I don’t venture into discussing economics in this blog because it’s not a subject I pretend to understand. In these heady days of the credit crunch aftermath, the potential melt-down of the European Union and ever-present threat of an ongoing recession in the Western World, it is difficult to avoid the subject altogether. Especially when it begins to talk about elderly people.
So here is my attempt at understanding an article in the financial pages of The Times on 1st February 2012 written by Andrew Clarke, a young-looking business commentator.
The report refers, in scary terms, to a prediction made by Standard & Poor’s (the most ominously named credit rating agency) that “Britain is facing a downgrade in its credit rating unless we reform the NHS – by 2050”.
The speculation by S & P is that Britain will not be able to afford the rising cost of health care and pensions, but neither will it take steps to reform the situation. Without dramatic change, they predict Britain’s borrowing would have to increase to FOUR TIMES its current level. THAT IS BANKRUPTCY ON A GRAND SCALE.
For every economist who thinks one thing, there is always another one who thinks the opposite, and sure enough Andrew Clarke disagrees with S & P, although he doesn’t explain why. So Mr Clarke’s little cameo on the S & P prediction was interesting but not very enlightening.
As ever, you have to figure it out for yourself, so here is my best guess:-
Firstly, the demographics of an ageing population in the UK are quite clear – we are living significantly longer lives.
Secondly, an older population means much higher health care costs .
Thirdly, it seems inevitable that we will not generate enough new income from growth to cover the cost of state-funded health care and pensions.
S & P describe this as “an economically toxic combination”.
Three options occur to me:-
Reduce pension payouts – which has already been started by extending retirement age and linking pension increases to CPI, not RPI. Closing public sector final salary schemes is the remaining stumbling block, but inevitably it will happen. You will also have to simultaneously reduce welfare benefits, otherwise no savings on public expenditure will result.
Cut back on free health care by privatising care of the elderly, which is already happening by denial of access to good care in the NHS thereby is forcing elderly people either to pay for themselves or go without. The missing piece in this jigsaw is the absence of an insurance product to cover long-term health care.
The Dutch final solution – Euthanasia is slowly creeping through the door under the slightly more acceptable term of assisted suicide. How long will it be before it becomes common practice to question older people in hospital about their will to live? Indeed isn’t it already happening and aren’t we conspiring to accelerate the situation by the neglect of older people in hospital and in the community.
The grim reality of our collective head in the sand, is that if we carry on as we are, we will probably end up with all three options playing a significant part in our economic and social future over the next twenty or thirty years.
There is, I believe, a better option if we face up to the changed situation. We have not generally saved enough in pensions to give ourselves an extended and happy old age, but many older people are home owners, with substantial accumulated equity in their homes. They need to take control of their own lives by cashing in their wealth to buy themselves a better future.
The economy is faltering. Politicians lack the courage to lead us out of the problem. Older people need to buy themselves a better future.