Needed: retirement at 70 and 24% VAT

PricewaterhouseCoopers’ latest analysis reveals that the cost of looking after the UK’s “greybeards” will become unsustainable unless younger generations work longer and pay higher taxes. 

The research into the long-term health of the public finances, which comes a week ahead of an official study on the subject by the Office for Budget Responsibility, contains some damning figures: 

  • The cost of looking after the UK’s older generation will rise by £68bn to £75bn a year by 2050.
  • Public debt will rise to 90 per cent of GDP by 2050 from current levels of about 70 per cent (even after the latest £110bn of austerity and a planned increase in the retirement age to 68). The will have a serious dampening effect on economic growth.
  • Bringing public debt back down to just below 40 per cent of GDP by 2050 (where it was in 2007 before the financial crisis) would require fiscal tightening of around 1.3 per cent of GDP by 2020
  • That would mean both a further £20bn of austerity (equivalent to another rise in VAT from 20pc to 24 per cent, or a two percentage point increase in both employer and employee National Insurance contribution rates.)
  • It would also mean an increase in the planned retirement age to 70.
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