We're living longer - but it costs

That’s the conclusion of the Scottish Parliament Finance Committee in a report that looks at the aging population in Scotland and the financial consequences. 

Scotland’s population increased to 5,295,000 in 2011 – the highest ever. Since the 2001 Census, the population has increased by 233,000 (5%). This represents the fastest growth rate between two census years in the last century. However, it is the most elderly age-groups of the population that are projected to increase most dramatically. Between 2010 and 2035 those aged 75 and over are projected to increase by 82%. 

Evidence to the committee highlighted the importance of focusing on healthy life expectancy as well as life expectancy.  The ratio of healthy life expectancy to non-healthy life expectancy is not changing much in Scotland (for men it is widening), so the increase in life expectancy is also increasing the potential costs. ADSW estimates the difference between best and worst case scenarios is over £1 billion by 2030 - the difference between an 18.4% increase in costs (excluding inflation) or a 28.7% increase between 2010 and 2030. The committee recommends that the Scottish Government, councils and health boards do more long term planning to address this issue. 

The Committee’s aim is clearly meant to be a wake up call to Government and public bodies to plan for the costs of an aging population. It therefore focuses on the negatives rather than the positives. This is something I mentioned when giving oral evidence to the committee before Christmas. Many older people are living healthier lives to a greater age which will decrease the number of years that they require care. Older people, particularly those with good pensions, have a huge spending power and businesses and policy makers should recognise the needs of ageing consumers. They also make a productive contribution through caring and volunteering in various settings and, since the abolition of the Default Retirement Age many of them are continuing to work well beyond the previous norm of 65.

The committee looked at the financial implications of this in three main areas: health and social care; housing; pensions and the labour force.

Council and health board budgets have not kept up with demographic change in the past ten years, let alone the future. For example, emergency admissions to hospitals have a targeted 10% reduction, but they are actually increasing, particularly for the o/75s. The committee found limited progress in preventative spending, joint planning or a shift in funding.

Evidence on housing highlighted the need for new build and adaption of existing stock to accommodate an aging population. For example, the overall number of pensioner households requiring adaptations will rise from 66,300 in 2008 to over 106,000 in 2033. It is unclear if this rising demand has been costed in current plans.

On pensions and the labour force the committee notes that longer life expectancy will increase the cost of public sector pension schemes. As the report quotes, I did highlight the fact that averages can hide a harsh reality for many workers in Scotland who are unlikely to reach the new retirement age. 

The Hutton Report recognised that costs would fall as a proportion of GDP. This is largely due to the 2008 reforms and further changes will reduce costs further. For example, this year the Scottish Government will save £295m on the NHS scheme.  The committee recommends that the government investigates the longer term costs. 

In summary, the report scopes a huge challenge for public finances and believes more needs to be done now. While this is a useful reminder, a focus on cost can obscure the positives of people living longer.