Forget Brexit, one of the biggest dangers to the British economy is the spiralling cost of an aging population.
The country could face half a century of tax increases and spending cuts to finance the price of aging, adding billions to the national debt, warns the Office of Budget Responsibility.
The government agency has calculated national debt could triple from 85% of the country’s annual earnings (GDP) now to 280% by 2067 with most of the money going on the soaring cost of health services and the state pension.
At the same time, fewer younger workers will be paying tax and national insurance contributions to fund the lifestyle of the aged.
Unsustainable burden
The result, says the OBR, is an unsustainable burden for the nation.
Other factors that will impact the economy are fewer immigrants after Brexit, and because immigrants tend to have young families, a lower birth rate.
The first sign of the impending economic disaster would be demographic changes leading to the government having to find more money for the National Health Service – borrowing this will push NHS borrowing from 0.3% of GDP now to 8.6% in 2068.
“This would reverse almost all the improvement in the primary balance that we expect between 2009-10 and 2022-23, the period of consolidation following the financial crisis,”saidRobert Chote, who heads the OBR.
Sums don’t add up
Although the government has announced finding an extra £20 billion for the NHS, Chote says he is not sure where the money is coming from.
The OBR forecasts the UK would have sent £13.3 billion to Brussels if the country stayed in the EU for 2022-23, but Brexit costs already come to £7.5 billion and most of the remaining £5.8 billion is earmarked for other spending.
“That would in principle cover a little under 30% of the extra health spending announced for that year, but that ignores other Brexit-related calls on those savings, including commitments the government has already made on farm support, structural funds, science and regulatory bodies, and possible continued contributions to the EU budget,” he said.
“While we await more detail, we have assumed here that the extra spending on health adds to total spending and borrowing.”