More cuts & state pension at 70?
A new report from PwC has painted a bleak picture of future UK public debt and suggested some tough measures to get the economy back on a stable footing.
They have forecast public debt rising to 90% of GDP by 2050, from a starting level of 70%. This is even after £110 billion of public spending cuts are implemented and the state pension age has been increased to 68.
PwC recommends increasing the pension age further still, to age 70, and making a further £20 billion of spending cuts.
They claim this combination of austerity measures is what is needed to bring public debt back down to below 40% of GDP by 2050, which would equate to 2007-levels of debt.
The PwC report also considers the impact of an ageing population on levels of public debt.
Whilst reforming public sector pensions and increasing the state pension age are important steps to help bring debt levels under control today, the cost of health and social care are massive costs to consider for the future.
These costs can only be funded if younger generations work for longer and pay higher taxes.
The demographic shape of the UK population means that the number of people in work supporting those in retirement is falling quickly.
This support ratio currently stands at 3.6 working age people for every pension age person.
It is set to fall to 2.4 working age people for every person in retirement by 2050, reducing the potential flow of tax revenues to pay for unfunded benefits and services, such as the state pension and public sector pension schemes.
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