The research was conducted in collaboration with the London School of Economics and was funded by Nuffield Foundation. It calls for a new approach, warning that the government’s previous approaches of reducing defence spending and increasing National Insurance are likely to be exhausted. 

Resolution Foundation’s Under Pressure report examines the fiscal pressures that the UK will face throughout the 2020s and reflects on how the country has tackled such pressures in the past. 

The report warns that demographic change “will drive much of the £24 billion a year increase in spending on the State Pension between now and 2030.”

Combined with the rising cost of healthcare, in part due to new treatments and higher rates of illness, demographic change is set to increase healthcare spending up by around £52 billion a year by the end of the decade. 

“Higher spending on pensions and health could push the size of the UK state to 44 per cent of GDP by 2030,” the report warns.

The report also warns of the economic implications of the UK’s transition to net zero, predicting that “tax revenues from fuel duty from cars alone will fall by £8 billion by the end of the decade.”

The report notes that, in the past, the UK has partly addressed the pressures of a larger welfare state by cutting back other areas of public expenditure as well as implementing National Insurance increases.

However, the report says “that simply repeating these strategies to manage the £76 billion fiscal headwind coming in the 2020s is either unwise, such as cutting investment spending at a time when the net zero transition must be accelerated; politically toxic, such as ending the NHS’ free at the point of use principle; or undesirable, such as further NI increases.”