151020 Fiscal sustainability
  • Fifty years from now… I’ve alluded to the above graph before, but it’s significant enough, I reckon, to reproduce in full. This is the main graph from the Office for Budget Responsibility’s Fiscal sustainability report. It shows their expectations for the national debt not just for the next five years, as we’re used to, but for each year until 2065.
  • …we’ll still be in debt… Don’t be taken in by the graceful curve of the line. It’s actually pretty brutal. According to the OBR, the debt, as a proportion of our economy, will reduce from its current level of 80.8 per cent to a low of 54.1 per cent in 2032-33. (Which is still higher than it was in those carefree days before the financial crisis.) But, after that, the demands of an ageing population have it rising again until it surpasses the current level in 2060-61 and reaches 87.4 per cent in 2064-65. Debt is as much a concern of the future as it is of the present.
  • …perhaps. Or will it be? There’s something kind of meaningless about gazing so far into the unknown and unknowable. The OBR was a full 13.4 percentage points out when it first forecast today’s debt in June 2010 – what chance does it have for 50 years hence? As they warn at the start of their report, “the long-term figures presented here should be seen as illustrative projections, not precise forecasts.”
  • From meaningless to meaningful. Yet the graph’s existence is meaningful in itself. Here is the Government’s own forecaster going beyond its immediate purview to warn of fiscal strains and ever-rising debt. Many others do this too, but few carry the weight of the OBR. Their account becomes the official one.
  • A happy constraint. This is part of the reason why, as I’ve explained before, the OBR is so important. In the past, governments would gerrymander their Budget figures so that they were as flattering as possible. Now they can’t. They have an independent organisation doing the working for them, and shouting when the results don’t look great – whether in the short term or the long. That’s quite a constraint on politicians’ largesse. The OBR could turn out to be one of George Osborne’s best innovations.