The state pension is set to become the main driver of tax for the next generation of taxpayers, a Labour-linked think tank has warned in a paper that urged Chancellor John Healey to levy higher charges on wealth rather than income.

New research from the Institute for Public Policy Research (IPPR), the former employer of Cabinet ministers and top advisers such as energy secretary Miatta Fahnbulleh and the Chancellor’s chief of staff Will Straw, has raised fresh concerns about the cost of an ageing population and the way that cost will be distributed across working-age taxpayers.

The paper found that demographic changes will account for two-thirds of rising fiscal pressures on the government by 2050 and four-fifths of those pressures by 2075.

Based on long-term projections from the Office for Budget Responsibility (OBR), the analysis suggested the proportion of people aged over 65 in 2075 could exceed a quarter of the population, compared with around 18 per cent today.

Professor Ben Ansell, the Oxford University political scientist who wrote the report, said the cost of the state pension and higher health spending would add about 10 per cent of GDP to the fiscal burden on taxpayers in 2075. He said the state pension would account for about three percentage points of that increase, with around half of that driven by the triple lock pension.

The analysis follows warnings from leading economists that the triple lock pension could push old-age benefits to about £181bn by 2030 under current projections. The triple lock ensures pensions rise by whichever is highest out of inflation, wage growth or 2.5 per cent.

Earlier this year, the OBR said the rising cost of supporting pensioners would help push UK public debt to three times the size of the economy and place an “unsustainable” strain on public finances.

“Ageing is going to become by far the biggest source of pressure on the public finances,” Ansell said.

“Yet our tax system has increasingly shifted responsibility towards younger workers while protecting many of those who have benefited most from decades of rising property and asset wealth.

“Reform is politically difficult, but avoiding it has simply given Britain an ever more complicated tax system.

“We need a new fiscal contract: one that raises the revenue the country will need, shifts more of the burden from work towards wealth and property, and is honest with the public about who pays and why.”

Reform taxes to ease state pension costs

Ansell said changes to the tax system could ease fiscal pressure on the UK economy, warning against introducing small revenue-raising measures that prompt “howls of displeasure from those affected”.

He urged Healey to consider a “rebalance” that would draw more money from wealth rather than income by “stealth”.

Among his suggestions was replacing council tax and stamp duty with a proportional property tax rate set at 0.65 per cent. He also backed proposals, mooted by senior Labour figures, to align capital gains tax rates with income tax rates.

Ansell said further changes, including a two per cent national insurance surcharge on pensioners, would help create a “new fiscal contract” that would “rebalance the system away from younger workers and towards wealth, property and unearned gains”.

He also urged Healey to consider how artificial intelligence should be taxed if wealth becomes more concentrated as a result of its impact on the jobs market and the wider UK economy.

His report said taxes on the use of AI, known as floating point or FLOP levies, could be difficult to design and collect.