The Office for Budget Responsibility (OBR) last week confirmed what many of us have long feared: that short-term fiscal retrenchment, prioritised by chancellor George Osborne following New Labour's record borrowing, must be followed immediately by tough medium-term decisions over tax and spending rates due to demographic pressures.
The OBR's first Fiscal Sustainability report, published on 13 July, revealed that rapid demographic changes alone could require the UK to increase spending by £80bn annually by 2060. According to the OBR, health and pensions account for the largest share of the projected increase in spending – with both expected to require an additional 2.4% of national income simply to sustain current policy commitments.
