Global Debt Levels
Increasing Healthcare Costs
Forthcoming Pension Crisis
As a manager of specialist UK real estate investments funds why are we so concerned about what we refer to as the 3 elephants in the room?
What has this to do with property investment?
We believe that the current and increasing levels of debt in the UK and globally, are unsustainable and are hindering a genuine recovery. As long as this continues, and the problem not addressed head on, then we believe that growth and returns on investment, will suffer. As government debt yields reduce further, then so will yields on other investment types, including property. At the same time, there is the real threat that QE policies may eventually lead to an inflationary surge, making us cautious in our approach. Our strategy of investing in RPI Property, provides a hedge against a sudden and long term inflationary environment.
We live in ageing population with the cost to individuals and governments, of providing suitable levels of care, are set to soar. We fear that this may add further the high levels of debt already in existence. Many are unaware, or chose to ignore this particular problem, leaving it for another day.
Finally, as defined benefit pension schemes become a thing of the past and we continue as we have done since 2008 with low returns, then the pension pots available will shrink, placing a greater demand on the public purse, further impacting on recovery.
It is worthwhile looking at these 3 elephants in more detail.
Global Debt Levels
The first and largest elephant in the room.
Not only is the level of debt rising, but interest charges are accumulating at an alarming rate.
The clocks are ticking.
If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.John Maynard Keynes
Debt as % of GDP
£ Debt per Citizen
£ Interest per Second
Interest per Year £'billion
Escalating Healthcare Costs
Healthcare costs continue to rise not only in the NHS, but through social costs of an ageing population.
With constraints on budgets due to high debt levels and an unwillingness to increase the tax burden, the sustainability of healthcare is being put under constant pressure.
We refer you to some detailed reports on the future of healthcare costs including from think tanks on both ends of the spectrum.
A hospital bed is a parked taxi with the meter running.
Deloitte's Global Healthcare Report
Across the globe, governments, health care delivery systems, insurers, and consumers are engaged in a persistent tug-of-war between competing priorities: meeting the increasing demand for health care services and reducing the rising cost of those services. Deloitte’s report examines Global healthcare sector trends in 2015, Costs, Adapting to market forces, Transformation & digital innovation and Regulations & compliance.
KingFund's Spending on Health & Social Care Review
The KingsFund’s, John Appleby analyses the factors that influence the demand for health and social care, taking a long-term perspective. He shows that pressures to increase spending on health and social care will result in these services consuming an increasing proportion of gross domestic product. The exact proportion will depend on how quickly the economy itself grows, and on the choices made about the levels of taxation, government borrowing and public spending priorities.
Free Market Welfare
According to this report, Britain’s welfare system is overcomplicated, wasteful and counterproductive. In Free Market Welfare, Michael Story makes the case for merging most working-age benefits into a Negative Income Tax – a single, tapered payment that tops up the wages of the working poor and guarantees that work always pays.
Hot on the heels of growing health costs, with the end of final salary pensions for the majority of the UK, the ageing population and declining working population, added to the problems associated with debt and the constraints on tax raising, many are oblivious to the pension time bomb ticking.
The stroll into the sunset may not be quite as comfortable as hoped as the following articles highlight.
It does not matter how slowly you go so long as you do not stop.Confucius
This Is Money
Work ’til you drop? Young workers could have to slog non-stop to AGE 77 for the same pension as the last generation.