The Office for Budget Responsibility released a report this week that showed the UK may need additional austerity measures to combat the rising costs of healthcare and pensions for its 65+ population. The number of individuals over 65 is expected to account for nearly 26% of the country’s population by 2061 compared to 17% today. The OBR’s analysis estimates that the national data will rise to 107% of gross domestic product (GDP) in the next 50 years versus 60% of GDP today.
With a lower economic growth outlook, the report finds that spending other than on debt interest rises from 36.3 per cent of GDP at the end of its medium-term forecast in 2015-16 to 41.7 percent of GDP by 2060-61, an increase of 5.4 per cent of GDP or £80 billion in today’s terms. The report stops short of calling for specific cuts or tax increases but raises the concern that longer-term policies will need to extend further beyond one time increases.
“if future governments accommodate these demographic pressures on spending, they are likely to have to tax more or spend less elsewhere to keep thepublic finances on a sustainable path. But this does not necessarily mean increasing the size of the already substantial fiscal tightening planned for this Parliament. This is a familiar story in many industrial countries,” said Robert Chote, Chairman of the OBR as part of his prepared remarks.