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Pensions And Health Care Pledges Put Uk At 'extreme Risk' Of Another Economic Crisis

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Higher taxes, more spending cuts and longer working lives will be needed to prevent the country "going bankrupt", risk analyst Maplecroft warns in its annual Fiscal Risk Index. The UK ranks 10th out of 163 countries, a rise of 16 places from last year, but is considered to be in less danger than Germany, France, Italy and Japan.

Maplecroft's warning undermined positive news from the Office for National Statistics (ONS) on the Government's deficit reduction programme. The Treasury raised £3.7bn more in taxes than it spent in January, its biggest monthly surplus in two-and-a-half years, putting it on course to beat the official deficit forecast this year by around £8bn.

However, economists cautioned the Chancellor against using any short-term windfall for a tax giveaway in next month's Budget. Speculation is mounting that George Osborne may axe the planned 1p increase in fuel duty, but Rowena Crawford, research economist at the Institute for Fiscal Studies, said: "Given the uncertainty over borrowing going forwards, he might best be advised to bank any improvement rather than engage in significant net giveaways."

Economists now expect the Budget deficit to drop to £140bn, against the £148.5bn official forecast, as tax revenues have been better than expected. January tends to be a good month for revenues, however, and the final deficit in April may be closer to the official forecast.

"It will take more than one month in surplus to deal with borrowing of almost £150bn for this financial year," a Treasury spokesman said.

Despite the attempts to get the public finances under control in the short-term, pension and health care threatens to blow a hole in the national debt in the next few decades. The International Monetary Fund has estimated that the fiscal implications of ageing populations would be almost 10 times the cost of the financial crisis.

The UK high public debt levels, projected to hit 70pc of GDP in 2013, could make the ageing problem have "a more profound impact and sooner", Maplecroft said. Siobhan Tuohy, a research analyst, added: "It is increasingly likely that the private sector will be called upon to contribute in the form of pensions and private health care."

A similar warning was made last November by the Office for Budget Responsibility, the UK's official forecasting body, which predicted that without reform public debt will rise to 100pc of GDP within 40 years despite the current austerity drive. Last week, Lord Warner, a government adviser drafting new plans for the elderly care system, suggested baby-boomers should be prepared to pay for their care rather than expect the taxpayer to foot the bill.

A report highlighting that the promises can't be met, but yet somehow magically the private sector will be able to. Somehow I think not the problem is I doubt the majority of the people will be able to pay the bill.

Watched this at the weekend Toughest place to be.. and the wife of the bus driver in the Philippines needed medication, needed to spend 300 peso a day on medication but they could only afford 200 peso for her. That's the private sector solution, there is no collective.

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