The state pension is set to become the main driver of tax for the next generation of taxpayers, according to a warning issued to Chancellor John Healey by the Labour-linked Institute for Public Policy Research (IPPR).
New research from the IPPR highlights that an ageing population will contribute significantly to rising fiscal pressures. The paper indicates that demographic changes could account for two-thirds of these pressures by 2050 and four-fifths by 2075. Professor Ben Ansell of Oxford University, who authored the report, stated that the cost of the state pension and increased health spending could add approximately 10 per cent of GDP to the fiscal burden on taxpayers by 2075, with the state pension making up about three percentage points of this rise.
Professor Ansell urged Chancellor Healey to consider reforming the tax system to ease these pressures, suggesting a rebalance towards taxing wealth rather than income. Proposed changes include replacing council taxes and stamp duty with a 0.65 per cent proportional property tax rate, and aligning capital gains tax rates with income taxes. He also suggested a two per cent national insurance surcharge on pensioners to help rebalance the system.