OBR report: Be aware, not afraid
If you're the kind of person that likes a good fiscal horror story, you'll find plenty of scary sounding numbers in today's report from the OBR on the long-term state of Britain's public finances.
However, if you're not that kind of thrill seeker, you might well come away from this report somewhat reassured.
By page 3, we've learnt that a broader definition of the government's net liabilities leads to a net debt figure of £1,216bn, or nearly 85% of GDP, compared with the traditonal measure of debt, which is now £760bn, or 53% of GDP.
We've also learned that, on unchanged policy, the ageing of the population is going to push up spending over the next 50 years as a share of the economy - while tax revenues would be broadly flat.
So, if policy remains broadly unchanged over the next 50 years, we have a problem. Net debt - on the traditional, internationally comparable measure - rises inexorably from 60% of GDP in the mid 2020s, to 107% and rising by 2060.
Of course, there is precisely zero chance that policy will remain unchanged over this period - even on the relatively broad definition of unchanged policy that the OBR has used.
It assumes, for example, that both benefits and income tax brackets will rise in line with earnings, not inflation. That is highly plausible, but it is not, strictly, current policy.
But what is perhaps most interesting is that, on the OBR's own assumptions, it would take relatively little in the way of tax rises or spending cuts to put the finances on to a long-term sustainable path.
Assume, for example, that the government wanted to bring net debt back to the old Gordon Brown target of 40 per cent of GDP. If the OBR is right, that would require a rise in taxes or cut in spending of 1.5 per cent of GDP, or £22bn in today's money.
That sounds bad, but it's roughly a fifth of what the current government is doing over 5 years. And, as the OBR note, it wouldn't have to happen overnight - it could be 0.5 per cent in tightening per decade.
So, all things considered, the scary numbers here are not that big. That is the biggest reason to be reassured by this report.
Unfortunately, that is also the best reason to be afraid.
The numbers are small because they are the small residual of calculations involving some other, extremely large, numbers, over long time periods, subject to assumptions which will almost certainly turn out to be wrong, in one direction or another.
Put it another way, these forecasts are wildly, unavoidably, sensitive to even small changes in the underlying assumptions.
For example, if the structural primary balance (budget balance excluding debt interest) in 2015-16 turns out to be only one percentage point better than the OBR now expects, our public sector debt would now be on a long term sustainable path.
Likewise, if it turns out to even one percentage point worse, then debt would be heading to 150% of GDP by 2060, not 107%.
Faster overall productivity growth; the rate of productivity in the health sector; the age structure of the population - even small changes in any or all of these variables would each have a dramatic impact on our bottom line.
So, I'm tempted to say, it's not the numbers, stupid, it's the reasoning that's gone into them.
If I were to pick one, I'd say the greatest contribution of this report was that it shows how the long-term health of our public finances is linked to the long-term health of our health sector.
If productivity in health continues to lag the rest of the economy, and health spending continues to rise to make up this gap, our net debt could be twice as high by 2060 as the OBR's base forecast.
When it comes to the very long term, health productivity isn't everything - but if the OBR is right, it may be more important than any other single factor in determining our long-term fiscal health.
That's food for thought, for a government that by 2016 could be spending nearly £1 on the NHS for every £2 spent on other public services, compared with ratio of 1 to 4 in 2009.