UK’s debt levels will result in tax and retirement age increases

| October 21, 2009 | 0 Comments

According to influential think tank, the National Institute of Economic and Social Research (NIESR), the UK’s out of control debt will result in tax hikes, cuts in spending and a rise in the retirement age.

The NIESR believes that the build up of Government debt could reach 93% of GDP by 2015. UK debt is currently the equivalent of 59% of GDP.

The respected group of economists said in order to control spiralling debt in the UK, the Government could have to put 7p in the pound on the basic rate of income tax, as well as raising the retirement age to 70.

Earlier this month, the Conservatives said if they win the next election, they will raise the state pension age for men from 65 to 66 from 2016 and did not rule out an increase in the pension age for women towards 66, as a result of growing debt levels.

Meanwhile, the Institute of Directors (IoD) last week said the UK state pension age to increase to 70 as soon as “reasonably practical”.

However, this was not due to debt levels but due to “greatly increased” longevity. The IoD argued that the state and private pension systems had become so complex that people were being deterred from saving for their retirement.

Currently, the state pension age is 60 for women and 65 for men and the Labour Government is planning to increase the state retirement age for men from 65 to 66 in 2026.

Government legislation means that the state pension age will then rise to 67 in 2036 and 68 in 2046.

Finally, the NIESR said VAT could be extended to be added on to more goods and the imposition of a public sector pay freeze could go some way to ease the spiralling national debt.

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