According to the Office for Budget Responsibility (OBR), Britain’s public finances are looking increasingly fragile, with the rising cost of the state pension triple lock a key concern. The OBR estimates it could cost taxpayers up to £15.5bn a year by the next general election – nearly three times its original forecast. This projection reflects higher-than-expected inflation and repeated economic shocks.
Rachel Reeves, the Chancellor, is under growing pressure to reduce public debt. However, the OBR says she has very little headroom within her existing borrowing rules. The UK is especially exposed to future economic shocks due to high debt, persistent deficits, slowing growth, an ageing population, and global instability.
Following the report, long-term borrowing costs jumped sharply. Yields on 30-year gilts hit 5.47%, the highest among major European economies, and above the level reached last week when concerns were raised about the Chancellor’s position.
The OBR criticised both Labour and Conservative governments for failing to reduce debt. It said that successive decisions to reverse planned tax rises and abandon spending cuts have worsened the UK’s fiscal outlook.
Rising debt interest costs could add another £22bn annually. As fewer people hold traditional final salary pensions, demand for UK gilts could fall. Higher interest rates may be needed to attract new investors, especially overseas.
The OBR concluded: “The UK’s fiscal position is increasingly vulnerable by both historical and international standards.”
Talk to us about your finances.
