The office for Budget responsibility has warned that unless the British government makes a further round of spending cuts in the region of £17billion the country will face catastrophe.
The report suggests that unless the measures are taken then the UK will be stuck in debt until after 2061. An increasingly aging population has led to a demographic time bomb waiting to detonate and cast the nation into financial ruin.
The OBR suggests that further tax hikes are required in order to relieve the nation’s budget deficit and will be vital if the government is to afford to alleviate the costs of an aging population. An extra £65 billion can be added to the current deficit if you look ahead to the future where the majority of people living in the country are either middle aged or elderly. Costs for healthcare and pensions are set to spiral out of control putting an unfair burden on the young of the future.
“In the absence of offsetting tax increases or spending cuts this would widen budget deficits over time and eventually put public sector net debt on an unsustainable upward trajectory,” it added.
“It is likely that such a path would lead to lower long-term economic growth and higher interest rates, exacerbating the fiscal problem. The UK, it should be said, is far from unique in facing such pressures.”
The calls for further belt tightening and tax hikes come after Chancellor George Osborne begins the next phase of his seven year fiscal consolidation programme which includes hundreds of thousands of public sector job losses, an overhaul of the welfare system and a higher pension age. Overall he hopes to save up to £123billion.
The UK is stuck in a double dip recession and has suffered from the ongoing Euro crisis. The strong pound has also not helped matters as exports to Europe have become more costly and demand has waned.
The Pound posted a fresh three-and-a-half year high against the Euro for the 5th day on the trot yesterday as Sterling continued to benefit from defensive inflows from the Eurozone.
The Pound to Euro exchange rate is currently trading at 1.267
The Pound to US Dollar exchange rate is currently trading at 1.543
The Euro to Australian Dollar exchange rate is currently trading at 1.203
The Euro to US Dollar exchange rate is currently trading at 1.217
The Euro to Pound exchange rate is currently trading at 0.788