PriceWaterhouseCooper have revealed research that they believe shows the only way Britain can return to the levels of public debt seen before the credit crunch is to increase the state pension age to 70 by 2046, and to implement a further £20billion of spending cuts.
With increased life expectancy making retirement planning increasingly difficult, PwC believe the government will only save money by reducing the number of people who receive the state pension.
PwC published a paper ahead of the Office for Budget Responsibility’s first long term report on the fiscal sustainability of the UK in the long term. In the paper PwC revealed that the ageing population would leave public debt at 90% of gross domestic product, and would be rising by 2050.
The report believes that if the government were to increase the state pension age to 70, instead of the current plan of 68 by 2046 they would see debt levels of 80% of GDP instead.
Chief economist from PwC, John Hawksworth explained, “The government has already taken steps to address this problem through reforms to public sector pensions and has started the process of raising the state pension age. But the bigger challenge relates to health and long-term care costs.”
The government have already announced plans last year to increase the state pension age to 66 for both sexes by 2020, and to 68 by 2046, earlier than had previously been announced by the Labour government.
In 2007 public debt in the UK was around 405 of GDP and PwC added that to find the pre credit crunch levels again the country would have to fiscally tighten by 1.3% of GDP, around £20billion.
They blamed the levels of debt on the pressure and cost of the post war baby boom generation, those born between 1946 and 1965 who will eventually be paid for by those working in future generations.
They also blamed the increased life expectancy, with people living longer and longer. In the UK today there are 3.6 people of working age for every retired person, but PwC predict this to fall to 2.4 people working per retired person.
