The research suggested that by 2050, the UK will be forced to spend 21.6% of GDP on long-term care, pensions and health services to cope with the rise in elderly people requiring state assistance.

This is an increase from 16.5% of GDP spent in 2010, and equates to a rise of about £80 billion in today’s terms.

That\’s going to be very painful indeed.

There\’s one answer that is continually attempted to this: Our Favourite Retired Accountant is known to use it, as is Dean Baker.

GDP will be bigger in the future so everyone can still have the same, or a rising, standard of living while we still divert andother 5% of everything to looking after the crumblies.

Well, yes, ish. But we\’re still going to be diverting an extra 5% of GDP: people will be poorer than they would be without the diversion. Whether the diversion will be fair or not isn\’t the point: it\’s whether those in 2050 will think it fair.

All of the possible solutions bump up against things that are already red lines. For example, we could provide a particular, absolute, (ie, inflation adjusted but no more) standard of living for pensioners. But that would mean relative poverty rising among pensioners and as relative poverty is what the left obsesses over, that won\’t do.

We could raise the retirement age, as is suggested. But that again falls foul of notions of fairness: lower socio-economic groups have shorter lifespans on average so they will enjoy fewer years of that retirement….as they do now of course.

This is actually one of those problems without a cute or simple solution. Yes, growing the economy is a good idea, diverting newly created resources is always easier than reallocating a fixed amount (which is rather a death knell for the no growth movement, eh?). But diversion of resources will still cause problems. Later retirements, yes, more private pensions, yes…..although those just change the source of the diversion, profits and interest instead of taxation.

More economically inactive people simply does mean that those economically active have to cough up more of their production to support those inactive. There just isn\’t any way around it.

Yes, this is even true if we cut other areas of government spending: that means the active are getting fewer Govt services for the tax they pay.

It\’s a fairly stark example of that economic truism: there are no solutions, only trade offs.

6 thoughts on “Ouch!”

  1. I’ve just checked my savings and assuming I don’t work again, the current plan, and start to get a frugal towards the end and sell my house, again the current plan, I should just about make it, should I be (un?)lucky enough to live to 95.

    Of course those calculations are based on keeping 100% of my pension fund (retired accountants please note) and the the rest of my savings not being stolen through inflation to pay towards idiotic spending to aid politicians get re-elected.

    Should either of those events occur I will become a burden on future tax payers.

  2. But Tim’s point is that we have very little control over such shifts. Your pension could be affected by inflation which has nothing to do with government spending but is a simple consequence of fewer workers, more retirees.

  3. How about the obvious and radical solution–attack the aging process itself. There is plenty of evidence that, given effort, human beings could, within a very few decades, have open-ended youthful lives stretching into centuries. No retirement needed or possible if you are still 21-25 physically regardless of the mileage on the clock.
    I know all the standard repostes. In money terms what I am proposing is the equiv of Salks polio vacine, while you are discussing ways and means to finance millions of iron lungs.

  4. It does seem “unfair” that the lower classes die earlier so get less pension benefit.
    However, there is a free market solution. Annuity firms offer “impaired life” pensions where the actuarial tables show the pension won’t be paid for long.
    So fairness decrees we should abolish the state pension.

  5. So Much For Subtlety

    Mr Ecks – “How about the obvious and radical solution–attack the aging process itself.”

    Not until all the Baby Boomers are dead. We really need some things to fade into the past as soon as possible. Disco for instance.

    “There is plenty of evidence that, given effort, human beings could, within a very few decades, have open-ended youthful lives stretching into centuries.”

    Plenty of evidence? You mean besides some wishful thinking?

    “In money terms what I am proposing is the equiv of Salks polio vacine, while you are discussing ways and means to finance millions of iron lungs.”

    Whereas the Government seems to be moving as quickly as public opinion will allow towards Logan’s Run.

  6. I suspect that there is quite a lot of room for automating elderly care (as with nursery care). The Japanese, for obvious reasons, are leading the way on this. In turn I suspect that the reason we don’t get it is the regulatory system prevents it, for example, by mandating a certain number of nurses (nursery suprevisors) per old (young) persom.

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