Octogenarians rule — quite literally in some cases. The star witness at the House of Lords inquiry into the ageing UK population this week was Charles Goodhart, the eminent economist, now a white-haired 88-year-old and still going strong.
Among the peers on the economic affairs committee asking the probing questions were the ex-chancellor Norman Lamont, who is 82, the former Treasury permanent secretary Terry Burns, 81, and the former cabinet secretary Andrew Turnbull, 80.
As an instructive vignette of how working life need not end at 66, the evidence session could hardly have been bettered. Only the appearance of the chairman, Lord Wood of Anfield, an indecently youthful 57, spoilt the look a bit.
The ageing of the UK population is one of those themes so familiar to us all that it rarely gets the attention it deserves. We periodically bemoan our falling fertility rate, cheer our rising longevity, shrug about the worsening dependency ratio, point to Japan, South Korea and Italy, where the picture is even more extreme, and move on to other things.
But shocks like the recent dreadful public finance figures should remind us that the rapid silvering of the UK population is a nettle that isn’t going away and will have to be grasped by policymakers at some point. Gilt market investors, if no one else, will demand it.
It is wonderful that we are living longer. The extraordinary rise in life expectancy is one of the greatest achievements of the 20th century, according to another expert, Professor Andrew Scott of the London Business School — but one of the biggest challenges of the 21st, he added.
For fiscal reasons alone, the alarm bells should now be ringing loudly. As the Office for Budget Responsibility warned last September, on the current path, national debt as a percentage of GDP will treble to an unsustainable 270 per cent by 2070, largely because of the growing bulge of older people.
If the OBR were to do the calculations again today, the numbers would be even more unpalatable as we now recognise the need for much higher defence spending and resign ourselves to a world of higher borrowing rates — with all that means for the interest bill on existing government debt.
An ageing population means a rising healthcare bill. Health spending per person in the UK is about £2,000 a year up to the age of 45, then starts to escalate. By age 85, the average cost is £13,000 a year. Social care costs rocket. The state pension, too, becomes a bigger proportionate expense to the Exchequer, as do other benefits, not to mention unfunded pension promises to public sector employees.
From the narrow point of view of a Treasury accountant, there’s nothing good about a greying population. All the intangible benefits provided by older people — the unpaid care they give to spouses and grandchildren, the huge amounts of volunteering they do and the intangible glue they provide that binds communities and families together — don’t get counted.
The demographics tell a simple story. In 1950, one in nine of the UK population was over 65. Today it is one in five and is now heading for one in three. Those over 80 accounted for 1.5 per cent of the population in 1950, 5 per cent today, and are heading towards 10 per cent.
To put it another way, by one projection, the UK population is going to grow by about 13 million to 81.7 million in the next 45 years. But of that increase, over-65s will account for 8.8 million or two thirds. The distribution of age groups in Britain is no longer a pyramid, with much smaller numbers up the age spectrum. It is a tower. Soon it will be a tower that bulges at the top. The dependency ratio, the ratio of over-65s to working age adults, will increase from the current 31 per cent to 47 per cent over the next 50 years, the OBR reckons.
Other demographic factors are unlikely to come to the rescue. Couples want fewer children or none at all. The fertility rate in England and Wales sank to the lowest on record at 1.44 in 2023. It needs to be 2.1 to sustain a level population. Measures in other western countries to encourage more children have been patchy at best. Large infusions of migrants could, in theory, help but for political reasons are out of the question.
One partial answer, according to Scott, is policies to keep us healthier for longer and therefore working for longer. That is already happening in the 50-64 age group, which has contributed more to the employment growth of the past ten years than anyone else. There are more fiftysomethings, and they are more likely to work.
Staying healthy after the state pension age of 66 is just as important, both to encourage more people to carry on working or just to prevent them becoming a major cost to the health and care services. The “healthy old” is a worthy goal.
Rising life expectancy has become a two-edged sword. The more important factor is healthy life expectancy. This is obviously desirable for quality of life, but also for the public finances. Ominously, this measure has started to go backwards. Medical advances have prolonged the lives of those living with chronic or severe illness more than curing those illnesses. Average healthy life expectancy has actually fallen from 65 years to 64 in the past ten years.
Measures to nudge people into healthier living and into working for longer (where they want to and physically can) will have to play a bigger role. We need to stop “medicalising” old age. And, bluntly, there may have to be more unpopular jolts, like the withdrawal last year of winter fuel payments to all but the poorest pensioners.
Labour recently promised to stick with the “triple lock” for the remainder of this parliament. This is the policy tool that raises the state pension by the highest of 2.5 per cent, inflation or wages growth. It is an unsustainable folly, which means that pensioner rewards are ratcheted up by more than the pay of the working population.
It will have to go at some point. Hopefully, before present-day workers start to get seriously resentful of us lucky boomers. Demography is not destiny, we are told, but it shapes our fortunes more than we might like.
