By Emmanuel Igwe, Economist at the Prosperity Institute

The Office for Budget Responsibility's latest fiscal risks report paints a picture in which tax increases appear to be the only viable response to Britain's deteriorating public finances.

It has become a grim July tradition: the OBR descends from Petty France to deliver its oracle on Fiscal Risks and Sustainability, as it did again this month. The message was predictably gloomy — Britain's debt is spiralling, markets are growing anxious about the country's economic prospects, and a heavier tax burden appears unavoidable. As Britain's newest Prime Minister, Andy Burnham now inherits both the oracle and its curse.

In its latest report, the OBR warns that debt will rise to 300 per cent of GDP by the 2070s without fiscal tightening of 3.8 per cent of GDP by 2031–32 — roughly the size of onshore corporation tax or total education expenditure by 2030–31. If tightening is delayed until 2050, the cost rises to eight per cent of GDP, equivalent to current health spending. Such long-term fiscal pressures from aging populations are a shared challenge across most G7 economies, though the OBR's projections suggest Britain's trajectory is among the steepest. For commentators at the Guardian and the Telegraph, the only remedy is for the government to extract more from taxpayers.

A Recurring Warning

Unsustainable debt has been a recurring theme in the OBR's publications for years, appearing in reports from 2021, 2022, 2023, 2024, and 2025. Last year's edition revealed that borrowing had reached three per cent above GDP despite the highest peacetime tax burden on record. Throughout the OBR's existence, its projections — many of which have gone unfulfilled — have underpinned successive tax increases, yet Britain's economic growth prospects continue to recede.

In the last financial year, British taxpayers paid £1.23 trillion to the Exchequer. The tax burden is projected to climb from its current level of 36.3 per cent of GDP to 38.5 per cent by the end of the decade. Professor David Miles of the OBR has acknowledged that Britain is moving into "uncharted territory", as further tax increases risk eroding future growth. In a striking admission, the OBR effectively prescribes a bitter medicine while cautioning that the patient may not tolerate it.

While the OBR stops short of explicitly recommending tax increases, it portrays a scenario in which they appear to be the only solution. Major reforms or spending cuts are effectively ruled out: the state pension triple-lock is treated as a permanent fixture, health spending is assumed to follow an ever-upward trajectory, and primary expenditure is projected to rise from 40 per cent of GDP to 49 per cent by 2070. The underlying driver is demographic — a declining ratio of working-age adults to pensioners that simultaneously inflates pension and healthcare obligations while narrowing the revenue base. Within this framework, spending functions as an uncontrollable force, leaving taxation as the sole adjustable lever.

Immigration Reassessment

The consequences of such modelling logic were evident when the OBR admitted in 2024 that its assumption that all immigration represented a net gain to the Exchequer was far from accurate. While it maintained that each new arrival over 25 contributed positively to economic growth in aggregate, a wage-based breakdown revealed that low-wage immigrants represented a net lifetime cost — particularly once factors such as indefinite leave to remain (ILR), dependents, and benefit eligibility were accounted for. This reality is becoming more pronounced as migrants who arrived during the Boriswave approach the five-year threshold at which they can obtain ILR visas, granting access to benefits and the ability to bring dependents to the UK — a development that is already beginning to materialise.

Growing Institutional Clout

More striking is the quasi-constitutional status that these reports have acquired. The controversy last year that culminated in the resignation of OBR chair Richard Hughes underscored the oracular weight that OBR publications now carry — both in Westminster and across City trading floors. Government budget statements increasingly resemble petitions to the market blessed by the OBR, rather than sovereign expressions of policy intent.

Jeremy Warner of the Telegraph has argued that Andy Burnham should raise taxes to close funding gaps. Yet as Mathew Bowles has written in The Critic, Burnham's toolbox is largely empty. His manifesto precluded increases to VAT, income tax, and National Insurance, constraining his options — particularly given that government debt already stands at 100 per cent of GDP, with debt interest payments alone reaching £110bn per year.

Burnham has pledged to honour the Labour Party's manifesto commitment against broad-based tax increases, but the challenge of funding his spending programme persists. He has so far declined to rule out a wealth tax and has indicated the country may need to "ask for a little more" to balance the books. His tax instincts lean toward reducing levies on labour and increasing them on assets — a stance pointing toward potentially higher business rates on warehouses and the alignment of capital gains tax rates with income tax rates. Such measures would further raise household costs and complicate the operating environment for businesses.

Adam Smith famously observed that "there is a great deal of ruin in a nation", seeking to reassure a friend alarmed about Britain's economic prospects in the eighteenth century. Rather than offering similar reassurance today, the latest OBR figures may have quantified just how much ruin Britain has left.