LONDON: Britain’s ageing population will cost the UK £30 billion every decade in increased NHS, pensions and social care costs over the next 50 years and put pressure on the Chancellor’s pledge to cut the deficit, a report warned the government.
According to details, the Office for Budget Responsibility found that spending on healthcare and pensions will grow faster than the British economy by 2066 leaving the UK with a gap of £156 billion unless taxes are increased and spending cut to pay for it.
The independent watchdog’s 50-year forecast estimates that without drastic action public sector net debt will surge from 82 per cent GDP to 234 per cent by 2066-67 as borrowing rises to 16.6 per cent.
The NHS will demand double the 6.9 per cent of GDP it currently costs in 50 years time, hitting 12.6 per cent and potentially costing every income tax payer an additional £1000 each decade.
Social care costs will also double from 1.1 per cent to 2 per cent over the period while pension spending will rise from 5.8 per cent to 8 per cent largely as a result of the triple lock promise.
The OBR warned that Britain’s public finances are on an “unsustainable path” and that unless the Chancellor plans long-term changes, he will miss his target to cut the deficit and be forced to increase taxes and slash spending to cope.
NHS costs pose the greatest risk, largely thanks to the UK’s growing older population as baby boomers retire and reach old age, while lower net migration and costly new operations becoming more widely available on the NHS will add to the bill.
As a result, instead of moving into a surplus the budget deficit would widen from 0.7 per cent of GDP in 2021-22 to 1.8 per cent by the end of the next Parliament in 2025-26.
“Rising healthcare costs could make it harder for the Chancellor to balance the budget in the next Parliament and put the public finances on an unsustainable path over the longer term in the absence of further tax increases or cuts in other public spending,” the OBR said.
Chancellor Philip Hammond said the forecast “sets out a possible outcome if the Government takes no action, and, as I made very clear in the Autumn Statement, we are acutely aware that action will be required in order to return the public finances to balance”.
Former Chancellor George Osborne had planned to balance the books by the end of this parliament, but Mr Hammond has already ditched this plan.
OBR chairman Robert Chote cautioned at the time this would prove “quite a challenge”.
