Lower birth rates and longer life expectancy means the structure of the UK’s population is changing; a shrinking proportion is of working age while a growing section is of pensionable age. In 2016 18% of the UK population was aged 65 or above, up from just over 14% in the mid-1970s. By 2046, this is forecast to have risen to almost a quarter of the population. These shifting demographics have potentially important ramifications for a range of public services, from health to pensions to housing, and ultimately for the public purse.
Health and social care
The most obvious service to be affected by a growing older population is health, and, closely related, social care. Patients aged 65 and over already account for 62% of total bed days spent in hospital, and emergency admissions of older people rose by 18% between 2010-11 and 2014-15. The demands on the NHS and so the costs of delivering healthcare are predicted to rise further as the population ages given the more extensive and complex health needs of older people. Average health spending on a 70-year-old is approximately treble that on a 30-year-old, while spending on a 90-year-old is an estimated eight times more than that on a thirty year old.
The closer integration of health and social care systems is frequently suggested as a solution to the mounting pressures on health services, the intention being that providing better day-to-day support for older people with frailties can improve health and quality of life, and consequently reduce the need for GP appointments, accident and emergency visits, and time spent in hospital. However, budgets and institutional structures make this a challenging reform in practice, and social care budgets, which are managed by local authorities, are already highly stretched. Another idea that is gaining increasing traction is of a hypothecated tax for the NHS and social care.
Closely linked to health and care is housing. A growing elderly population, many of whom will live alone and who will require additional support for daily living, need homes that are suited to their needs. There are several models that the evidence suggests work well, from extra-care housing to tele-care and co-housing, but delivering them is likely to be challenging in a period of chronic under-investment in the housing stock, both public and private. And it isn’t just homes themselves that matter; the design of the neighbourhood, the availability of public transport and many other factors related to the wider environment also affect the health and wellbeing of older people.
Pensions and financial security
Longer lives are also meaning more time spent in retirement. State pension costs are forecast to rise as a result – by 1.8% of national income over the next 50 years, and despite increases to the state pension age. Keeping state pension costs under control and ensuring personal financial security in retirement may therefore require people to work for longer still. But what would the broader implications of longer working lives be for the mental and physical health of individuals, and for training and education? How might workplaces have to adapt to accommodate the needs of older workers?
There are also important questions over how generous the government can afford to be with the state pension. The ‘triple lock’, which commits government to raising the value of the state pension annually by whichever is larger of inflation, earnings growth or 2.5%, is a significant driver of pension costs. More specifically, the projected increase in pension spending would be halved if the state pension was earnings-indexed instead.
Meeting the costs associated with an ageing population
Demands on many public services are forecast to rise as the proportion of older people in the UK’s population rises. At the same time, a smaller working population relative to the non-working population will have consequences for tax revenues. How therefore can public services adapt in line with demographic change to get back on a sustainable footing?
One issue that merits serious debate is the respective obligations of the state and individuals in old age. Does there need to be an enhanced role for private payments for health and care services alongside state contributions? There is also an important debate about how working lives might have to change. Working for longer and multiple careers may have to become the norm if we are to ensure a decent quality of life in retirement and fund essential public services, but this might not be appropriate for everyone. Finally, there may be ways of delivering services differently, for example health and social care and housing for older people, that can improve outcomes and reduce costs on the state over the longer-term, though they may require upfront investment; politically tricky for governments with an eye on the budget deficit.