The Office for Budget Responsibility, (OBR), an independent watchdog, has said that austerity measures must extend well beyond the end of this Parliament if the national debt is to be brought under control. It could take as many as fifty years to reduce the national debt to its 2007 pre-financial crisis level.
The OBR, in its annual report, said that the national debt will continue to increase if permanent cuts to government spending are not made. If public spending is permanently reduced by £20 billion by 2020, the national debt could be reduced to 40 per cent of Britain’s economic output or GDP by 2064.
Last year, in 2014, the net debt for public spending was £1.48 trillion, 80 per cent of the GDP. In 2008, the net debt was £600 billion, around 42 per cent of the UK’s economic output.
The OBR went on to warn that even if public spending is reduced by as much as £20 billion, this will not be sufficient to keep the national debt to around 40 per cent in the years following 2064.
The report from the Office of Budget Responsibility comes a day after the Chancellor, George Osborne, announced plans to legally bind future governments from spending more than they receive in tax revenue during times of economic growth. The OBR will be responsible for ensuring the new regulations are followed. It is also likely to be given the power to decide if a government should be able to spend more than it is gaining in tax revenue in times of recession.
The OBR forecast such a steep increase in national debt by 2064, if sufficient cuts are not made to public spending. This is due to the UK’s ageing population, the impact of student loans and the fact that revenue from North Sea oil and gas will continue to decline.
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