OBR warns UK economy "vulnerable": What it means for your money
The Office for Budget Responsibility (OBR) has warned that the UK’s fiscal outlook faces “mounting risks.”
The OBR is the official watchdog that monitors Government spending and provides economic and fiscal forecasts and assessments.
As part of this remit, it publishes an annual report called Fiscal Risks and Sustainability, which considers the wider UK economic picture alongside Government spending, taxation, and debt levels.
Its 2025 report makes for difficult reading for anyone concerned about the UK’s current precarious finances.
The OBR says the UK has, on average, a 4% bigger budget deficit than comparable advanced economies. Underlying debt has risen by 24% in 15 years. Public debt is at its highest level since the early 1960s.
In particular, the OBR has singled out areas such as the state pension triple lock as causes for concern, with its cost being three times higher than initially forecast. In 2012, the average annual cost increase was forecast by the OBR to be £5.2 billion by 2029–30. However, this figure is now forecast at £15.5 billion.
Richard Hughes, Chair of the OBR, said debt would rise to 270% of GDP by 2070—up from less than 100% today—if no changes to fiscal policy were made.
“The UK public finances are in an unsustainable position in the long run. The UK cannot afford the array of promises that it has made to the public,” he commented.
Tax Rises
The biggest question in all of these negative figures is how the Government intends to ensure it can pay all of its obligations.
With spending cuts politically very difficult for the Government, and more borrowing hampered by a nervous bond market, there are ever-fewer options for Chancellor Reeves to make the numbers add up.
It now seems inevitable that tax rises will come in the Autumn in order to meet the Government’s spending obligations.
How these tax rises look is impossible to say. Labour categorically ruled out hikes to income tax, VAT, or National Insurance (for employees) in its election manifesto.
Other options include lengthening the freeze on income tax allowances, which Prime Minister Starmer has refused to rule out.
Plenty of other options exist but will likely not come without their own controversies.
What is really important now, however, is not to panic over potential future tax changes. Financial decisions and changes to portfolios should only be made in full knowledge of the landscape.
The critical risk here is exposing your long-term financial plans to unnecessary risks or liabilities based on rumours of what the Government may or may not do. Instead, it is important to speak to a financial planner who can help you make informed choices about your finances to ensure the best outcomes possible.