Lord Lamont of Lerwick (Con)

My Lords, I begin by thanking the noble Lord, Lord Wood, for his outstanding chairmanship. I have already paid tribute to him at Question Time, and I do so very happily again today, because his job was brilliantly done. It is a pleasure to follow the noble Lord, Lord Liddle, who has summarised our report very comprehensively; he has not left much for anyone to say, even within three minutes. For me, the most important paragraph in the report was one referred to by the noble Lord, Lord Liddle. It is paragraph two, which refers to the OBR stating, as the noble Lord, Lord Liddle, emphasised, in its Fiscal Risks and Sustainability Report, an annual publication about ageing, that without a change in policy, government spending pressures will push up debt to “above 270% of GDP by the early 2070s”. Those are very alarming figures. Of course, many people will say that this will never happen, but it will not happen only if we take steps to prevent it happening. According to the OBR, age-related public spending will increase total spending by 10% of GDP by 2074. When you add debt interest on top of that, it will raise total government spending from 44.5% of GDP to 60% of GDP by 2073. Taxes are already at an all-time high. What would they be if spending were to reach 60% of GDP? What policies are there that can mitigate the apparent need for deep spending cuts or increases in taxation? The usual answer from a Government, of course, is growth, but alas, growth does not always happen and has not always happened in response to the exhortations of government. According to the OBR, immigration on any likely acceptable scale will not be sufficient to improve the debt dynamic. According to our witnesses, efforts to increase fertility rates in other countries have largely failed. Raising the pension age, which the Government intend to do, does save money but does not, as the noble Lord, Lord Liddle, emphasised, increase participation rates or promote longer working lives. One alternative, which is recommended in our report and accepted by the Government, is to increase labour force participation among those aged between 50 and pension age. Finding a solution to the problem of social care—which is an urgent problem in its own right, not just a financial problem—would help many of those in their mid-50s and 60s to remain at work. But a national care service modelled on the NHS, as suggested by the Prime Minister, could cost no less than up to £19 billion a year in 10 years’ time, so that will not help our fiscal problems. If we do not increase the proportion of older people at work, output per capita and the overall size of the economy will be lower, with fewer workers and higher pension payments. We have to improve productivity per worker and, at the same time, get more of the old to remain at work. It is not impossible. Over the past 100 years, the old age dependency ratio tripled, but it has not been a factor in holding back growth. In the past, we have adapted. Our report only scratches the surface of what is a huge subject. The ageing of society is transformational and will reach into every department, but the impact is felt only gradually, almost imperceptibly. We need a longer-term framework to allow well-informed development of policy to prepare for these profound changes. If we do not face reality, reality is going to face us.