The UK’s ageing population will add £80bn to government spending by 2060 as services such as health and state pensions require greater funding, the government’s fiscal watchdog has said.
The Office for Budget Responsibility put a figure on public sector pensions for the first time, saying the total liabilities for the pensions of teachers, policemen and civil servants was £1.13 trillion.
As reported by City A.M yesterday, the OBR also raised its estimates for the liabilities associated with private finance initiatives – where companies build infrastructure for public bodies to remove their upfront capital outlay – to £40bn, from just £5bn previously.
But it shied away from putting a figure on the net present value of future state pensions payments – the single largest liability facing the UK – as it says the value remains dependent on future policy decisions it cannot control.
It said only that annual spending on state pension payments will increase from 5.5 per cent of GDP in 2011 to 7.9 per cent by 2060 as the population ages.
The government has however factored a cost of state pensions into its expenditure predictions. The Institute of Economic Affairs has calculated from these that current state pension liabilities are £1.1 trillion while future liabilities are £1.7 trillion.
Social care costs will also rise from 1.2 per cent of GDP in 2015 to two per cent by 2060, it warned.
The government expects to have to pay £105bn for nuclear decommissioning and other future provisions.
The accounts including these items, called the whole of government accounts, also includes £759bn of tangible and intangible fixed assets as of March 2010 – 84.5 per cent of GDP at that time.