David Prosser: Pay more tax, or your children will have to

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The Independent Online

Outlook What would you say if George Osborne were to stand up next Wednesday and present a Budget that raised taxes by 15 per cent? One imagines the Chancellor might find himself short ofsupporters, even among the most leftwing members of the Coalition Government – but such an increase would be fairer than you might think.

Broadly speaking, 15 per cent is the increase in taxes required for inter-generational parity, according to an analysis from the National Institute of Economic and Social Research (NIESR). Or to put it another way, those of us currently living in this country are not paying enough tax to fund the spending commitments being made on our behalf. Unless we are simply expecting our unborn children to make up that shortfall, we will have to pay more – the NIESR reckons 15 per cent should do the trick.

This isn't a result of the financial crisis-driven deficit with which Mr Osborne is already trying to deal. Most of the shortfall is accounted for by the way demographics have changed in Britain since the Second World War, with an ageing population requiring ever greater resources to pay for healthcare and pensions.

These pressures will inevitably have to be dealt with gradually – the NIESR isn't really suggesting a 15 per cent increase in the tax burden overnight (or a corresponding reduction in spending, which would also close the gap). But while this is a long-term issue, it is one we must begin to grapple with – and the decisions we will have to take are going to be difficult.

The row in recent days over public sector pensions is going to be replayed many times in the years ahead. We have built a social welfare system that we are not currently prepared to pay for. Are we happy to saddle our children and grandchildren with the bill?