LONDON, England / The Telegraph / Politics / May 23, 2011
OECD: huge elderly care bill threatens family ties
Britain faces one of the largest bills for elderly care of any leading industrialised nation, with rising costs threatening to undermine the bonds between parents and their children, a major international study has found.
By 2050, the UK will spend more than one-fifth of GDP
on services for the elderly Photo: GETTY
By Tim Ross, Social Affairs Editor
Research to be presented this week suggests that a combination of low birth rates and rising life expectancy will force the UK to spend an extra £80 billion each year on pensions, long-term care and the health service by 2050.
The mounting costs will leave working adults facing a triple blow of higher taxes, longer working lives and less inherited wealth as their parents are forced to sell property to pay for care, the study said.
The Organisation for Economic Cooperation and Development, which conducted the research, warned that workers may be unable or unwilling to take time off to look after elderly relatives or pay more tax to support rising numbers of older people in future. (Photo: OECD)
In order to preserve goodwill, the elderly will have to stay in work for longer and save more towards their own private pensions so that they are seen to be fending for themselves, the study said.
In an interview with The Daily Telegraph, the OECD’s leading pensions analyst warned that Britain’s ageing population, combined with already high rates of family breakdown, meant relations between the old and the young are under threat.
Edward Whitehouse, the organisation’s head of pensions policy analysis, said the UK was projected to have “among the highest long-term care expenditures by 2050” of any of the 28 countries examined.
“I don’t think that future governments will be able to afford that, which brings us on to how we are going to pay for that system,” he said. “The money has got to be found from somewhere. It is going to have to be higher taxes or cuts in public spending on other programmes.”
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.
According to government projections, 11 million Britons will live to the age of 100. Economists have estimated that the international cost of ageing populations will be 10 times that resulting from the financial crisis.
Last week, the pensions minister, Steve Webb, warned that the UK must radically re-think the idea of retirement as life expectancy continues to lengthen.
Plans are in place to raise the state pension age to 66 and the default retirement age of 65 has already been abolished.
Last night, David Willetts, the universities minister, backed the OECD for setting out the “inevitable” burden Britain faces “as the baby boomers age”.
The OECD analysis, which will be presented in Paris this week, suggested that to pay for the care and pensions that an ageing population will need, adults will be forced to spend much longer working and taxes may have to rise.
According to the OECD’s figures, Britain’s projected bill for long-term care and support services – such as home help, adaptations to property, and residential accommodation – will almost double from 2.2% of GDP to 4.3% by 2050.
Of the 28 OECD countries included in the research, only Malta and Spain will be spending a higher proportion of national income on long-term care.
But the research on “intergenerational solidarity” warned that the rising bill for elderly care could “undermine the nexus of family relations between generations”.
The OECD report said: “Future generations may be less willing and able to pay continually rising taxes to support a growing share of economically inactive people.”
Countries where large numbers of older people rely on state pensions and care are more likely to regard the elderly as “a burden” on society, the research suggested.
In addition, the UK is particularly at risk as a result of high rates of family breakdown, with more than 12% of British children living in step families, compared with an OECD average of 8%, and more single parents.
Mr Whitehouse said smaller and more complex families meant there would be fewer people to provide “informal care” to frail relatives in future.
One key solution would be for older people to remain in work for longer and build up their own private pensions, he said.
“When people see that older people are doing things to help themselves they have a more positive attitude towards them than in countries where they are very reliant on the state and where people are retiring early,” he said.
The research also suggested, however, that many older people provide childcare for their grandchildren and give more of their time and money to younger people than they receive directly in return. Those most likely to regard older people as “a burden” were the elderly themselves.
Mr Willetts, whose has written a book on the subject, The Pinch, will detail the government’s plans to ensure fairness between generations in a speech at the Social Market Foundation think tank.
He told The Telegraph that the OECD had set out some of the increased burdens are “inevitable” as the post-war “baby boom” generation ages.
“Any healthy society has an obligation to its older members as well as its younger members but we have got to be more flexible,” he said. “That’s why we are moving to raise the pension age.
“The contract between generations is in everyone’s interest. We have got an obligation to our kids to give them a good education and help them get a start on the housing ladder and build up pension savings. That increases the chance that they will then sustain us when baby boomers need domiciliary care and nursing care.
“There is an American bumper sticker which says, ‘Be nice to your kids, they choose your nursing home.’”
Stephen Burke, director of United for All Ages, a social enterprise working with councils and charities, said the growing bill for elderly care was “already causing tensions between generations”. “The cuts in public spending are pitting the needs of older and disabled people against children, young people and families,” he said. “Using older people’s wealth, for example through a care duty on estates, would be a fairer way of paying for better care for our ageing population.”
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