Taxes may have to rise by £1,000 to cope with ageing population

TAXES will have to rise by £30billion a decade – equal to £1,000 per taxpayer – to keep pace with the costs of an ageing population, an official report warned yesterday.

In a sobering analysis, it said that spending on health alone is set to double to £250billion a year, blowing an ‘unsustainable’ hole in the public finances.

The cost of social care will also double to almost £ 0billion a year, placing further pressure on budgets. And, in a triple whammy for Treasury coffers, pension costs are also set to soar by more than a third.

The figures come from the Office for Budget Responsibility in a detailed outline of the demands on the public purse over the next 50 years. It suggested the tax rises of £30billion over each decade will be needed to get Britain’s finances back to the levels before the 2008 financial crisis.

The watchdog said: ‘Rising healthcare costs could make it harder 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 spending.’ The OBR, which produces independent forecasts on tax and spending, has previously said future health spending will be driven largely by demographics as Britain gets older.

But its latest study warned that future costs are likely to rise even faster because advances in medicine and technology will make treatment available for more people.

Previously, the watchdog had suggested that health spending would surge from 6.9 per cent of gross domestic product to 8 per cent because of demographic changes. But the latest forecast predicted health spending will soar to 12.6 per cent over the next five decades.

The OBR stated that total ‘age-related spending’ will be £83billion a year higher than today by the middle of the 2060s. But it suggested no government would try to find the money in one go.

The watchdog said ministers are likely to raise taxes or cut spending in other areas over many years. Without action to raise taxes or cut spending, Britain’s national debt will almost treble from 82 per cent of GDP to a staggering 23 per cent.

The OBR analysis suggested ministers could ease the long-term pressure by scrapping the ‘triple lock’ protecting the state pension, which could save almost £20billion a year by the mid-2060s.

The report also raised doubts about the Government’s aim of balancing the nation’s books early in the next Parliament.

A Treasury spokesman said: ‘The Government has already made significant progress in repairing the public finances – reducing the deficit from 10 per cent of GDP to per cent over the last six years.

‘The Chancellor has set out new fiscal rules to bring them back to balance as soon as possible in the next Parliament. We must continue to build on this progress.’

‘Rising health care costs’