UK needs £20bn more austerity and retirement at 70, says Price Waterhouse Cooper (PwC) … Britain faces another £20bn of austerity and an increase in the pension age to 70 if public debt is to return to pre-crisis levels over the long-term, according to a new report. The pension, health and long-term care costs of the large baby-boomer generation will in future be paid for by a dwindling number of working age. The cost of looking after the country's ageing population will become unsustainable unless younger generations work longer and pay higher taxes, analysis by PricewaterhouseCoopers (PwC) has found. – UK Telegraph
Dominant Social Theme: Action must be taken and retirements must be raised. People will simply have to get used to it.
Free-Market Analysis: We have often suggested that the 20th century was a kind of Dreamtime when Anglosphere elite control was at its highest point and people accepted most of the power elite's dominant social themes. But in the 21st century many of these memes have begun to unravel thanks to the Internet, while others are predictably proving to be unsustainable. The idea that Western state capitalism and "investing" could provide a comfortable retirement is one such meme.
As the reality of Dreamtime sinks in, thanks to the collapsing economies of the West and the additional truth-telling of the Internet Reformation era, the massive American and European middle classes are growing increasingly upset.
The elites have counterattacked with the usual tools of authoritarianism and war.
Such antidotes will only exacerbate tension and expand the chaos that the elites wish to impose in order to create increased global governance. We shall see, as the Internet Reformation expands, how successful they shall be. The 21st century is not the 20th and the Internet Reformation is a process not an episode.
Austerity is a necessary emergent meme of Western elites within this context. If society is to remain as it is, elite themes having to do with leisurely and prosperous retirements will have to be reconfigured. The promises will have to be reduced. This is already happening in Europe and is gradually moving West to Britain and America.
It is not being well received. People misunderstand it, however; as it is not in our view a diminishment of prospects people are reacting to so much as a diminution of their expectations. The Anglosphere elites promoted Western regulatory democracy as the antidote to Depression. This meme has been exposed for what it is: a hollow promise that has little meaning. The reverberations will eventually result in significant social change in our view. Elites will not be able to control all the ramifications, no matter how hard they try or what tools they use.
Now comes the results of an accounting firms' analysis on the subject (see above excerpt) prepared at the request of the UK Office for Budget Responsibility (OBR). From the Telegraph we learn that the OBR has already warned that tax rises and spending cuts would be needed to pay for age-related health and living costs. PwC puts an estimated price tag on those cuts and tax hikes. The study suggests the UK needs £20bn more in austerity and the retirement age needs to be upped to 70.
Public debt may rise to 90 percent of GDP by 2050, far higher than the current 70 percent, even after the latest cuts of some US$200 billion and an increase in the retirement age to 68. Public debt of 90 percent is significant as it begins to have a significant impact on growth.
The figures that PwC suggests will reduce the public debt to 40 percent of GDP by 2050. This would put the debt back to where it was in 2007 before the financial crisis. "The final costs could be higher still if the Government adopts Andrew Dilnot's report into long-term care. The cost of his plan would be an additional [US$3 billion] a year initially, but rise over time as the population ages." Here's some more from the article:
After a decade, his proposals are estimated to cost £5bn. John Hawksworth, chief economist at PwC, said: "The government has already taken steps to address this problem through reforms to public sector pensions and has started the process of raising the state pension age. But the bigger challenge relates to health and long-term care costs." UK needs £20bn more austerity and retirement at 70, says PwC.
In addition to rising longevity, the problem is that the pension, health and long-term care costs of the large baby-boomer generation will in future be paid for by a dwindling number of working age people. "Together these two demographic challenges mean that the 'support ratio' of working age people to those above state pension age is set to fall from 3.6 in 2010 to around 2.4 in 2050," PwC's report said.
The OBR, the Treasury's independent forecaster, is almost certain to make similar recommendations next week. In its interim review of long-term UK fiscal sustainability last November, it said: "If left unaddressed, upward pressure on spending from the ageing of the population might well … eventually put public sector net debt on an unsustainable upward trajectory." It added policy changes would be needed.
These numbers, while dramatic, are probably not the end of the story. What is left unsaid in this study is just how inefficient and spendthrift the public sector of any Western government really is. The British generally tolerate the incredible waste in government for cultural reasons – or they have up until now – but who knows how the next decade will play out?
For a number of years we've been writing that the Internet like the Gutenberg press before it has changed the context of elite dominant social themes. Without total control over information, elites have partially lost a grip on their messaging. Western middle classes are growing increasingly restive, and the ability of Anglosphere elites to justify globalization and the costs associated with it is growing weaker.
The elites continue to pound home the same message regarding "investing" and "capitalism." But we see it is becoming increasingly hard to sustain. This is one of the reasons the power elite has struggled so hard to expand employment in the face of the continuing downturn. Nothing destabilizes society like long-term unemployment.
Unemployment is a predictable result of the West's central banking economies. These economies are based on phony paper money flows. Central banks overprint money and trick people into thinking the economy is better than it is. Businesses expand and then, when the crash inevitably comes, are unable to cope with expanded liabilities. The bankruptcy of businesses in particular aggravates the downturn.
Elites profit from downturns because thanks to their control of central banking they have money when others do not. Thus, consolidation further centralizes elite control of finance and the larger economy. The trouble comes, however, when this cycle is repeated too often.
After sustained intervals of central bank stimulation, price signals grow confused. Government interference and an overabundance of paper money has made investing very difficult. Banks do not know which companies are solvent. And entrepreneurs have difficulty determining what sectors of the economy are growing.
Central banking is important nonetheless to the elites. It is a key to their ability to move toward global governance. The ability to print money-from-nothing supports their schemes. The unraveling of employment is a significant check on their ability to easily pursue their goals.
What is going on now is that the Dreamtime the elites were able to create in the 20th century has become exposed for what it is. People no longer believe that investing in the stock market will make them wealthy. It is seen more as a confiscatory situation more ammenable to enriching a few than a promising one for the many.
Additionally, as mercantilist public/private central banking has driven economies into collapse, the elites need to promote the idea of "austerity." They have been waging a campaign to make people feel their governments have been profligate and that the only solution is significant cutbacks. What is left unsaid is that government profligacy is an expectable outcome of central banking overprinting of money. Governments are apt to overspend just as businesses are.
The austerity that the elites are trying to impose on Europe has reached Britain's shores. Americans do not realize it yet, but the arguments over the debt ceiling are the first signs that the austerity battle has been joined in the US as well.
In our view, the pushback against austerity in America will be significant and may even destabilize the current system. It is already doing so in Greece. In fact, people generally may be waking up to the idea that regulatory democracy is unsustainable. This awakening combined with the imposition of austerity programs may have significant destabilizing results.
In America, the Tea Party is already providing significant pushback to the current economic environment. But this is probably only the beginning of a dialogue between middle classes and the larger system. It is one that in our view is bound to grow significantly more heated as the realities of American "austerity" sink in.
The collapse of Dreamtime in Europe, Britain and America may have significant destabilizing results. We regularly trace how elite memes have provided the West with a fairly false historical narrative. But when one of these false narratives attacks people's pocketbooks directly, the results can be explosive.
As we don't believe that current Western economies can be significantly, or sufficiently, re-stimulated, the battle, inevitably, shall be joined. Things are bound to get a good deal more contentious. The results will have an impact on the larger economy and also on specific items from Western currencies to money metals. It remains difficult for us to see many of the former appreciating dramatically or the latter's prices decreasing substantially.