Brexit to spark deficit by mid-2020s, says new report

"The economic implications of Brexit are likely to put the country on a lower growth, lower investment trajectory, worsening the public finances"

The Institute For Public Policy Research says an ageing society will drive demand for public spending from the mid-2020s onwards. Spending on health, long-term social care, the state pension and other old-age benets are forecast to increase annual spending by around 2.5 per cent of GDP between 2019/20 and 2030.

The over-65s population is expected to surge from 11.6 million today to 15.4 million by 2030, with the over 85s population nearly doubling by 2030. By contrast, the working age population (16-64) will increase by only 3%.

The income of high-income households is also forecast to rise 11 times faster than for low income households in the 2020s.

The IPPR says the tax gap between receipts and expenditure is forecast to grow over the back-half of the decade as a result and is due to return to 2015/16 levels only after 2050.

Its data shows that over the longer term, the difference between expected spending and forecast tax receipts would rise to £341 billion by 2050 – almost double the expected 2016/17 deficit as a percentage of GDP.

The 2020s will see a transformation in housing tenure, according to the research, which predicts private sector renting to surge among the young, often in substandard conditions as rising prices put homeownership out of reach for many.

By 2030, almost 40% of all under-40s are forecast to be living back at home with their parents, up from around 14% today.

Overall, the report says that the economic implications of Brexit are "likely to put the country on a lower growth, lower investment trajectory, worsening the public finances, with important consequences for the UK’s economy and living standards".