Retirement at 70 ‘needed to control public debt in a decade’
Only a retirement age of 70, a basic income tax rate of 37% or a 10% slashing of public spending would get Britain’s public debt under control within a decade, a think tank is reported to have concluded.
The National Institute for Economic and Social Research (NIESR) will issue a report today warning drastic action was required and backing longer working as the best solution, The Daily Telegraph said.
Even if the working age was raised to 70 between 2013 and 2023 — 23 years earlier than then the present plans to push it up to 68 for men and women — taxes would still have to go up 8p in the pound, it was expected to say.
Other options were a 15p increase in the basic rate of income tax or cutting government spending by a tenth with inevitable impacts on front line services such as health and education.
Ray Barrell, a senior research fellow at the institute, told the newspaper: “The choice is we have got to raise income tax a lot, cut spending a lot, or work longer.
“There is a stronger case for extending working lives because we’re all living so much longer.”
Chancellor Alistair Darling’s Budget last month set out plans for state borrowing to rise to a record £175 billion this year, with the economy not coming back into balance until 2018.
The independent Institute for Fiscal Studies has predicted debt will not be within the Government’s former target of 40% of GDP until 2032.
The NIESR is also less optimistic than Mr Darling about the economy’s performance this year, the newspaper said, predicting a 4.3% decline as opposed to the Chancellor’s 3.5%.
This week the European Commission downgraded its UK forecasts — expecting output to shrink by 3.8% in 2009 before edging just 0.1% ahead in 2010, against Mr Darling’s more optimistic 1.25% prediction for next year.
Government debts as a share of output could be pushed “close to 85%” by 2010/11, it added.
But an index of UK companies’ optimism today showed it had risen from 89.9 in January to 91.2 in April, according to research by accountants and business advisers BDO Stoy Hayward.
The index, which measures medium term business confidence, suggested the recession had troughed in both the UK and Eurozone and that the pace of the slowdown would diminish.