“Uneconomic Prediction”

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:-

  1. 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.
  2. 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.
  3. 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.

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4 Responses to “Uneconomic Prediction”

  1. John as ever you push buttons!!! What is the answer? I agree to some respect with your views that the elderly have homes which are asset rich-cash poor. However stop and pause for a moment in this downturn of economic cycles it is the purchaser of the elders property who provides the momentum to go forward, is it not? Then if we are not all greedy then we all benifit from a modest trade or exchange between us all. My comments are that the younger peoples have to have the income and the employment to provide the stimulus for investment in their own personal future? Is this true today? The younger people are not seeking family responsibiliites, and are frightened of family ties and children, and are to some respect if they can find employment, seeking out the higher paid jobs of the jobs market. We are in an inward looking spirial of denial to which I agree: How to break this I find difficult as we all seek personal attainment over social responsibilities. We cannot all support the poor and wretched indivually, but collectively we can as a social society. What we do to help our selves along the way, to our common problems of how spend our our and collective and individual savings with respect to the problems of health and welfare in old age, needs an indepth across the board disscusion by all political and social groups as to how we can benifit the many and not just the few.

  2. To day Friday 10 February 2012 the Daily Telegraph front page have a news flash on the older generation. Have we solved the problem, I think not? It makes for uncomfotable reading.
    Work until 70+ draw your pensions (State and private) at a minimum age of 70.
    Rent your house out/ down size (Not sure how)!!
    This is a loaded situation. Take the house(Literally-It is robbery) down size: How by
    1 Renting downsize property (The new rent covered by renting out the mortgage free house?)
    This begs the question the renting of the mortgage free owned property: Is it cheaper for the council/new tenents to pay below market rent values for the house, or is it altruistic dreams to help with the rent of the downsized property rent? What happens when the downsizing has been completed and these persons need welfare and care? Do the council compulsory purchase at the lower vaue of the downsized rent??? Robbery I say.
    2 Why do not the older persons sell the property for a reasonable market value and downsize into a private or leased property relinguishing all title to the original property? Who stands to gain if it is an amicable solution, or is the market so depressed that expectations are that only a compusory purchase by the local councils is the only solution?? Again is it robbery?? How does one release funds for welfare and care??
    3 For the older person downsizing to make arrangements and hold tenancy agreements for their property if they rent it out means hassle, and the ability remain business astute and wise until or as they reach the purley gates! Again another expense put on the older person, who has to be able to provide for themselves and spouse/partner, with a roof over their head and the proviso of welfare and care if needed?/ I doubt if this is viable and practical over the age of say 80? Unless you invite family or legal representatives to do the business for you?? Again it is monies spent for who’s benifit.
    4 We are over retirement age to employ helpers and assistants to help the economic climate of UKPLC.??

    Some of the ideas are reasonable, but I feel we are all going to hell in a handcart!!!! Answers on a postcard please.

  3. John T says:

    I am told that in the UK, as here in the US, there is an enormous amount of “deadwood” on the public dole. It is very clearly written that “those who will not work will not eat”. Until both countries come to the realization that all welfare systems have become nation destroyers and stop facilitating these failed systems, the truly needy, including the elderly, will be the ones to suffer the consequences. Step one is to stop the flood of third world freeloaders into our countries and step two is require an honest days work for taxpayer funded handouts. By allowing the able bodied to live off the labors of their fellow citizens, we create a society of non-producers. In most cases, the elderly have paid their dues and deserve our care and attention, while the young able bodied freeloaders deserve a swift kick in the derrieres.

    • john graham says:

      Typically Texan forthrightness . Shoot first ask questions later 🙂

      If our politicians spoke out like this would they get elected ? I guess you will know fairy soon in the U.S.A. In the U.K. the debate still goes on.

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