Recommendation 13

With the UK’s debt as a proportion of GDP above 100%, any increases in interest rates would have a significant impact on the economy and government spending. When asked whether it was modelling for interest rate increases, the Treasury confirmed that it did, but deferred to the OBR as the prime place for this information, noting that the 16 Public Accounts Committee, Twenty-Eighth Report of Session 2019–21, The Nuclear Decommissioning Authority’s management of the Magnox contract, HC 653 November 2020 17 Q 77 18 Q 79 19 Q 81 20 WGA 2018–19, p 41 21 Qq 75–76 22 WGA 2018–19, para 1.12, p 3 23 National Audit Office, Evaluating the government balance sheet: borrowing, HC 526, November 2017 24 Q 16 Whole of Government Accounts 2018–19 11 OBR’s fiscal risk report specifically identifies rising interest as one of the big risks for the public finances. When pushed to expand on the impact of rising interest rates on the public finances, the Treasury outlined in general terms how interest rate rises would result in bigger debt interest costs and less for other public spending.25 When asked whether it had conducted any analysis or forecasting on further significant increases in debt to GDP ratios, the Treasury deferred to the OBR.26 The Treasury also confirmed that it had not conducted any analysis on how the increased debt to GDP ratio may impact the UK’s credit rating.27