Keep up with the news by installing RT’s extension for . Never miss a story with this clean and simple app that delivers the latest headlines to you.

 

UK tax watchdog: Britain needs $102 billion in austerity cuts

Published time: July 19, 2012 13:49
Edited time: July 19, 2012 17:49
United Kingdom, London: A woman takes a picture during a street party near Tower Bridge during the Thames Diamond Jubilee Pageant on the River Thames in London on June 3, 2012. (AFP Photo / Justin Tallis)

United Kingdom, London: A woman takes a picture during a street party near Tower Bridge during the Thames Diamond Jubilee Pageant on the River Thames in London on June 3, 2012. (AFP Photo / Justin Tallis)

Britain will need another $102 billion in tough austerity measures to cope with an ageing population, the UK’s tax and spending watchdog has warned.

This comes on top of Chancellor George Osborne’s  $193 billion seven-year fiscal drive, which involves hundreds of thousands of public sector job losses, and a highly controversial overhaul of the welfare system and a higher pension age.

The Office for Budget Responsibility (OBR) raised the prospect of decades of tax hikes or spending cuts to rein in finances from April 2018 until 2061. 

The ageing population is the key challenge for public finances, as spending on health care and pensions increases.

Health spending is set to rise from 6.8% of GDP in 2016-17 to 9.1% in 2061-62, rising smoothly as the population ages.

State pension costs are expected to increase from 5.6% of GDP to 8.3% as the population structure ages and state second pension entitlements mature.

Meanwhile, social care costs are projected to rise from 1.1% of GDP in 2016-17 to 2% in 2061-62.

The OBR said these increases are partially offset by a fall in gross public sector pension payments from 2.2% of GDP in 2016/2017 to 1.3% of GDP in 2061-62.

“In the absence of offsetting tax increases or spending cuts this would widen budget deficits over time and eventually put public sector net debt on an unsustainable upward trajectory,” the OBR report says. “It is likely that such a path would lead to lower long-term economic growth and higher interest rates, exacerbating the fiscal problem. The UK is far from being unique in facing such pressures.”

The OBR said the budget balance, the difference between revenues and spending, is currently projected to move from a surplus of 1.7% of GDP in 2016-17 to a deficit of 2.6% in 2061-62 and to maintain the surplus of 1.7%, a further £65 billion in spending cuts and tax hikes is needed.

To avoid a budget deficit by 2061-62, the UK Government would need a further £39 billion in austerity measures.

In other measures, the OBR said the Government would need to impose a permanent tax increase or spending cut of £17bn in the financial year 2017-18 to get debt back to pre-financial crisis levels of 40% of GDP.

Meanwhile the country’s government is to underwrite up to $79 billion of investment in UK infrastructure and exports to give a kick to the economy.

Chancellor George Osborne announced the plans, saying he was using the coalition's "hard won fiscal credibility" to free up private sector funds.

The initiative comes amid mounting pressure on ministers to support the economy by loosening the purse strings. Earlier this week the IMF again cut the country's growth forecasts to just 0.2% for 2012.

However, the move can raise fears that the British taxpayer is taking on liabilities that the private sector considers too risky.

Comments (1)

Anonymous user 25.04.2013 23:16

Get it from Amazon, Google and Co. make laws to stop tax evation on top

Add comment

Authorization required for adding comments

Register or

Name

Password

Show password

Register

or Register

Request a new password

Send

or Register

To complete a registration check
your Email:

OK

or Register

A password has been sent to your email address

Edit profile

X

Name

New password

Retype new password

Current password

Save

Cancel

Follow us