Osborne won't tackle pensions, so how will he tackle the deficit?

Chancellor George Osborne has announced that he won't include the state pension in the newly introduced welfare cap.

There's a clear moral case for this - many have expected a state pension and planned to receive one all their lives, and disrupting those plans can be seen as unfair - but the money required to pay these pensions is likely to explode in the coming decades.

The real scandal is that governments decided to crowd out social and private provisions of pensions in the first place, and weren't able to predict the rapid demographic changes that have occurred in the UK.

Now chancellors are stuck between the moral unfairness of cutting pensions and the coming impossibility of paying for them. Either way, pensioners will inevitably suffer. Rory Meakin of the TaxPayers' Alliance:

Most of the government’s attempts to reduce the deficit so far have been through taxes, which have increased from £476bn in 2009-10 to a projected £612bn this year. This tightening of the economy’s tax screws has hobbled growth and led to the lacklustre performance we’ve seen recently. But while the sheer size of the tax drain on the economy is certainly formidable, spending will dwarf even this colossal number.

At a projected £720bn this year, the government’s spending plans are too ambitious even now. And the truth is that any long-term plan for a balanced budget must address welfare spending. Crucially, that includes the £90bn we are spending on state pensions. Even after adjusting for inflation, that number is set to jump to over £200bn by 2040, and then to £400bn by 2060.

(Full article)