Uk Faces 'crippling' Tax Rises And Spending Cuts To Fund Pensions And Healthcare

[Sancho Panza]

Telegraph 13/3/14

'Britain faces “crippling” tax rises and spending cuts if it is to meet the needs of an ageing population, according to the Institute of Economic Affairs. The IEA calculated the Government would need to slash spending by more than a quarter or impose significant tax hikes because official calculations had failed to factor in future pension and healthcare liabilities. “As populations age, tax bases will grow more slowly while government spending rises faster,” its report said.

In a stark warning, the think-tank said Britain faced tax rises within just two years equivalent to more than 17pc of GDP – more than £300bn - in order to meet all future spending commitments. This is larger than the entire annual NHS budget and would increase taxes from 38pc to 55pc of national income.

Philip Booth, the IEA’s programme director, said tax increases of this magnitude would be “impossible” to implement “without choking off economic growth and actually reducing tax revenues.

“The underlying problem is that successive governments have made promises which can simply not be honoured from the existing tax base. The electorate is grazing a fiscal commons at the expense of future generations,” he said.

In the absence of further tax hikes, Jagadeesh Gokhale, the author of the IEA's report: the Government Debt Iceberg, said total spending would have to be cut by more than one quarter or health and welfare expenditure by 53pc compared with the current implied level if all future spending was to be met out of tax revenue.

While the IEA said increases to the state pension age would help to soften the blow of future tax rises, it said policies were being implemented too slowly and were “inadequate” on their own.

Mr Gokhale said policies to address pension saving and healthcare costs were needed now or the problem would quickly grow out of control.

“Without significant changes to spending levels, huge sacrifices will have to be made by future generations either through significantly higher taxes or reduced benefits,” the report said.

The IEA calculated that delaying crucial pension and healthcare reforms by just a few years would dramatically increase the burden because of growing debt interest payments. It said the ratio would increase from 13.7pc of GDP in 2010 - already higher than the EU average of 13.5pc - to almost 17.1pc by 2016 if no policy adjustments were made.

“We have never been in a situation like this before. It is quite possible that we will not find our way through without serious social breakdown and/or mass emigration of the most mobile and productive people,” said Mr Booth.

The report also warned that governments would not be able to grow their way out of trouble, and were too often “fixated” on short term growth. It said while the Government’s decision to move assets of the Royal Mail pension fund had reduced short-term debt measures, long-term state pension liabilities had increased.

“The Government took the assets of the Royal Mail pension fund and gave the workers promises of government pensions in return,” the report said. “The explicit government debt was reduced but future government liabilities – in this case contractual – were increased.”

“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,” said Mr Booth. “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 taxpayers, not by sacrifices that they will make themselves.”'

[Patfig]

Telegraph 13/3/14

'Britain faces “crippling” tax rises and spending cuts if it is to meet the needs of an ageing population, according to the Institute of Economic Affairs. The IEA calculated the Government would need to slash spending by more than a quarter or impose significant tax hikes because official calculations had failed to factor in future pension and healthcare liabilities. “As populations age, tax bases will grow more slowly while government spending rises faster,” its report said.

In a stark warning, the think-tank said Britain faced tax rises within just two years equivalent to more than 17pc of GDP – more than £300bn - in order to meet all future spending commitments. This is larger than the entire annual NHS budget and would increase taxes from 38pc to 55pc of national income.

Philip Booth, the IEA’s programme director, said tax increases of this magnitude would be “impossible” to implement “without choking off economic growth and actually reducing tax revenues.

“The underlying problem is that successive governments have made promises which can simply not be honoured from the existing tax base. The electorate is grazing a fiscal commons at the expense of future generations,” he said.

In the absence of further tax hikes, Jagadeesh Gokhale, the author of the IEA's report: the Government Debt Iceberg, said total spending would have to be cut by more than one quarter or health and welfare expenditure by 53pc compared with the current implied level if all future spending was to be met out of tax revenue.

While the IEA said increases to the state pension age would help to soften the blow of future tax rises, it said policies were being implemented too slowly and were “inadequate” on their own.

Mr Gokhale said policies to address pension saving and healthcare costs were needed now or the problem would quickly grow out of control.

“Without significant changes to spending levels, huge sacrifices will have to be made by future generations either through significantly higher taxes or reduced benefits,” the report said.

The IEA calculated that delaying crucial pension and healthcare reforms by just a few years would dramatically increase the burden because of growing debt interest payments. It said the ratio would increase from 13.7pc of GDP in 2010 - already higher than the EU average of 13.5pc - to almost 17.1pc by 2016 if no policy adjustments were made.

“We have never been in a situation like this before. It is quite possible that we will not find our way through without serious social breakdown and/or mass emigration of the most mobile and productive people,” said Mr Booth.

The report also warned that governments would not be able to grow their way out of trouble, and were too often “fixated” on short term growth. It said while the Government’s decision to move assets of the Royal Mail pension fund had reduced short-term debt measures, long-term state pension liabilities had increased.

