The costs of demographic change – an EU obsession?

 The European Union’s massive 2012 Ageing Report, published on 15 May and promptly endorsed by national governments, warns darkly of the impact of demographic change in driving up age-related public expenditure, and undermining the sustainability of government finances, in the context of the current financial crisis.

The same themes run through a lot of recent EU work – President Barroso’s EU2020 strategy, the 2012 Annual Growth Survey, and this spring’s Pensions White Paper.  

Ambitiously presenting a projection for 2010-2060, the 2012 Ageing report suggests that “age-related expenditure” will increase by 4.1% of GDP, counting pensions (+1.5%), health expenditure (+1.5%), and long term care (+1.1%).   Altogether, age-related expenditure accounts for 25% of GDP, and about 50% of general government expenditure, so we are talking big stuff, and small adjustments can have big consequences.

The EU seems to focus almost obsessively on demographic projections.  The numbers of Europeans over 65 will double by 2060, from 87.5m to 152.6m, and the 85+ will triple from 23.7m to 62.4m.   But the report does not acknowledge that the older people of 2060 are children today. When we reach 2060, will they have the same needs as older people today?   Will they have the same demands on public expenditure?   These are unknowns, so projecting from today’s needs seems inherently flawed. 

The age dependency ratio, which the EU  solemnly shows as doubling by 2060 (from four working age people to two, to every ‘retired’ person), assumes that those aged 20-64 are active in the labour market and that the 65+ are passive and dependent. 

But older people today contribute greatly to their communities as volunteers, to their families as grandparents, and to the economy as consumers. The EC makes no attempt to monetize these contributions – let alone project them over the next 50 years – so they are not included in their calculations. It is naive and one-sided to talk of the dependency ratio, without understanding these important contributions.

Looking forward, the increasing dependency the EU fears could be mitigated by smarter policies to promote  working longer prevent illness and reduce care needs. 

Economic growth, the answer to everyone’s prayers, will not flow from its historical engine – an increase in the number of young workers entering employment.   Instead we have to invest in the productivity of our existing labour force, and grow the silver economy by designing better products and services for older people.  The proposed European Accessibility Act is an opportunity to do this.

The EU’s 2012 Ageing Report is a proper call to action, but it should not drive cuts in health and pensions spending.   Other smarter policies can help manage demographic change and give Europeans the opportunity to live longer, more fullfilled lives which our ancestors would never have dreamed possible.

Find out more about Age UK’s European work

Read another blog contributed by Mervyn Kohler

 

 

 

Fuel poverty numbers falling!

Well, that’s not a headline you expected to read. But that is the official story, as charted in the 2012 Annual Report on Fuel Poverty Statistics, published this week (17 May).

The number of households in fuel poverty in England was 4m in 2009: in this latest report covering the year 2010, the numbers had fallen to 3.5m. This seems counter-intuitive as our memory is of cold, hard winters and rising energy prices, but some interesting features emerge about 2010 from the report.

First, it was a cold year, with January, February and December being months with average temperatures well below the norm for the last five years.   Household energy consumption rose by about 10%. But energy prices were falling for the first time since 2000 – and of course have increased sharply again since 2010.

Second, incomes for most of the population increased by 2-3%, but for the poorest quintile the increase was 4%. This group includes a large proportion of the fuel poor, and the combination of better incomes and lower energy prices obviously feeds into the fuel poverty calculations.

Third, there was a startling improvement in the energy efficiency of our housing stock. Households with gas fired condensing boilers grew from 24% to 32%, and this more energy efficient equipment contributes to the story of an unusual year. The proportion of households in the upper four bands (out of seven) on the scale measuring energy efficiency rose from 52% to 57%.   Since then, the Warm Front programme has been drastically scaled down, reducing that option for a lot of fuel poor households.

In fairness, ministers are not presenting these figures as a policy triumph.   Their projections for 2011 and 2012 see fuel poverty numbers resuming their upward rise. The task of eradicating the scourge of fuel poverty (with its associated misery, illness and even death) remains a daunting one, and older households are very much in the front line. This time next year, with the next Annual Report, we will probably be delving into the thesaurus to find synonyms for depressing, lamentable or disgraceful.

