Ben Chu: Government needs to start saving now

 

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We're living longer, so what does that mean for the economy? It means social costs. The state pension bill is already one of the biggest single outlays of the state, at around £87bn in 2010/11. The Government is raising the qualification age to 66 from 2018 and 67 from 2026 and George Osborne proposed in last week's Budget to create an automatic link between rising longevity and the pension age.

Health and social care costs will also rise as a larger proportion of the population gets frailer and needs more assistance. It is not just a question of money and taxes, however. Unless the supply of new residential buildings expands, there is likely be more pressure on the housing stock as more elderly people stay in their large family homes for longer.

The ONS longevity forecast should concentrate minds on addressing these difficult problems now, rather than waiting.

However, longer working lives will also mean a larger workforce. More experienced brains should result in more a more productive economy, which should drive up living standards. Rising life expectancy need not be a curse, so long as we exploit the benefits to the full and share the costs fairly.

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