UK Government Spending — All Streams Stacked to 2075 (% of GDP)
State Pension (triple lock)
Public Sector Pension Net Cost
🚨 The key visual: The coloured bars show total spending. The teal line shows projected tax revenues. Every year the bars exceed the line, the government must borrow or raise taxes. As debt accumulates, interest payments grow — pushing spending higher still. This is the compounding spiral the OBR warns will take debt to 274% of GDP by 2074 without action.
🔍 What This Actually Means — In Plain English
Right now, in 2026, the government spends approximately £1,368bn but only collects £1,098bn in taxes. That leaves a gap of £132bn — money that has to be borrowed every single year just to keep the lights on. This is before we even discuss growing future costs.
Now suppose the government did everything reasonable at once — raised taxes, cut spending, and grew the economy faster. Here is what each measure actually buys:
The 2026 Gap — £132bn
📈 GDP growth back to 2%/yr
-£30bn
💷 +2p on income tax
-£13bn
🏢 +1% employer NI
-£8bn
✂️ 2% spending efficiency
-£14bn
👴 Pension age rises
-£6bn
🔴 Still need to borrow
£61bn
⚠️ Even after doing all of the above simultaneously — the most ambitious package of fiscal tightening since the 2010 austerity programme — the UK still needs to borrow roughly £61bn in 2026 alone. That borrowing adds to the existing £2.91 trillion debt. That extra debt generates extra interest. And that extra interest makes next year's gap even wider.
The policy levers shown above — growth, tax rises, efficiency cuts, pension reforms — are roughly constant in size year after year. But the red bars on the chart above keep growing as NHS demand rises with an ageing population, as the state pension triple lock compounds, and as interest on the debt accumulates. The gap between what reasonable policy can achieve and what the spending trajectory demands gets wider every single year.
This is precisely what the OBR means when they say "something has to give." The maths does not close without either growth significantly above trend for decades, reforms that fundamentally change the pension or NHS cost trajectory, tax rises substantially larger than anything currently in political discussion — or accepting that debt spirals toward 274% of GDP. Your chart below shows all three paths.
£132bn
Current annual deficit
What we borrow every year just at today's spending levels
£71bn
What all levers together cover
Growth + taxes + cuts + pension reform combined
£61bn
Still needs borrowing
Even after the most ambitious realistic package of measures
£110bn
Annual interest already owed
On the existing £2.99tn debt — before any new borrowing
Annual Fiscal Gap — Borrowing Required or Tax Rise Needed Each Year (£bn)
Gap if all borrowed (% GDP) — grows as interest compounds
Gap if 50/50 tax + borrow — grows more slowly
Gap if all tax rises — stays lower as no compounding interest
📋 How to read this: All three lines show the same spending pressures — the difference is how the gap is funded. When you borrow everything, debt grows, interest payments rise, which widens next year's gap further — so the red line curves upward. When taxes cover the gap instead, there's no extra interest, so the green line is lower and flatter. The gap between red and green lines is the compounding cost of borrowing rather than taxing. Expressed as % of GDP so the numbers stay comparable over time — 5% of GDP today is ~£148bn; 5% of GDP in 2050 will be a larger cash amount but the same share of the economy.
Debt Trajectory Under Three Scenarios — % of GDP to 2075
Borrow All (OBR baseline ~274% by 2074)
Tax All Gaps (stabilises debt)
🚨 The compounding interest trap: When the government borrows to fill the gap, that new debt generates more interest. That extra interest widens next year's gap. Which requires more borrowing. Which creates more interest. This self-reinforcing cycle is why the OBR projects debt at 274% by 2074 — not because of reckless spending increases, but because the compound maths of debt-funded deficits is relentless.
Year-by-Year Breakdown (£bn at current prices × GDP deflator)
| Year |
Interest |
St. Pension |
NHS |
Welfare |
PS Pension |
Defence |
Other |
Total Spend |
Revenue |
Gap |
Debt %GDP |
📋 All figures in nominal £bn growing with inflation and GDP. "Gap" = spending minus revenue — positive = borrowing required, negative = surplus. "PS Pension" = public sector pension net cost (contributions in minus payments out). Toggle off in controls above to see official PSND-only view.
What Has to Give? — Three Paths to Sustainability (2026–2050 Cumulative)
⚠️ The OBR's own assessment: "The baseline projection would require fiscal tightening of 1.5% of GDP per decade over the next 50 years to return debt to pre-pandemic levels." That's roughly £45bn of annual tightening needed by 2030, rising every decade. The equivalent of cutting the entire schools budget — every decade, repeatedly — just to hold the line.
🚨 Why this is different from just the OBR baseline: The OBR's published 274% figure uses official PSND and excludes off-balance-sheet pension liabilities. When you include the growing net cost of public sector pensions (the annual cash drain, not the stock liability), total spending is around 1–1.5% of GDP higher throughout the projection — which compounds into an even worse debt trajectory. This is the number that matters for actual government cashflow.
Closing the Gap — What Each Lever Covers (Selected Years, % of GDP)
GDP growth to 2%/yr saves
2% spending efficiency saves
Remaining gap (still needs borrowing or further action)
📋 How to read this: Each bar represents one year. The coloured segments show how much of the annual gap each policy lever covers. The red segment at the top is what remains after all these measures — the bit that still needs to be borrowed or found from additional action. In 2030 the combination of measures covers a meaningful share of the gap. By 2050 and beyond the gap has grown so much that even all these measures together leave a large red remainder — showing why the OBR says the challenge requires sustained action every decade.
📋 How to read this chart: The red bars show the total annual gap — the amount the government must find through some combination of higher taxes, spending cuts, borrowing, or growth. The coloured lines show what specific policy levers would contribute toward closing it. When the lines together reach the top of the red bar, the gap is closed for that year. When they fall short, borrowing fills the remainder.
✅
Example — the 2030 gap in plain English: In 2030 the model shows an annual gap of roughly
~£180bn. Here is what each lever contributes:
📈 GDP Growth to 2%
~£30bn
Saves this much vs the low-growth baseline by increasing tax revenues naturally
💷 +2p Income Tax
~£13bn
2p added to the basic rate (20p → 22p). Affects all basic-rate taxpayers
🏢 +1% Employer NI
~£8bn
Raises employer NI from 15% to 16%. Partly passed to workers as lower wages
✂️ Spending Restraint
~£14bn
2% real-terms efficiency target across NHS and non-protected departments
👴 Pension Age Rises
~£6bn
Legislated rises in state pension age saving DWP cost each year
📊 Remaining Gap
~£109bn
Still needs to be borrowed or found from further tax rises / spending cuts
⚠️ Why the gap keeps growing even with these measures: The combination above covers the structural primary deficit (day-to-day spending gap). But the interest on the existing £2.99tn debt stock — currently £110bn/yr and rising — is separate. Even if you balanced the primary budget today, you still need to service the existing debt. That interest payment itself grows every year until the debt stock starts shrinking, which requires running a surplus. This is the trap the OBR is warning about.