Pensions bill ‘a threat to UK surplus’

GEORGE Osborne’s plans to force future governments to spend less than they raise in taxes was dealt a blow by the spending watchdog last night.

The Office for Budget Responsibility warned spending on the ageing population would push Britain back into the red without further swingeing cuts. Ministers could be forced to abandon the ‘triple lock’ which pushes up the value of pensions, OBR chairman Robert Chote warned.

This week George Osborne announced his intention to pass a legal requirement to run budget surpluses under ‘normal’ economic circumstances. But in a report yesterday, the OBR warned that without further cuts, the Government would quickly go back into the red in the coming decades because of extra costs linked to older people.

Under the lock, the basic State pension rises every year by inflation, .5 per cent or average earnings, whichever is higher.

Tens of billions more of further cuts or tax rises will be needed, the OBR said. It predicts that in the next half century, health spending will rise by one third, State pension by one quarter and the cost of social care by two-thirds. Overall, spending on people over 65 is likely to rise to one in every four pounds spent by the government, from less than one in five today.

Mr Chote said: ‘The triple lock does put systematic upward pressure on pension spending as a share of GDP and that creates choices about... whether you might want to make savings elsewhere.’

Overall debt stands at around £1.48trillion or 80 per cent of GDP – or £55,600 for every UK household.