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OBR warning on ageing population
A fresh wave of tax hikes or spending cuts will be needed to meet the growing cost of Britain's ageing population, the financial watchdog has warned.
The next generation of workers also face having to stay in employment until they reach 70 to help keep the country's finances on the right track, according to the Office for Budget Responsibility (OBR).
It found that long-term spending on health, s tate pensions and social care will put a strain on the public purse.
House prices are also set to "consistently rise" faster than pay without a significant increase in the number of new homes being built which will lead to a steady rise in household debt relative to income, the report warned.
According to the analysis, Britain's budget deficit is set to widen to such an extent over the long term that there would be an "unsustainable" continuously rising trajectory of public sector net debt as a share of national income.
Future governments will need to find new sources of revenues to meet all the demands, the fiscal sustainability report said.
" One way to pay for rising age-related demands for health, long-term care and pensions spending would be for a greater proportion of the population to be in employment, earning income and paying taxes."
Chancellor George Osborne said: "Today's report from the OBR provides further evidence that the Government's long-term economic plan is working and the country's hard work is paying off.
"It shows that as a result of the decisions we have taken over the past year, in the next 50 years, debt as a share of our national income will be two thirds lower than it would have been."
Philip Booth, editorial and programme director at the Institute of Economic Affairs, said: " This report shows the severe difficulties governments will face over the coming decades resulting from the promises made via the post-war welfare state.
"The OBR's central projection, which assumes that the deficit is cleared within four years, shows that debt will start rising again from the mid-2030s and will be back up to 84% of GDP by 2063/64 if policies remain unchanged.
"Even this projection is based on the heroic assumption that productivity improvements in healthcare will be the same as in the rest of the economy over the next five decades.
"More realistic assumptions about health productivity growth would see public debt explode to over 200% of GDP.
"This problem will be intensified if the Government continues to protect healthcare spending up to 2018/19.
"Whilst there have been welcome changes to the state pension age, the OBR's report shows other areas where new government liabilities have been created that will have an impact on future generations of taxpayers.
"The triple lock on the state pension and the abolition of contracting out of state pension schemes are two further policies which worsen the long-term fiscal outlook.
"If the Government is serious about our long-term fiscal health, the ring-fence on healthcare spending should be removed and policy should promote private provision and pre-funding of healthcare and retirement incomes."