Find out more about Age UK’s work to reduce the number of excess winter deaths.

Getting the measure of fuel poverty

 The idea that a household is in fuel poverty if it needs to spend more than 10% of its income to keep adequately warm – the traditional definition of fuel poverty – is flawed.   The 10% just happened to be twice the average household spending in the 1990s.   Calculating a number based on this definition is a statistical exercise:  it is not based on actual household experience.   Consequently it has been difficult to accurately target programmes to assist the fuel poor, and these programmes have had to rely on imperfect proxy benefits designed for other purposes.

That is the rationale behind John Hills’ quest in his magisterial review of fuel poverty for a new definition.   He proposes instead to bring together data which matches low incomes with high energy costs, and supplement that with a new indicator measuring the ‘fuel poverty gap’ – the spending required by households with high costs compared to the median household.   The first gives a picture of fuel poverty:  the second shows the extent, the depth, of that fuel poverty.

The net result reduces the numbers in fuel poverty but by only a little, and the average depth of fuel poverty in 2009 stood at £414 per household.   Together, as Hills also comments, these paint a picture of a very serious problem, and it is still growing.   Analysing the impact of policies which will be in place through to 2016, there will be between 2.6 and 3 million households in fuel poverty (affecting over 8m individuals), and the fuel poverty gap will be £600.

Will the new measure help to target fuel poverty programmes better?   It is possible to identify low income households, but adding high costs will inevitably mean using proxies, such as having oil or solid fuel heating, having solid walls, living in a rural area off the gas grid, or in a pre-1945 house.   But Hills has given us a better picture of what sort of household to look for in what kind of property.

There is little comfort for the Government from all this impressive analysis.  Fuel poverty remains a big and growing problem, affecting health, poverty, communities and climate change.   There has to be a more robust policy response than the weird comment from DECC that Hills is ‘showing the positive impact of current Government policies are having on tackling fuel poverty’.   They are having the kind of impact a fire extinguisher has on a forest fire.  

Age UK is campaigning to reduce the number of excess winter deaths. Find out more about our Spread the Warmth campaign.

 Read the Hills Fuel Poverty Review final report

 

What’s the point of the Age Action Alliance?

 The needs and aspirations of older people deserve more serious attention – not just because they are a fast growing element in the population.   They can no longer be lumped together and stereotyped as passive and undemanding ‘pensioners’:  they are the best educated, fittest, most diverse generation of older people we have ever seen in history.

Yet perversely, their numbers include a growing group of the most socially excluded people in society. Approaching one in five live below the poverty line, millions are living alone, and clusters of supportive family members living nearby is a thing of the past. Traditional networks centred on post offices, local bank branches, or village or neighbourhood retailers, are dwindling.   The digital age is advancing relentlessly, and a generation of older people are being left in the slipstream.   The loudest voices in society are calling for choice and ‘personalisation’, but this is merely confusing if not supported by information and advice.

Government, public services, the commercial world and the voluntary and community agencies need to take a fresh look at the older population in all these dimensions.   And against a backdrop of austerity, all need to find sharper, smarter ways of reaching out to older people.

That is the simple starting point of the Age Action Alliance. The objective is to:

  • bring together in new partnerships organisations which have neither thought nor needed to collaborate in the past,
  • explore ways of working together which can share insights, knowledge and resources,
  • seek new ways to deliver information, services and support to older people.  

 The focus is on people who are socially excluded or at risk of landing there.

Do we need a new organisation to do this?   Is there not a lot of this happening already?   Of course there is, and where there is good practice we want to celebrate and pluralise it.   The organisation is essentially a coalition of the willing, sharing and developing ideas through a website.

There will be a lively discussion about the Age Action Alliance at Age UK’s Agenda for Later Life conference on 8 March.   The initiative for the Alliance was taken by Age UK and the DWP, but it is ‘owned’ by the partners who step up to work together.   Too many good ideas have been lost as funding streams dried up, or the wilful individuals driving them moved on.   Society is facing unprecedented changes and tensions, but out of that we want a better deal for older people.

