LONDON (Reuters) – Britain's public debt could surge to more than 300 per cent of annual economic output by the 2070s, up from about 100pc now, and the government is not taking measures to make big changes in the short term, the government's budget forecasters said.

The Office for Budget Responsibility said on Thursday the long-term challenges from an ageing society, climate change and geopolitical tensions were already posing significant fiscal risks this decade.

But the government's plans for stabilising and then reducing debt as a share of gross domestic product were relatively modest by historical and international standards, the OBR said in an annual report on the long-term outlook for the public finances.

British finance minister Jeremy Hunt has set a target of getting underlying debt to fall in five years' time.

The OBR said British government borrowing costs have risen more than in any other Group of Seven economy and had been more volatile than at any time in the past 40 years, adding to the challenge of bringing down debt levels.

High Inflation

The warning comes as Hunt said on Thursday that high inflation continued to hamper economic growth after the latest data showed that the economy contracted in May.

“While an extra Bank Holiday had an impact on growth in May, high inflation remains a drag anchor on economic growth," Hunt said in a statement.

"The best way to get growth going again and ease the pressure on families is to bring inflation down as quickly as possible. Our plan will work, but we must stick to it."

Economic output fell by 0.1pc in May from April, the Office for National Statistics (ONS) said.