LONDON (Reuters) - Rising costs of pensions and long-term care will put “unsustainable” pressure on Britain’s public finances unless 19 billion pounds ($29 billion) of spending cuts or tax rises are introduced, according to the country’s independent watchdog.
The Office for Budget Responsibility said the additional savings would be needed in five years’ time to reduce the level of national debt to 40 percent of national income, the threshold deemed sustainable by the previous Labour government.
“It is clear that longer-term spending pressures, if unaddressed, would put the public finances on an unsustainable path,” it said.
Britain is not the only country facing challenges from an ageing population. Many Western countries have already been forced to take measures to reduce pension liabilities.
The budget watchdog predicted public spending on health would increase to 8.8 percent of GDP in 2062-63 from 7 percent in 2017-18, while the costs of the state pension would rise to 8.4 percent of GDP from 5.8 percent over the same period.
Falling tax receipts from North Sea oil, as production declines, are also expected to contribute to the worsening fiscal outlook. The OBR said revenue was likely to decline to just 0.03 percent of GDP over the next 20 years from 0.7 percent in 2011-12.
The OBR was set up by the coalition government in 2010 to provide independent and authoritative economic forecasts.
Reporting by Christina Fincher; Editing by Catherine Evans