“The Government took the assets of the Royal Mail pension fund and gave the workers promises of government pensions in return,” the report said. “The explicit government debt was reduced but future government liabilities – in this case contractual – were increased.”

“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,” said Mr Booth. “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 taxpayers, not by sacrifices that they will make themselves.”'

Quick buy houses it's the only way out buy buy buy

[wonderpup]

Banking bonuses worldwide up 29% as City of London fares even better

Happy days are here again,

the skies above are clear again

let us sing a song of cheer again

Happy days are here again,

Altogether shout it now

There's no one who can doubt it now

so let's tell the world about it now

Happy days are here again,

[dances with sheeple]

Happy days are here again,

the skies above are clear again

let us sing a song of cheer again

Happy days are here again,

Altogether shout it now

There's no one who can doubt it now

so let's tell the world about it now

Happy days are here again,

You won`t be singing that when some accessorised, minimum wage twit who thinks he should be famous is wringing out your incontinence pad to save money.

[porca misèria]

Erm ...

Haven't governments of both colours shown us the "solution" to that? First (2001-7) they had the banks lend it into existence, then when that imploded (2007/8) they printed (2009-) to fill the gap. Money no longer serves as a store of value.

[SarahBell]

There doesn't have to be any tax rises for the minions if the big companies paid what they should.

Is there no FairTax organisation asking that all companies be asked to pay the tax fairly?

[Georgia O'Keeffe]

There doesn't have to be any tax rises for the minions if the big companies paid what they should.

Is there no FairTax organisation asking that all companies be asked to pay the tax fairly?

the only way to pay tax fairly is to remove all violence from the transaction, in which case taxation would be voluntary (which is pretty much the definition of fairness). I doubt fair taxation would amount to more than a few million (and certainly not federalism) which would probably cause an issue for any special flowers reliant on (violence) such as politicians (govt), likewise it would likely cause an issue for any fair society defending itself against an unfair one which would inevitably have greater resources to call upon

In reality you arent after fairness at all, you are after violence being used in a way that you deem acceptable, the same as big companies, even if your view is clearly more sustainable

Edited March 13, 2014 by Maria Gorska

[Economic Exile]

You won`t be singing that when some accessorised, minimum wage twit who thinks he should be famous is wringing out your incontinence pad to save money.

That's what scares me most. Ending up needing social "care".

[goldbug9999]

the only way to pay tax fairly is to remove all violence from the transaction, in which case taxation would be voluntary (which is pretty much the definition of fairness). I doubt fair taxation would amount to more than a few million (and certainly not federalism) which would probably cause an issue for any special flowers reliant on (violence) such as politicians (govt), likewise it would likely cause an issue for any fair society defending itself against an unfair one which would inevitably have greater resources to call upon

In reality you arent after fairness at all, you are after violence being used in a way that you deem acceptable, the same as big companies, even if your view is clearly more sustainable

I'm sure all the medical staff at an A&E will be queuing up to voluntarily fix up any tree hugging anarchist who is brought in for treatment despite them never having payed a penny tax in their lives.

[Georgia O'Keeffe]

I'm sure all the medical staff at an A&E will be queuing up to voluntarily fix up any tree hugging anarchist who is brought in for treatment despite them never having payed a penny tax in their lives.

no they are unlikely to without an emotional tie to that individual, which is in summary what i stated, violence works, fairness doesnt (mainly because fairness is entirely subjective, whilst violence is objective)

Edited March 13, 2014 by Maria Gorska

[wonderpup]

the only way to pay tax fairly is to remove all violence from the transaction, in which case taxation would be voluntary (which is pretty much the definition of fairness). I doubt fair taxation would amount to more than a few million (and certainly not federalism) which would probably cause an issue for any special flowers reliant on (violence) such as politicians (govt), likewise it would likely cause an issue for any fair society defending itself against an unfair one which would inevitably have greater resources to call upon

In reality you arent after fairness at all, you are after violence being used in a way that you deem acceptable, the same as big companies, even if your view is clearly more sustainable

It's an odd argument to make that corporations should be granted the same freedoms as individuals- given that they cannot be subject to same sanctions as individuals.

In my view corporations that funnel their profits abroad to avoid taxes are genuine parasites to the degree that they operate in an infrastructure that is both vital to their operation and must be paid for by taxation.

[porca misèria]

That's what scares me most. Ending up needing social "care".

I firmly expect that today's system of keeping wretched zombies "alive", as mockeries of the memory of the people they used to be, is in retreat. Those of us now of working age won't suffer so badly unless afflicted unusually young. I guess terminal cancer is the main risk for under-80s, probably even under-90s.

The ghouls still have the upper hand today and will make an almighty fuss. But they can't prevail for ever as those of our international peers who shared the madness switch to more rational and more humane regimes.

Edited March 14, 2014 by porca misèria

[interestrateripoff]

Is this a push for private health insurance like the US model which will increase costs even more and ensure anyone who is ill has all the wealth extracted from them by the bankers?

[porca misèria]

Is this a push for private health insurance like the US model which will increase costs even more and ensure anyone who is ill has all the wealth extracted from them by the bankers?