Find out more about Agenda for Later Life 2012

Find out more about the Age Action Alliance

Read the latest Age Action Alliance blog posts

Hills Fuel Poverty Review

Professor John Hills is possibly the leading contemporary academic expert on poverty and inequality in Britain today.   He follows in the distinguished footsteps of Tawney, Titmus and Peter Thompson.   He accepted the challenge to lead the independent review into fuel poverty because, as he modestly says,

Julio Martinez

he was intrigued by the subject and wanted to understand it better.

The first part of his brief was “to consider fuel poverty from first principles:  to determine the nature of the issues at its core, including the extent to which fuel poverty is distinct from poverty, and the detriment it causes”.   Long term fuel poverty campaigners were fearful that by making this the question, Government ministers wanted to find an excuse to airbrush fuel poverty off the agenda and get off the hook of confronting the rapidly escalating numbers of households dropping into fuel poverty over the last five or six years.   Their fears are confounded in Hills’ Foreword to his report:  “That fuel poverty remains a serious problem is clear from the evidence we review”, he states.  

His report goes on to observe that households in or on the margins of poverty face costs stacking up an aggregate to £1.1bn more than typical households to keep warm, that those on low incomes cannot afford the investment to make their houses energy efficient – which is a key issue in the climate change and carbon reduction agenda, and crucially that living in cold homes has a series of effects on illness and mental health.   That last is the lead item on his chapter on the Impacts of Fuel Poverty.

For the rest of this typically thorough and comprehensive review (over 150 pages), the Hills team have looked at different ways of defining fuel poverty.   The current definition, which John Hills accepts, is based on the 2000 Warm Homes and Energy Conservation Act, which states that “a person is to be regarded as living in fuel poverty if he is a member of a household living on a lower income in a home which cannot be kept warm at a reasonable cost”.   But if the devil is in the detail, this leads to further issues about defining low income, adequate warmth, and reasonable cost, and most of this Interim Report is probing around this area.  

 Hills props up several different methodologies to measure fuel poverty, all of which come up with big numbers, and some are higher and some lower than the current statistical measurements indicate.

 Hills will produce his final report in January, when he will put some recommendations forward, as well as analysing the impact of various policy prescriptions for the growing number of households in fuel poverty.  

 Read the full report

 Find out about our Spread the Warmth campaign

The Party Conferences and Public Service Reform

The headline stories from the Party Conferences were about the economy, and the orchestration by the organisers and managers to present their parties in themost favourable light.   Party members were a bit thin on the ground, but lobbyists were there in abundance.   Yet around the fringe meetings, the theme of public service reform was vigorously discussed.

Public service reform is one area to which all the parties subscribe with varying degrees of warmth.   The common ground is that we cannot provide services in the top-down way as in the past:  they must be more user-responsive and ‘personalised’, and we have to re-configure them to get more outcomes for less money.  

How we do this is more difficult.   Localism, enshrined in the Coalition Agreement, passes more responsibility to local government and local representatives, with a diminished role for the centre to set national targets and eligibility criteria, but local councillors attending the conferences were in two minds about having this task thrust upon them.   They will need to rethink their role:  are they the voice of the Council delivering the services, or are they the voice of the neighbourhood, demanding that the Council needs to change the way it provides services (ie place-shapers, seeking new powers for community groups and other service-providers in their patch)?  

Nowhere was this more hotly debated than in the area of social care provision, a big ticket spending item for local government, and one where there is a policy vacuum as the Government tries to draw a new map which triangulates national entitlements, local flexibility in service responses, and encouraging new service providers to enter the market.

That last was also discussed on the fringe.   How do we enable more mutuals and social enterprises, and support more local volunteering, to add to our public service offering?   At all the conferences there was willingness to engage with this issue, but a raft of difficulties and barriers was identified.  

We are spreading the word about models of good practice very poorly.   There are few immediate places where would-be providers can access good information about extant working models.   There is little resource for the consumer who is encouraged to take control of their personalised budget to find ideas and inspiration.   Whilst at all the Party Conferences there was willingness to address public services reform, there was a shared frustration with how to do so.

Find out more about our party conference activity