The government will need to make significant changes to its financial plans if it has any hope of funding future pension and social care obligations, a report released yesterday by the Institute of Economic Affairs (IEA) has found.
The report, named ‘The Government Debt Iceberg’, says that in order to fund pension and social care obligations, the government will need to cut spending by more than a quarter, cut health and social protection spending by 50%, or impose ‘significant tax hikes.’
The IEA say that in addition, the measures that have been planned in the UK to address the situation, such as proposed rise in state pension age, are being ‘implemented slowly and are inadequate on their own.’
‘The Government Debt Iceberg’ also reveals the extent to which western governments are keeping taxpayers in the dark about true levels of debt and are hiding the magnitude of future spending commitments that cannot feasibly be met by future tax receipts.
The report calls for an urgent reform, warning that if the UK and rest of the EU fail to address its fiscal imbalances, the size of the necessary adjustment will continue to increase over time and will not go away, regardless of how much the economy grows.
Commenting on the research, Professor Philip Booth, Editorial and Programme Director at the Institute of Economic Affairs, said:
“Without reform, today’s young people are likely to be disappointed, either in terms of higher tax rates or in terms of reduced future benefits provided by government. The quicker the government changes policy, the more painlessly the situation will be resolved. For too long people have voted themselves benefits to be paid for by the next generation of tax payers, not be sacrifices they will make themselves.”
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