If you believe our NHS delivers value, you're what Stalin described as a Useful Idiot.

NHS care is a lottery. If you're amongst the majority who lose when they have a medical problem sufficiently serious to matter, they have well-oiled machines for brushing you under the carpet.

[stumpy]

You won`t be singing that when some accessorised, minimum wage twit who thinks he should be famous is wringing out your incontinence pad to save money.

Soylent Green will be showing at all cinema's

[Billy soy]

Is this a push for private health insurance like the US model which will increase costs even more and ensure anyone who is ill has all the wealth extracted from them by the bankers?

Create the crisis then swoop in with the solution, American style healthcare. Anecdotally I read a comment from an NHS worker claiming the NHS bill recently brought in by the Tories states the government isn't responsible for providing healthcare and bids must go to the cheapest provider. Care homes in Poland? India?

The new auto enrolment of workers into pensions and the noises being made about NIC being scrapped and renamed earnings tax probably means the end for the state pension as we know it.

[crashmonitor]

The truth is we barely pay enough tax to pay for all the goodies we expect when we are working, yet most of us enter retirement expecting a state pension of £7,000 and a further £4,000 in health benefits before any of the other public services; most of the benefits have not be paid for by the recipients and are unfunded.

The Ponzi is being kept alive by immigration and debt, but even the immigration solution will one day need paying for in terms of retiring immigrant workers and again in excess of their contributions. We will probably need a further three immigrants to support each immigrant in retirement to enable the Ponzi not to collapse.

Meanwhile the politicians are just doing enough at present in terms of immigration and debt to ensure benefits for their lifetimes. Anybody under 40 needs to bend over and pay the piper.

Edited March 14, 2014 by crashmonitor

[R K]

Taxy taxy.

Start with all the mutli-millionaires in London and the other British tax havens.

The money's there so no problem.

[Solitaire]

The new auto enrolment of workers into pensions and the noises being made about NIC being scrapped and renamed earnings tax probably means the end for the state pension as we know it.

+1

It seems to be the only logical outcome of the changes that have been made.

[Guest spp]

Taxy taxy.

Start with all the mutli-millionaires in London and the other British tax havens.

The money's there so no problem.

Rubbish!

Show us the numbers! There is simply not enough to cover the damage.

+ TAX is part of the problem.

[Guest spp]

+1

It seems to be the only logical outcome of the changes that have been made.

Can't see how those already with a public/private pension will have any chance of getting state retirement.

Not far off 70 already...like most of us will live that long anyway!

The goal posts are being moved to preserve the status quo and cement the ineptocracy. Though don't despair, things should really start heating up by the end of 2015.

Edited March 14, 2014 by spp

[Neverwhere]

If you believe our NHS delivers value, you're what Stalin described as a Useful Idiot.

NHS care is a lottery. If you're amongst the majority who lose when they have a medical problem sufficiently serious to matter, they have well-oiled machines for brushing you under the carpet.

+1

Have experienced this myself: years of the NHS refusing to properly treat a spinal injury (failure to treat resulted in the development of two seperate additional neurological conditions that could otherwise have been avoided) while continually prescribing specialist neurological medications, regular physiotherapy and consultations that over the course of the injury must have exceeded the cost of the single operation I needed (which has a high success rate). Eventually managed to force them into doing the surgery anyway by paying for private medical care to prove the need, and to treat the two conditions born solely of the lack of treatment of the original injury (both of which the NHS continually maintained were untreatable despite research from the 1980s onwards demonstrating quite the opposite). I assume they were playing a numbers game whereby the quarterly expense for the useless non-treatment they actually gave was at least marginally less than the operation that eventually fixed the problem, so the quarterly costs looked cheaper even though the overall cost for the entire course of the injury was much higher (for both them and me) than if they'd just fixed the problem outright at the start.

Unfortunately I know others who've had similarly poor experiences as well. I suspect the NHS is being run into the ground intentionally in order to eventually justify off-loading it. Although it could just as easily be the inevitable outcome of a top-heavy target-driven management structure. Or perhaps a combination of both

Btw the private medical sector in the UK is incredibly overpriced unless you already have insurance. If you don't it's much better to go to the continent where procedures can, in my experience, be between 1/5th and 1/20th of the cost (although this might be a phenomenon limited to neurology as I haven't had to use any other services privately, here or abroad).

[Roman Roady]

Exactly what part of UNFUNDED LIABILITIES or PYRAMID SCHEME are people not understanding?

[MarkG]

Exactly what part of UNFUNDED LIABILITIES or PYRAMID SCHEME are people not understanding?

The part where they think they can enslave enough kids to pay for them, while most of those kids are on the dole or making minimum wage in Starbucks.

The reality is, it's never going to happen. The only chance to fund those liabilities was real economic growth, and you don't get that from a bloated government that sticks its nose into every aspect of everyday life and regulates new business out of the country. The question now is not whether the welfare state will fail, but when?

[Billy soy]

Exactly what part of UNFUNDED LIABILITIES or PYRAMID SCHEME are people BOOMERS not understanding?