The massive economic challenge ahead in the UK

UK living standards are set to fall 7% in coming two years, according to the OBR. Credit: PA

Here is the UK's economic challenge - some would say economic failure - in the OBR stats.

1) Departmental budgets are rising to 43.4% of GDP in 2027/8, compared with 39.3% in 2019/20.

But that reflects "higher debt interest and welfare spending raising cash spending, and the energy-shock-driven smaller economy".

In other words, more spending is NOT delivering improved public services.

This is the cost of an economic flop.

2) Higher borrowing means the national debt is rising from 84.3% of GDP last year to a 63-year high of 97.6% in 2025-26.

3) The near tripling of interest rates since March means the share of revenues consumed by servicing the national debt is rising from 5% in 2019/20 to a painful 8.5% in 2027/28.

To put that into context, that rise in interest payments is equivalent to more than the entire budget the defence secretary Ben Wallace wants for the UK's military and security, and which Hunt today said he could not promise.

Also as OBR says, the public finances remain "vulnerable to future shocks or swings in market sentiments", of the sort that sunk Truss and Kwarteng.

4) Even with the public finances set to remain so vulnerable, the tax burden is rising from 33.1% of GDP in 2019/20 to 37.1% of GDP in five years, what the OBR called "its highest sustained level since the second world war".

5) Forget the shallow recession forecast for the next year, more important is that living standards are set to fall 7% in coming two years, wiping out the eight previous years of living standards recovery.

So here's the nutshell: even after a government stimulus worth £42.8bn since March, and then a cumulative squeeze of almost £80bn in the three years starting in 2025/26, the outlook is grim, grim, grim.

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know.