The net zero push and Britain’s aging population will force Britain to raise taxes or cut spending by more than £180 billion, the budget watchdog has warned.
The Office for Budget Responsibility said a loss of vehicle tax revenue and rising old-age care spending will ensure that debt exceeds 100 percent of GDP by the middle of the century and 267 pc. in 50 years.
Keeping debt at pre-pandemic levels, about 75 percent of GDP, would require an additional £37 billion every decade over the next 50 years, either through tax increases or austerity measures per decade.
The watchdog said it’s a “significant amount, but not unimaginable over a ten-year period”, totaling £185 billion over the next five decades.
Without action, debt would be higher than during World War II, the OBR warned in its report Fiscal Risks and Sustainability.
Global shocks are contributing to aging and other domestic cost pressures to put public debt on an unsustainable path, the OBR said.
The government is expected to generate about £26 billion from fuel excise duty this year but the rise of electric cars threatens to wipe out this important source of income in the long run. It will likely force ministers to announce major road tax reforms to offset the decline, such as a pay-by-mile system.
The government’s Climate Change Committee (CCC) has: recommended equipping electric cars with tracking devices to enable a tax system per kilometer.
The OBR outlined a number of risks to public finances, including a more dangerous world following Vladimir Putin’s invasion of Ukraine. It warned that higher defense spending, major cyber-attacks and trade wars threaten to skyrocket credit at a time when public finances are already under pressure from an aging population.
The OBR said in the report: “The experience of the past two decades makes it difficult to escape the conclusion that the world is becoming a riskier place, with emerging geopolitical and energy challenges that undermine the risks we have explored in previous studies. enlarge instead of replace reports.
“The result is a challenging combined picture for current and future governments as they steer public finances through both slowly building pressures and unavoidable future shocks.”
The OBR revealed that the government will spend as much this year on supporting the cost of living as it did on helping the economy at the height of the financial crisis.