Friday, July 01, 2011

Britain's age timebomb: Cost of 1.4m extra pensioners means NHS cannot stay free, says think tank

Britain faces a bleak future of higher taxes and a rising deficit if ministers continue to increase spending on state pensions and the NHS, a hard-hitting report warns today.

The country is facing a demographic timebomb with the number of over-65s set to increase by 1.4million over the next five years. The report by think tank Reform warns that this ageing population threatens to overwhelm the Coalition's attempts to bring down the UK's biggest ever peace-time deficit.

The report calculates that the ageing population will impose an additional burden on the taxpayer of £32billion for pensions and nearly £40billion for healthcare by 2041, without allowing for inflation. This is set to force up both taxes and state borrowing during the next Parliament, 'swamping' Chancellor George Osborne's plans for deficit reduction.

The authors accuse ministers of 'burying their heads in the sand' about the scale of the impending crisis and call on individuals to take responsibility for their own futures. They go on to urge the Government to face down the unions by holding firm on reforms to public sector pensions.

The report also proposes a number of radical and controversial measures to prevent Britain from collapsing into a spiral of debt, including charging for the NHS.

They also include scrapping popular 'gimmicks' such as the Winter Fuel Allowance and free bus passes – and forcing people to save for their retirement.

The pro-market think tank also calls for the Coalition to reverse its decision to link the state pension with earnings and drop plans for a single tier pension – which has been estimated to cost an additional £11billion per year.

It says: 'Decisions such as indexing the state pension to wage growth not price growth should be reversed. 'Shifting forward the increase in the retirement age has not made this change affordable. It will only save money until 2021 after which the age will be back on its earlier trajectory.'

The report, called Old and Broke, says that between 2011 and 2016, the number of people aged 65 and over will increase by 1.4million while the working age population below 50 will decrease. There are currently 10.1million people aged 65 or over in the UK.

Population ageing will continue so that the ratio of workers to pensioners will fall from 3.9 in 2011, to 3.2 in 2021, and then to 2.5 in 2041.

The report adds: 'Change has to take place. Government programmes are largely funded on a pay as you go basis. 'With the ageing of the population ... younger people will face the prospect of paying more for less while the elderly population enjoys a heavily subsidised lifestyle and unearned windfall gains.'

The report continues: 'Research has shown that the UK has the largest pensions gap in Europe. Too many people “play chicken with the State” and assume that taxpayers will always be there to bail them out in periods of need.'

Pointing out that people in the UK make one of the smallest contributions to healthcare in Europe, the report calls for more charging in the NHS. It says: 'The service cannot remain free at the point of care. As well as increasing revenue for the services, charging will moderate demand and engage patients more in how they consume health services and how they manage their own health.'

The report's lead author, Dr Patrick Nolan, added: 'Starting long-term reform will give people time to make alternative plans for their future.'


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