'Tough measures' to cut UK debt

The retirement age may have to be raised to 70, NIESR said

The UK's spiralling debt will lead to tax rises, spending cuts and delayed retirement far beyond what is being discussed, a think tank has said.

The National Institute of Economic and Social Research (NIESR) said the retirement age should be raised to 70 if debt levels are to fall by 2015.

Alternatively, the government would have to raise the basic rate of income tax by 7p in the pound, it argued.

Separately, employers' group CBI said UK manufacturers were turning a corner.

"No politician so far has addressed the scale of the [debt] problem," said the NIESR.

"The build up of government debt, which may reach 93% of of GDP by 2015, will leave a burden for our descendants," the think tank added.

Firms finally seem to be benefiting from a weakened pound, as global markets recover, helping to lift demand for UK exports Ian McCafferty, chief economic adviser, CBI

Other measures to reduce debt levels could include extending VAT to a wider range of goods, or imposing a five-year public sector pay freeze.

All these policies would raise the equivalent of 2% of GDP, the NIESR said.

The think tank also forecast that the UK economy would return to growth by the end of the year, growing by 1.3% next year and by 1.5% in 2011.

'Lifting demand'

Meanwhile, the employers' group, the CBI, has said that the decline in UK manufacturing output has "eased considerably" in the past three months.

It added that sentiment in the sector was improving and it expected to see growth returning in the next three months.

Mr Hockley calls himself "the debt doctor". His firm helps people suffering the thick end of the recession Boom time for the debt doctors

The CBI Quarterly Industrial Trends Survey found that 34% of manufacturers said output fell in the three months to October, while 26% said it rose.

The resulting balance of -8% is a big improvement on the -31% balance found in the last survey in July.

"Having endured a brutal recession, manufacturers appear to be turning the corner, with optimism up and mild growth in output and demand expected over the next three months," said Ian McCafferty, the CBI chief economic adviser.

"Firms finally seem to be benefiting from a weakened pound, as global markets recover, helping to lift demand for UK exports."

A separate survey by consultant Regus found that firms across the wider economy were rather less upbeat.

The Regus BusinessTracker survey of 11,000 firms across 15 countries found that British companies did not expect to see signs of recovery until September 2010, making them more pessimistic than firms in any other country surveyed apart from Spain.