Sean O'Grady: Life will be longer, but poorer as we don't produce enough to pay for public services

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The longer, healthier lives the British can expect to lead will not always be happier, or at least as prosperous, as we might wish to assume – and the public services we have come to enjoy and take for granted will have to change as they grow less affordable.

The obvious answer is that everything should be privatised, hived off and sent to private finance, but that services should still be available free or cheaply at the point of use.

This is roughly what is happening in the National Health Service now, and is what governments of all parties have been doing for years. As the CBI argues, finding private-sector investors willing to put in the billions needed to fund a new motorway or even an airport is not so difficult if they can be assured of a steady reliable stream of income.

In areas such as housing, health and education, central and local government still undertakes huge amounts of admin. That could be hived off, and costs reduced.

So in a decade's time expect to pay tolls on many more privately owned roads; be treated at more privately owned and run hospitals; have your complaints about fly-tipping being dealt with by private contractors working for the councils; and have more choice from many more private schools. That might not be so bad.

The problem comes when private provision is expensive, and the financial risk stays, in reality, with the taxpayer – as with the hospital trust in south London that has just gone bust.

From defence procurement to hospital car parks, the history of privatisation has not always been an object lesson in extracting value for taxpayers. So privatisation is not the whole answer. The uncomfortable truth is that the British may have to, in time, accept that they can no longer afford their welfare state, however it is run – just as we learned we could no longer afford the Empire.

We are still consuming – in the private and public sectors – more than we earn, and we can no longer readily borrow the difference from the rest of the world.

That means that private sector consumption will fall – new cars, holidays, eating out – but public sector consumption will fall as well.

Welfare will have to be increasingly means-tested, but most vulnerable is the NHS. Nye Bevan's principle of universal health care is something only a productive, as well as long-lived, people can afford. And we are no longer as productive as we were.

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