In this article, Dr Eamonn Butler argues that the UK is facing another financial crisis as early as 2019. He claims the next crisis will be caused by us promising ourselves state healthcare, pensions, and other benefits that our taxpaying children won't be able to afford to pay off.
There’s another financial crisis facing the UK, according to the award-winning analyst Miles Saltiel in a report for the Adam Smith Institute, On Borrowed Time. And this time we won’t be able to blame the Americans, or the banks, or anyone but ourselves. Because the next crisis will be caused by us promising ourselves state healthcare, pensions, and other benefits that our taxpaying children just simply won’t be able to afford.
We are in a much bigger debt hole than any government is prepared to own up to. On top of the trillion or so they admit, you have to add another three trillion or so for the future costs of public and state pensions. Then what about the cost of all those healthcare and other benefits? Our problem is not just that the last government spent billions trying to borrow its way out of economic incompetence – and indeed trying to borrow its way out of debt. Our real, long-term problem is that we have promised ourselves more and more generous benefits on the assumption that we can pass the bill to our kids.
If we had the decency to kill ourselves with booze and fags, there wouldn’t be so much of a problem. But now we are all goody-goodies and living well beyond our allotted span, all those promised pensions, health benefits, free TV licences and bus passes, winter fuel payments and the rest add up to an unpayable bill.
Saltiel looks at three scenarios. The first is where the current Government’s ‘cuts’ – well, you know what I mean: reductions in the rate of increase – work through until 2015, and then the proceeds of any economic growth after that go to fund yet more government spending. That is not as outlandish as it sounds, because governments these days are pretty good at swallowing up the greater part of our economic growth. But if they do, Saltiel figures Britain will be bust by 2019.
The second scenario is where future governments show uncharacteristic restraint and split the proceeds of growth 50:50 between increasing public spending and reducing public debt. We still go bust, but not until 2031.
The third possibility is where all post-2015 growth goes into paying off our debts. The cheery conclusion is that in time, we could actually pay off the national debt. The chilling conclusion is that even with restraint on that scale, it wouldn’t be paid off until 2041, so there’s only an evens chance that I would live to see it.
We can’t keep voting ourselves gold-plated social benefits. We need to make politicians fess up to the real scale of the obligations we have shifted onto future generations, so we can see just how deep a hole we are in. Then we need to make them reveal the future cost of new policies they propose today. And we need to put limits on how much cost we can push onto our children. Otherwise, both generations have had it.