The Office for Budget Responsibility put out its annual Fiscal Sustainabilty report yesterday. It’s got three graphs which are a wee bit scary.
Here’s the first graph, showing what proportion of taxes paid and state services used comes from which age group:
Speaks for itself, really. We rely heavily on the middle-aged for taxes, and spend heavily on early and later years. Look in particular at the pink lines – that’s health and long term care. Now look at graph number two:
Spot where the growth is. Note the percentages are the average increases each and every year, for the next 50 years. Put the two graphs together and you get graph number three:
Decoded from OBR-speak, that’s a yawning budget deficit and an increasing national debt. Summarising its projections, the OBR says:
The main lesson of our analysis is that future governments are likely to have to undertake some additional fiscal tightening beyond the current consolidation plan for the next five years in order to address the fiscal costs of an ageing population and perhaps upward pressures on health spending.
In case you were wondering, ‘additional fiscal tightening’ means more spending cuts and/or tax rises. JRF would be the first people to say ageing should never be seen simply as a burden. Anything projecting trends to 2061 also needs a healthy dose of scepticism – for all we know JRF will be tackling poverty on the moon/in underwater cities/in the post-WW3-apocalypse by then – and intriguingly, the OBR says that inward migration could mean quite a different demographic future.
But the OBR presents a scenario for current trends and policies staying the same. And things staying the same is exactly what we saw this week: a social care white paper unveiled which had much that was welcome, but no progress at all on funding. In the face of demographic change that is essentially the same as doing nothing – and if that approach is continued, then the OBR’s numbers will become not mere projections, but an immediate and very painful reality.
In short: we’ve got an ageing society. That’s expensive. If we don’t work out how to pay for it, then sooner or later, we’ll be broke.
Gordon Hector is public affairs manager at the Joseph Rowntree Foundation
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