Preparing for an ageing society

Lord Filkin was bitingly critical in his response to the Government’s response to his committee’s report on Ready for Ageing?’ The report had peered twenty years ahead, and found that the political establishment was ‘woefully underprepared’ for the enormous changes presented by an ageing society:  the response, Lord Filkin declared, showed that the Government was ‘wilfully underprepared’ to address these issues.  He damned its focus ‘on past achievements and the coming election’, when what he wanted was a frank assessment of the changes we will need to make in welfare policies, pensions, health and social care, public services and citizen behaviour over the next couple of decades.440px_older_carers_hands

We share Lord Filkin’s frustration.  It is clear that the Government finds it difficult to think long term – which is perhaps understandable in a Coalition Government with a programme pivoted on 2015. Whilst they have ignored the suggestion to produce a White Paper setting out strategies to approach changing demographics the Government’s rather minimalist response to ask its chief scientist to review the impact of ageing on policies may produce some fruit. Continue reading “Preparing for an ageing society”

Protecting the future: We all have to pay, but negative framing of the challenge in the context of ageing is unhelpful

In mid-July the Office for Budgetary Responsibility (OBR), the independent forecaster of the economy and public finances, published its annual Fiscal Sustainability report. The purpose is to identify whether and when changes in government policy may be necessary to move the public finances from an unsustainable to a sustainable path. The report paints a bleak picture for the UK’s economic recovery without further Government intervention and highlights spending related to population ageing as the key driver of this bleak economic future.

According to the OBR, in order to compensate for the demographic pressures and keep the national debt in 2060-61 at its pre-crisis level of 40% of GDP, another £17bn of savings will have to be found in 2017/18. This assumes that it is imperative to return to pre-crisis levels of debt to GDP. While this long-term aspiration is desirable there is much dispute within economic circles about whether this needs to happen quite so quickly.

It also suggests that maintaining benefits to which people are currently entitled will create a £65bn hole in the budget deficit between 2016/17 and 2061/62 and that health spending will need to increase from 6.8 per cent of GDP in 2016-17 to 9.1 per cent of GDP in 2061-62.

At first glance the figures look worrying and clearly difficult decisions lie ahead. Highlighting the need for these decisions is important – focusing the blame on ageing is unhelpful.

When you look at the detail in the report the impact of ageing is not as doomsday as the OBR make out.

Continue reading “Protecting the future: We all have to pay, but negative framing of the challenge in the context of ageing is unhelpful”

Keep calm, but note the warning

Whilst social care reform proposals remain bedevilled by an inability to find a funding solution, the Office for Budget Responsibility (OBR) has published its annual Fiscal Sustainability Report.  As last year, this warns of the age-related risks to public finances in the longer term – which, to the OBR, is 50 years.

Its big picture forecast is of rising costs on health and pensions, offset by falls on public sector pensions, and of shrinking revenues from parts of the existing tax base especially oil and gas and (because of globalisation) corporation taxes and VAT. It expressly does not call for more fiscal tightening in the medium term – the period in the Treasury’s sights to 2017 – but it concludes that “governments would be likely to need some replacement sources of revenue just to keep the tax burden constant, let alone to meet the costs of an ageing population”.

Comparing 2016/17 with 2061/62, the OBR sees:

  • health spending rising smoothly as the population ages from 6.8% of Gross Domestic Product to 9.1%;
  • state pension costs increasing from 5.6% to 8.3%;
  • social care costs growing from 1.1% to 2%;
  • gross public service pension payments falling from 2.2% to 1.3% – or in net terms (including contributions) from 1.7% to 0.9%.

The shortfall in tax revenues are even less easy to project, but could amount to 2% of GDP or more.

These percentages translate into big money – in today’s terms, 1% of GDP is about £15bn. But it is striking how modestly social care features in these estimates. And of course, all the calculations are based on what we are doing today and cannot reflect any significant change in public habits and behaviour, or indeed scientific breakthroughs, such as finding a cure for dementia.

Meanwhile, what do we know about the public’s attitude to paying higher taxes for better public services? The picture is often contradictory. Polling by MORI shows that in 2010, 58% of the public supported cutting public services to pay off the national debt, but by June this year, that had fallen to 46%. The British Social Attitudes Survey, covering the years 1998 to 2009, showed a falling appetite for spending more on welfare benefits for the poor if it led to higher taxes: different age cohorts hold different views (with older generations being more supportive), but nearly half the baby-boomers, for example, supported this proposition at the beginning of the period, but only a third by the end. There has been a slow but steady shift from supporting a society which emphasises social and collective provision of welfare towards encouraging individuals to look after themselves – the balance is now 51:49.

The row about social care reform, of course, is that people probably would do more to look after themselves if the reforms gave them a credible platform to do so. That was the whole point of Andrew Dilnot’s proposed caps, which we now learn the Government agrees with in principle. If we look at the OBR’s rather gloomy forecasts we cannot have these proposals too soon, both for social care per se and for getting more efficiencies into the health service. Kicking these decisions into the long grass is not going to make the OBR any less gloomy next year.

Read Age UK’s briefing about the Governments proposals for social care reform

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