Future generations will have to work longer to pay off Britain's debts because of the pressure that Britain's ageing population is putting on public finances, the independent financial watchdog has warned.
The Office for Budget Responsibility said that Coalition policies such as raising the state pension age and further cuts will reduce Britain's debt as a proportion of national income by two thirds.
It found that without the measures, Britain's debt would be £1.14 trillion higher in the next 50 years as the economy struggles to cope with an huge rise in the number of pensioners and the decline in the number of people working.
George Osborne hailed the findings as evidence that flagship policies are paying off amid growing concerns that about the pressure Britain's ageing population is putting on care budgets and public services.
As part of his flagship pension reforms, Mr Osborne announced last year that increases in life expectancy will automatically trigger a rise in life-expectancy. Under the plans, the state pension age is likely to rise to 70 within 50 years.
They Chancellor said on Thursday: "Today’s report from the OBR provides further evidence that the Government’s long term economic plan is working and the country’s hard work is paying off.
"It shows that as a result of the decisions we have taken over the past year, in the next fifty years, debt as a share of our national income will be two thirds lower than it would have been."
According to official forecasts, over the next 50 years the number of people aged over 85 will almost quadruple and reach 5.86 million – equivalent to nearly one in 12 people. The number of over 65s will almost double, reaching 20 million.
The OBR warned that spending on social care costs will almost double in 50 years and rise to 2.3 per cent of Britain's GDP, while health expenditure will rise from 7.9 per cent of GDP to 8.5 per cent.
However, the it said that the impact of Britain's ageing population will be "more than offset" by two key Coalition policies – increasing the state pension age and a new round of spending cuts.
Last year, Mr Osborne announced in his Autumn Statement that the state pension age will be rise to 68 in the mid-2030s and 69 by the late 2040s. It was also formally linked to life-expectancy.
The OBR forecast that under the policy, the state pension age will reach 70 for the first time by 2064. It is currently 65 for men and 60 for women.
Mr Osborne has also announced plans for further spending cuts, which will see £67 billion worth of austerity measures by 2018-19.
According to the OBR, the two policies will reduce Britain’s debt by £1.14 trillion in real terms over the next 50 years.
Without them, it forecast that Britain's debt would rise from 76 per cent of Britain's GDP today, equivalent to £1.2 trillion, to 150 per cent in 2064, equivalent to £2.58 trillion.
With them, the OBR said that Britain’s that net debt in 50 years time is likely to be 84 per cent of GDP, equivalent to £1.45 trillion in real terms.
Robert Chote, chairman of the OBR, said: "In the absence of any policy measures, things would have got worse, for two main reasons. First, the new population projections are less favourable – a smaller working population relative to the young and old.
"And second, the structural budget balance at the end of the medium term forecast would be slightly worse – in part because we expect to get less tax revenue per pound of economic activity than we did a year ago.
"The position looks slightly better than it did last year. The population projections and the medium term forecast are less favourable, but this is more than offset by the decisions to announce an additional year of spending cuts and to link the State Pension age to life expectancy."
Christian Guy, director of the Centre for Social Justice, warned that there is growing "generational tension" as younger people feel they are paying for the old.
He said: "There is a generational tension that exists. There is a concern amongst the younger generation that the older people today have been protected in a way that has been unbalanced and politically motivated.
"As we see an ageing society emerge there are legitimate concerns that the working age population will have to pay for it.
"I don't think there will be quite the same support for them as they reach older age. People will have to become more self-reliant."
Last year Steve Webb, the Pensions minister, warned that the growing numbers of people living into their 80s and 90s would leave taxpayers with a rising bill and meant “the sums” would never add up if people continued to retire in their 50s.
According to official forecasts, the population of older people will rise dramatically over the coming years as a result of better health care and previously high birth rates in the post-war “baby boom” years.
