Selected Issues Papers

Public Spending Pressures in the UK: United Kingdom

Author/Editor:

Andrew Hodge

Publication Date:

July 24, 2024

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

This paper characterizes UK public spending pressures over a ten-year horizon and their implications for public deficits and debt levels. The analysis is based on a ‘bottom-up’ scenario for total public expenditure, that includes, inter alia, implementation of the NHS Long-Term Workforce Plan, public investment to support the Balanced Pathway to Net Zero, and state pension spending under the Triple Lock policy. This scenario is approximately consistent with IMF staff’s baseline projection for the medium term (to FY2029/30) shown in the 2024 Article IV consultation staff report, which assumes real growth in Departmental Expenditure Limits (DEL) of two percent per year after FY2024/25. Assuming revenue stabilizes in FY2028/29 at the level projected by IMF staff (40.8 percent of GDP), public debt does not stabilize over ten years, reaching 101.3 percent of GDP by FY2034/35. Stabilizing debt will require the primary balance to be 0.8–1.4 ppts of GDP higher per year (on average after FY2024/25), depending on the time horizon for stabilization (5 or 10 years) and the target probability of debt stabilization (50 or 75 percent).

Series:

Selected Issues Paper No. 2024/029

Subject:

Capital spending Education Education spending Expenditure External debt Health care spending Housing Interest payments National accounts Pension spending Public debt Total expenditures

Frequency:

Regular