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Wednesday, April 20, 2005


The 500 billion pound gorilla

It has been widely remarked by assorted commentators that none of three main parties wants to talk about Europe in this election campaign. Each party calculates that there is nothing to gain but quite a lot to lose.

But there's a more fundamental political question that none of the parties wishes to talk about, and that is the long-term cost of pensions and healthcare. An
article by Anatole Kaletsky in today's Times explores this topic and comes to some uncomfortable conclusions.

Health and pensions account for nearly half of Britain's annual £519 billion of public expenditure.

Health is cited by 44% of voters as their greatest concern, which makes it by far the biggest issue in this election.

Yet there is surprisingly little fundamental argument about these issues, which explains why there is so little difference between the parties in terms of their overall taxation and spending plans.

The fact is that pensions and health are the most intractable, indeed insoluble, challenges confronting any modern government. And they are the two subjects that define most sharply the fundamental ideological question that all Britain’s political parties seem desperate to avoid: where should we draw the dividing line between the public and private sectors, between the responsibilities of the individual and the state?

Health and pensions raise these questions because they will inevitably absorb an ever-growing share of Britain’s national income as the population ages and as the elderly become more demanding for an affluent and comfortable lifestyle.

The unavoidable implication is that taxes and public spending will have to rise continuously if the government remains the dominant provider of both pensions and healthcare in the decades ahead. In an ageing society, where the ratio of people over 65 to the working-age population will almost double from 28 per cent today to about 50 per cent in 30 years’ time, expecting the Government to finance both health and pensions will mean an inexorable rise in taxes and a creeping takeover of the whole economy by the state.

That, in turn, will imply the sort of economic sclerosis of the kind we see in many continental countries, where age-related public spending has already risen to the levels that threaten Britain in the coming decades.
It is obvious that any grown-up debate will be deferred until after this election campaign is over - but for how much longer?

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