Government needs to find £50bn of extra spending cuts, says OBR
Wednesday 11 July 2012
The Government will be told by its official forecaster tomorrow that it needs to find up to £50 billion of further spending cuts or tax rises by 2061 to keep a lid on public debts.
The Office for Budget Responsibility (OBR) will warn that the Government must take further action on top of the current £123 billion, seven-year austerity plan or debt will spiral out of control.
Its annual Fiscal Sustainability Report, published tomorrow, will raise the spectre of the unsustainable impact of Britain's ageing population on public finances.
Chancellor George Osborne is likely to seize on the report as evidence for the need to press ahead with his tough programme of austerity measures, which include hundreds of thousands of job losses, an overhaul of the welfare system and a higher pension age.
However, the OBR will not use the report to update its growth or borrowing forecasts, which are delivered at the time of the annual Budget and Chancellor's autumn statement.
The OBR will reportedly say that additional action is needed to prevent the national debt hitting 120% of GDP by 2061, from the current 65%.
In its inaugural sustainability report last year, the OBR warned that as people live longer, health, social care and state pension costs will set off on an "unsustainable upward trajectory" over the next 50 years.
The OBR said it calculated that permanent tax rises or spending cuts worth £22 billion in today's prices would be required in 2016-17 to maintain debt at the previous target of 40% of GDP. It stressed that such a move could be staggered over time.
Tomorrow's report will also provide an update on the true state of the nation's finances, taking into account the cost of public sector pension promises, private finance initiatives, nuclear decommissioning and support for the banking sector.
Even after offsetting those liabilities with certain public sector assets, the OBR is reportedly expected to show that the "whole of government accounts" (WGA) measure of public debt is £500 billion higher than official figures.
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