Fiscal risks report 2021

(2021 Office for Budget Responsibility)


Every two years the Office for Budget Responsibility produces a report on the fiscal risks facing the UK. Our next Fiscal risks report (FRR) is due to be released this summer. 

This¬†FRR¬†is being prepared in the wake of the largest fiscal risk to have crystallised in peacetime¬†‚Äď the coronavirus pandemic¬†‚Ästthe economic and fiscal¬†consequences of which¬†continue to¬†be felt.¬†It¬†will therefore focus on what¬†we can learn¬†from this experience¬†to enhance¬†our¬†understanding¬†and inform¬†the Government‚Äôs¬†management)¬†of other¬†potentially¬†catastrophic or ‚Äėtail risks‚Äô facing the UK and countries around the world.

So, in addition to providing updates on significant developments regarding the specific risks highlighted in previous reports, the 2021 FRR will examine three sources of risk in greater detail: 

  • The first will be the pandemic itself, where we will explore:¬†what¬†can¬†be¬†learnt¬†from UK and international experience of this unprecedented economic and fiscal shock; the economic and fiscal support extended by¬†governments¬†during the crisis and the¬†legacy risks that these might pose for the public finances over the medium¬†term; and the potential longer-term implications of the pandemic for the economy and public finances.¬†
  • The second¬†will be climate change, where we¬†will¬†consider¬†the potential economic¬†and fiscal¬†consequences of:¬†unmitigated climate change¬†relative to a¬†world¬†in which¬†the¬†Paris¬†targets¬†for¬†limiting global warming¬†are met;¬†approaches to decarbonising the¬†UK¬†economy;¬†and¬†different¬†scenarios for¬†meeting¬†the¬†Government‚Äôs target¬†for¬†net zero¬†emissions¬†from the UK¬†economy¬†by¬†2050.¬†
  • The third¬†will be public debt, where we will look at¬†the¬†historic¬†drivers of debt levels¬†and¬†¬†interest¬†rates;¬†consider¬†potential scenarios¬†for the future path of¬†interest¬†rates; and¬†implications for long-run¬†fiscal¬†sustainability¬†.¬†

While these risks come from different sources and have their own unique drivers, they also share some commonalities.¬†There is a significant degree of uncertainty concerning both the timings and scale of their associated costs; they¬†are characterised by¬†non-linearities¬†or ‚Äėsnowball effects‚Äô in which costs can escalate dramatically from the point of crystallisation,¬†with potentially catastrophic consequences for economies and public finances;¬†and they are also global in nature with high potential for rapid contagion¬†of risk¬†across countries. Governments¬†seeking to manage these threats¬†must¬†therefore¬†weigh the¬†known¬†costs of¬†early action to¬†mitigate¬†these¬†risks against¬†the¬†uncertain¬†costs of¬†dealing with them when they crystallise; and they¬†need to weigh the limited but more deliverable benefits of acting unilaterally against the¬†much¬†greater but more¬†elusive gains from acting¬†globally.

Compiling this report will take the OBR into some areas beyond our core expertise. We would therefore like to invite those with expertise or experience in these areas to share with us their insights or direct us to relevant material that we should consider for the report. You can contact us by emailing


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