00:00National debt projected to rise to 270% of GDP by the early 2070s. Seems a long way off,
00:06but it's not actually that far away. Joining us now is Director at the Centre for Policy
00:09Studies, Robert Colville. Robert, how worried should we be about these projections?
00:14We should be very worried about them. I mean, this should be the main story on the news
00:18every single day, that unless something is done, unless we change path, the country is
00:23in an unsustainable position. Essentially, we're going to need either very big tax rises
00:28or very big spending cuts. I mean, this is the most extraordinary thing about it all.
00:33I mean, the central prediction is that debt is going to go from, well, it's near 100%
00:38of GDP now, that's bad enough, to 270% of GDP. But the report says that if productivity continues
00:46to grow at the sluggish pace that it's been growing at for the last couple of years, 270
00:51actually would be a massive underestimate. It could rise to 647% of GDP. I mean, is there
00:58every single country in the world that has debt at that level? I mean, that is effective
01:03bankruptcy? Yeah. We've been running the public finances essentially since the financial crisis
01:08on the basis that something will turn up, that somehow productivity growth will snap
01:12back into place, that living standards will rise again, that we'll go back to the world
01:16in the 90s and the 2000s and the 80s, that everything will turn out okay. And we're slowly accepting
01:25that it's not going to do that. I mean, the NHS alone, over the next 50 years, as the population
01:30ages, is set to double as the percentage of the national wealth it takes. As the report today
01:38says, the state pension with the triple lock is marching ever upwards. We saw just the other
01:42week. Welfare and incapacity spending meant to go up by £30 billion this parliament. Labour MPs
01:49couldn't even wring themselves to back something which would have taken £5 billion off that £30
01:52billion. Robert, how much of this is about the pandemic? Because the report also says that we're
01:57in a particularly vulnerable position for any shocks. So if there were, God forbid, something
02:01like that to happen again to the global economy, we'd be stuffed. Yeah. So the pandemic is a huge part
02:07of this. But it's accelerated a longer term story, which is that we haven't been, you know, the way
02:12you're meant to do this is you're meant to save during the good years to afford to be able to cope
02:15with things like the pandemic or the financial crisis. And what we've been doing is we've been
02:20splashing the cash when crises come along. But we haven't then been saving, we haven't then been
02:24going back and getting our budget back into surplus. I mean, from memory, I think the budget,
02:28the national budget has been in surplus four or five times in the last 50 years. So and since the
02:34pandemic, because of the huge amounts of money we spent and the economic impacts of that,
02:39essentially, we've been running the public finances on a sort of razor edge. The reason
02:43that everyone cares about the OBR now and cares about fiscal headroom is that the Chancellor,
02:47both Jeremy Hunt and Rachel Reeves and any other Chancellor, has been running the public
02:53finances really, really close to the edge. That is such a good point. I mean, if there was
02:59less of a large deficit, we wouldn't care what the OBR said. It wouldn't matter so much. Robert,
03:03just really quickly, in the mid 1970s, we had to go crawling to the IMF for a bailout. It was a
03:09humiliation for this country. And with it came conditions. I mean, is there any way out of this
03:14that doesn't mean that we could head towards the International Monetary Fund for some sort of third
03:20world bailout? I think the real danger is of a bond strike. It's of the guilt market. We are relying
03:27on the guilt markets to buy huge amounts of debt from our country every year. And the interest on
03:33that debt alone is going to cost us £100 billion every year for the rest of the Parliament. We are
03:38already in the top range of the amount we have to pay because the people selling that, buying that
03:43debt are a bit worried about our trajectory. If they go on strike, if they decide, you know what,
03:48we're not going to fund this anymore, we're going to jack up the price this country has to pay,
03:52then we will need to have very, very, as I said before, we will need to have very sharp taxes.
03:57Let's hope some tough decisions are made.
Comments