Posted on March 17th, 2011 | Categories - News
Previous generations have received more in state benefits than current tax payers will in the future.
A rise in taxation is essential to pay for future pensions.
Taxes must rise over £80 billion a year to meet the cost of healthcare and pensions, according to an economic research body.
The National Institute of Economic and Social Research (NIESR) reported that a higher tax rate, which would equate to about 6% of GDP, should be set in place to help future generations avoid tax rises and cuts to services.
The NIESR highlighted that a child born today will pay £68,000 more in taxes over the course of its life than what it will get back in retirement income and health services – a child born in the next ten years will have to pay £160,000 extra.
However, those currently aged 65 have received £220,000 more from the state than the amount they paid in.
The research body’s paper, entitled Generational Accounts in the United Kingdom, stated: “One might think that, in a steady state, the net contribution would be zero. However, there is a past history of pay-as you-go benefits, which has allowed earlier generations to receive more from the state than they have contributed over their lifetimes and it is inevitable that there is now a net contribution which has to be paid”.
It added that tax has to rise in line with future spending pressures to bring the generational balance into account.
Expert forecasts on interest rates and inflation outline that over the next 100 years the UK would need to find £7 trillion in taxes to fund pensions and healthcare needs.