Britain set to go bankrupt due to rising OAP numbers

Published on Wednesday 13 July 2011 17:38

THE next generation of the UK's political leaders face bankruptcy because of the rocketing costs of caring for Britain's increasingly elderly population.

The findings were made in a report by the country's leading economic forecaster.

The Office of Budget Responsibility (OBR) said that, by 2058, ministers would have no choice but to impose fierce spending cuts or huge tax rises as the greying of the population put public finances under impossible strain.

Academics in Scotland warned the so-called "demographic timebomb" was worse north of the Border, as lower rates of immigration had made the country's profile even older.

The OBR, an independent body set up by the coalition government, says that "in the absence of tax increases or spending cuts", the pressures on budgets will "eventually increase the budget deficit sufficiently to put public sector net debt on an unsustainable upward trajectory".

Debt could hit 100 per cent of GDP by 2058 as the increased life expectancy of Britons imposed a mounting strain. Figures from the Office of National Statistics show the proportion of the population aged 65 and over will rise from 17 per cent today to 26 per cent by 2061. In Scotland, official figures estimate the cost of elderly care will increase by 3.35 billion, or 74 per cent, by 2031.

The OBR report comes amid calls for an overhaul of the public sector in Scotland, with warnings it will not be able to cope with the coming challenge unless it reduces demand.

The OBR says that, if things stay the same, health spending will have to rise from 7.4 per cent of GDP in 2015-16 to 9.8 per cent in 2060-61. State pension costs will increase from 5.5 per cent of GDP to 7.9 per cent. Social care costs will rise from 1.2 per cent of GDP in 2015-16 to 2 per cent in 2060-61.

Professor Robert Wright of Strathclyde University, one of Scotland's leading experts on demographic trends, warned that Scotland's crisis was deeper than that in the rest of the UK.

He said: "Net migration has been negative in Scotland for longer than the rest of the UK for a longer period of time. Also, mortality and fertility have been lower.

"These differentials have been allowed to grind away in Scotland for decades, which means our population is going to be much older than England's over the next 20 years. It doesn't matter how the politicians choose to paint this: fewer numbers of working-age people are going to be paying for more older people who aren't working.

"I have always argued the key to accommodating the ageing population in Scotland and the UK is in managed immigration, copying systems like they have in Australia and Canada. It is managed migration, not a free for all."

Union chiefs claimed the OBR report was an attempt by the UK government to "strengthen its hand" in attempts to cut public-sector pensions.

Business leaders said it showed the need for government to back a strong private sector-led recovery.David Kern, chief economist at the British Chambers of Commerce, said: "Only greater productivity and higher growth in the private sector can pay for public-sector services and public-sector pensions in the future."

But Michelle Mitchell, Age UK charity director, said: "If we plan sensibly and carefully calibrate long-term spending and taxation decisions, there is no need for national debt to increase alongside life expectancy."