Financial watchdog alerts the UK of £30 billion bill each decade to cover NHS costs as population lives longer.
The cost of the increase in people’s lifespan could be as much as £30 billion each decade across the NHS, pensions and social care, over the coming 50 years. The Office for Budget Responsibility identified that allocations for healthcare and pensions will increase more rapidly than the UK economy by 2066 – creating a shortfall of £156 billion unless necessary cuts/tax increases are made to cover it.
It is thought that without drastic measures the public sector net debt will jump from 82 per cent GDP to 234 per cent by 2066-67, in line with borrowing rises, to 16.6 per cent.
In 50 years the NHS will require double the 6.9 per cent of GDP it currently utilises meaning that the new figure of 12.6 per cent would cost each income tax payer an extra £1000 per decade.
Social care costs will go from from 1.1 per cent to 2 per cent over the same timeframe and pension spending will go from 5.8 per cent to 8 per cent primarily due to the triple lock promise.
NHS costs are the most significant factor due to the UK’s growing older population, lower net migration and expensive new operations – resulting in large bills for the NHS.
The report mentioned that, “upward pressure from ageing and the ‘triple lock’ guarantee more than offsetting savings from prospective rises in the state pension age”.
The OBR alerted the Chancellor of the need for him to step in following the new forecasts. If the forecasts are correct it is thought that the budget deficit will widen from 0.7 per cent of GDP in 2021-22 to 1.8 per cent by the end of the next Parliament in 2025-26.
“Rising healthcare costs could make it harder for the Chancellor to balance the budget in the next Parliament and put the public finances on an unsustainable path over the longer term in the absence of further tax increases or cuts in other public spending,” the OBR said.
Chancellor Philip Hammond said the forecast “sets out a possible outcome if the Government takes no action, and, as I made very clear in the Autumn Statement, we are acutely aware that action will be required in order to return the public finances to balance”.
Hammond went on to recommend a “mature” conversation between all parties as soon as possible, due to the size of the challenge ahead.
Photo credit: Julita B.C.