UK’s Aging Population Causes ‘Debt Timebomb’

October 29, 2014

Luke-Notley small (Custom)The aging and ever-growing population of the UK is quickly creating a Debt Timebomb according to the Institute of Economic Affairs (IEA). The thinktank has warned this developing problem can only be solved through a combination of significant spending cuts, increased state pension age and ending universal free healthcare.

Calling on the Government to slash public spending by a quarter and charge for some NHS services, the thinktank has warned that significant changes need to be made before the timebomb detonates.

The thinktank has calculated that the Government would need to cut spending by 9.6% of Gross Domestic Product (GDP) – roughly £168bn per year – to avoid the potential irreversible damages of the country’s debt. In the current Government budgets, this would be the equivalent of cutting the health, welfare and pensions budgets in half or the overall spending by a quarter.

Editorial Director at the Institute of Economic Affairs, Philip Booth, revealed: “Politicians must wake up to the size of the debt time bomb in the UK. Older generations have voted themselves benefits that will indebt future generations, meaning crippling tax hikes for our children and grandchildren. Very significant spending restraint and reform of entitlements will be required in the next parliament and beyond to get our debt levels back under control.”

Improving healthcare has led to a significant increase in the number of elderly citizens. It is anticipated that over the next 50 years, the number of people in the UK aged over 85 will quadruple to 5.86 million. Furthermore, the number of over 65s will almost double in the same time period to 20 million.

The thinktank’s report revealed: “The long-term impact of an ageing population presents a significant fiscal challenge to the UK,” the report said. “Very significant spending restraint will be required in the next parliament and beyond in order to get public sector debt levels back to a sustainable level.”

The IEA has also suggested greater contributions should be made by employers to work pensions, significantly relieving the stress placed upon state pensions. This would mirror the system currently in operation in Australia.

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