· OBR report highlights need to rebalance the economy towards the private sector
Commenting on the Office for Budget Responsibility’s (OBR) new fiscal sustainability report, and the Treasury’s publication of new public sector balance sheet information, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“The publication of more comprehensive public sector accounts, and the OBR’s fiscal sustainability report, is an important contribution to the transparency of our public finances, and provides a meaningful basis for debating long-term policy issues.
“The OBR’s projections show that our public finances will come under growing long-term pressure mainly as a result of the ageing population. The conclusion, that in the absence of offsetting tax increases or spending cuts, Britain’s public sector net debt will become unsustainable, makes for grim reading. Public sector net debt could reach 110% of GDP by 2061, and could climb even higher. The very large liabilities associated with public sector pension claimants are estimated at £1133bn, 78.7% of GDP, at the end of March 2010.
“The OBR’s report suggests that, even if the government’s tough austerity plan is implemented successfully, we will not be able to return to the levels of public spending seen before the downturn. We have to accept the need to adapt our economic and social ambitions to our more limited resources. That means acknowledging that the private sector is the sole source of wealth creation in our society. Only greater productivity and higher growth in the private sector can pay for public sector services and public sector pensions in the future. Businesses must be able to create jobs, invest and export, and the government has to make good on its promises to free up the private sector to grow.”