1.1trn, or some 80 per cent of GDP, but the bill will decline in relation to the size of the economy, meaning it is not obviously by itself "unsustainable".

Liabilities arising from private finance initiative contracts were around £40bn – far above the £5.1bn previously revealed. Student loans are projected to add £63bn in today's terms to the net debt by the early 2030s.

Meanwhile, the Office for National Statistics reported a fall in unemployment of 26,000 in the three months to May, compared to a drop of 88,000 in the three months to April – a slackening in the rate of improvement.

The numbers claiming Jobseeker's Allowance rose for a fourth successive month to 1.5 million, some of which reflects reforms to the benefits system. Wage rises, at 2.4 per cent, remain well below inflation of 4.2 per cent.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones