Beyond social care

How can the government prepare to deal with an ageing population?


Boris Johnson’s recent surprise tax rise will put £12 billion into the NHS and social care funding such things as residential care for elderly people. The hike unfairly targets younger generations exempting elderly people with assets – but its overall aim is an important and increasingly urgent one.

The population is ageing: over 65s will make up 24 per cent of the population by 2043, up from 18.5 per cent currently. In France, it’s 20 per cent, in Italy 23 per cent and in Japan it is 28 per cent. The dependency ratio (between working age people and retirees) is narrowing. Globally, there are 6.3 working people per over 65 but the UN predicts that will fall to just two to one by 2100. An imbalance of productivity and reliance is emerging.

One solution is increasing the labour force participation rate, encouraging new parents to return to work and reducing unemployment. Japan excels in providing citizens with job security and correspondingly has an 85 per cent rate of participation. The Nordic countries rank even higher (Sweden has 89 per cent rate). One reason is their system of active labour market policies dubbed flexicurity. Accompanied by a high unemployment benefit and an easier dismissal process, it provides retraining and subsidised employment amongst other support measures for those seeking work. Finding ways to increase the UK’s participation rate from its current level of 82.6 per cent would be wise.

Childcare makes a huge difference. Unicef names Luxembourg, Iceland and Sweden as having the best combined systems of affordability, high standards, job-protected leave for mothers and fathers and access, ranking the UK 35th globally.

Britain could raise the age of retirement, currently at 66 (set to be 68 by 2037). Although not comparatively low, Britons live longer and are healthier than most of the world. Fitness varies and jobs require varied levels of exertion. A nuanced retirement system could incentivise those who can work to do so for longer.

Since 2010, the average real growth rate in healthcare spending in the UK has been the lowest in its history. Office for Budget Responsibility data suggests spending should rise from 7.2 per cent of national income today to 10.2 per cent in 20 years. Investments in overall healthcare will also pay off: fitter seniors require less resources. 

The UK’s spending on long-term care is still far too low; it is currently less than half that of Norway’s (ONS data). Looking at Japan’s long-term care insurance, which is financed by a combination of taxes, premiums and copayments, suggests that hybrid systems seem to work.

The west has been relying on young immigrants to plug their gaps. But non-western countries’ populations are also ageing. Increasing funds to social care is a start, but a broader approach to the challenges of an ageing population will be needed very soon.

14th October 2021