A House of Lords committee has issued a stark warning regarding the UK’s national debt, cautioning that it is on a potentially unsustainable trajectory. The committee emphasized that without immediate intervention, Britain will face tough choices, including higher taxes or reductions in state services.
In a recent report, the Lords economic affairs committee stressed the urgency of addressing the national debt, which currently stands just below 100% of the UK’s annual national income. The committee called for new rules for managing public finances, arguing that the debt must be placed on a decisive downward path.
Lord Bridges, chair of the committee, described the report as a “big red flag” for the government, highlighting the growing financial demands from key areas such as defense, the net zero transition, and the care of an aging population. He pointed out that these pressures make the situation more difficult, but addressing the debt is critical to ensuring long-term sustainability.
“Our national debt risks developing on an unsustainable path,” Bridges said. “This issue has not received the attention it deserves, partly because of a flawed debt rule, created by the previous government and adopted by the current one.”
The report was met with acknowledgment from the government, which blamed previous administrations for the current financial state. Darren Jones, Chief Secretary to the Treasury, welcomed the Lords’ findings, stating, “The Lords could not have been clearer about the dire state of the country’s finances. We have inherited a decade of lost economic growth, a £22bn black hole in our public finances, and unsustainable long-term debt.”
Jones further emphasized the need for “tough decisions” to repair the economy and prevent future overspending. He noted that the government is taking steps to strengthen the Office for Budget Responsibility (OBR) and will soon confirm robust fiscal rules aimed at restoring fiscal discipline.
The committee also warned that the economic conditions that once helped reduce the debt burden—such as a growing working-age population, a peace dividend, and rising global trade—are no longer reliable. The report stressed that the UK must now choose between raising taxes or reducing the role of the state to maintain public services.
The committee, which includes former Chancellor Norman Lamont, highlighted that changes in how the UK finances its debt have made the country more vulnerable to economic shocks. It pointed to the increased sensitivity of debt servicing costs to rising interest rates, inflation, and investor sentiment due to the use of quantitative easing and a greater proportion of index-linked debt held by overseas investors. The Lords committee backed the government’s goal of reducing the debt ratio but urged for a tougher fiscal rule, committing the government to ensuring that the debt is lower in five years than it is today.
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