David Miles, a member of the OBR’s executive committee, warned that Britain’s debt was at risk of “blow[ing] up” as he warned that investors could lose faith in the UK’s ability to pay back its debts.
He said: “If governments continue to provide public services in line with rising demand [and] don’t pay for it in taxes, how much debt do they have to issue? The problem with that is, it’s almost certainly unsustainable.
“At some point, it will blow up. You can’t just expect the rest of the world to keep on buying more and more UK government debt, which rises at an ever accelerating rate.”
Trying to get debt down through tax rises alone could “damage people’s incentives to work and to save on such a scale that it actually undermines the production of the GDP, which those tax revenues depend on”, Mr Miles warned.
“One would, I think, be wary of thinking that you can increase the tax take year after year, without it doing some serious damage to the productive potential of the economy and the growth in productivity, which is the more painless way of closing the gap.”
Responding to the report, Mr Jones said the Government was beginning work “immediately to address the inheritance with tough choices on spending alongside ambitious action to drive growth”.
“By fixing the foundations, we will rebuild Britain and make every part of the country better off,” he said.
How net zero and the ageing population are fuelling Britain’s debt nightmare
The OBR’s fiscal risks report runs to more than 120 pages and paints a bleak picture of the outlook for public finances over the next half a century.
A succession of forces are set to force public spending higher, putting the national debt on an “unsustainable” path.
Here are the main problems facing public finances:
Ageing population
Britain is getting older at a startling rate. Women are having fewer babies on average and people are living longer, a combination that is pushing up the typical age of a Briton.
As welcome as longer lifespans are, they have alarming consequences for the public finances. An older population means more spending on healthcare and more years receiving the state pension, with a smaller share of people in work and paying the taxes needed to cover those bills.
Health spending is currently equivalent to almost 8pc of GDP. By the 2070s, it is set to rise to 14.5pc, according to the OBR.