Britain faces a "bleak future" of rising taxes and rising deficits unless the Government reverses plans to increase state spending on the NHS and pensions, a report has warned.
The UK's ageing population threatens to overwhelm politicians' efforts to get spending under control and bring down the national debt, said the report from pro-market think-tank Reform.
With the number of people aged over 65 due to soar by 1.4 million between 2011 and 2015, and the ratio of workers to pensioners expected to drop from 3.9 now to 3.2 in 2021 and 2.5 in 2041, the UK is entering a period of soaring demand for pensions and healthcare.
The Government must hold firm on plans to reform public sector pensions, despite Thursday's strikes, and must resist any proposals from next week's Dilnot Commission for increased state spending on long-term care for the elderly, said the report's author, Patrick Nolan.
And he warned that, unless Government policies change, the ageing population will impose an additional burden on the taxpayer of £32 billion for retirement pensions and nearly £40 billion for healthcare by 2041, even without allowing for inflation.
This is likely to force up both taxes and state borrowing over the next Parliament, "swamping" Chancellor George Osborne's plans for deficit reduction, said Dr Nolan, Reform's chief economist.
The report called for elderly people to fund the cost of their long-term care, including by selling their homes.
And it said the Government should reverse its promise to increase the state pension in line with earnings, drop plans for a single-tier pension and rethink universal benefits such as the winter fuel allowance.
On health, the report called for ministers to "look urgently at ways for citizens to pay privately towards the cost of the NHS".
Dr Nolan said: "The temptation will be to put off dealing with the cost of pensions and the NHS, which are amongst the most politically sensitive issues. But if ministers act soon, the costs to the taxpayer will be relatively low and there will be few people who lose out from any changes. Starting long-term reform will give people time to make alternative plans for their future."