Box sets » Fiscal risks and sustainability - July 2025
To investigate the effect of an ageing population on asset demand and rates of return in the context of the wider pension system, we have used the UK Overlapping Generations model (UK OLG). This box explained why the UK OLG is uniquely useful for this kind of life cycle analysis, presented an outline of the model's structure, and gave an overview of the data sources we used to calibrate the model.
Unfunded pension liabilities represent the second-largest government liability after gilts, but are not included in the PSNFL measure of debt. In this box, we analysed the treatment of unfunded pensions in the National Accounts and the fiscal risks they create.
Public sector net debt (ex BoE) has risen substantially over the past 25 years, despite repeated government plans to get it falling. In this box, we examined the key drivers behind this upward trend, including the impact of major economic shocks, the persistent gap between forecasted and actual debt outcomes, and the increasing difficulty of stabilising debt due to structural fiscal pressures.
The 2025 Spending Review increased the envelope for departmental financial transactions relative to the assumptions in our March 2025 forecast. In this box, we explored how this funding has been allocated and how this may impact future OBR work.
The expected level of write-offs associated with different parts of the Government's loan book affects how they are recorded by the ONS in the public finances. In this box we reviewed the effect which the valuation methodology used by the ONS for different elements of the loan book has on PSNFL.
There is a large degree of uncertainty around the estimates of the fiscal costs from climate damage. In this box we considered the main sources of the risks and uncertainties to climate damage costs, which are skewed to the downside.
In June, the Government published the conclusions of the 2025 Spending Review, including allocations to net zero spending over the five years from 2025-26 to 2029-30. In this box we reviewed how the Government's Spending Review plans compare to the CCC's central scenario above for the public investment costs needed to achieve net zero emissions by 2050.
There is considerable uncertainty around the economic and fiscal costs associated with climate change mitigation. In this box we explored wider upside and downside risks around the CCC's central estimates of the whole-economy costs of the net zero transition and the impact the transition could have on the productive potential of the UK economy.
The UK’s fiscal position is increasingly vulnerable, by both historical and international standards. In this box, we considered the drivers of fiscal vulnerability, such as persistent large deficits, slower growth and higher interest rates, and the extent to which these may limit the Government's scope to respond to future economic shocks.