Lib Dem Party Conference LIVE Event Blog – Will the EU’s ageing population bankrupt Europe?
At an event organised by BNE and CentreForum in partnership with Aviva, an eminent panel spoke to a packed room of experts and party activists on the challenges of Europe’s ageing demographic.
Sir Graham Watson MEP, Prof Steve Webb MP, Paul O'Hagan, James Lloyd, Dr Tim Leunig
Dr Tim Leunig, chief economist of CentreForm opened the discussion. He started by asking whether Europe had any political will whatsoever. He answered that it looked like not. “They will struggle on until there is a direct pensions crisis”, he said, which had two components. First, people are living longer, secondly not enough young people are being born.
He said that the first was something to celebrate. One in four girls born this year are expected to live to 100. He noted that this was an amazing opportunity. The lower birthrate was a different question however, requiring different solutions. He noted that ratio or old people to working age people has increased.
Dr Leunig said that there were three choices in the long term. Work longer – increase retirement age. Second, be poorer and third, allow people to immigrate – “draw in people from eastern Europe and elsewhere to replace the children we should be having.”
He suggested that we should consider having an “automatic rule” to upgrade the pension age – a month every three or four months or so, with review every three or four years.
He went on to say that “we need to think about inequality – mainly of life expectancy. What are we doing to change that? We can’t have a retirement age that the typical person in Hull never gets to retire. So we could have a variable pension age, or other mechanisms.”
It was clear, he finished that “we need to face up to inequality in genders. Men die before women, mainly because they make stupid life choices.” He said that what Steve Webb, the pensions minister was doing was “strongly progressive.”
The next speaker, James Lloyd, was Director of the Strategic Society Centre. He said that the euro crisis has changed everything. In the UK, in terms of public sector pensions reform, we have “kept the crisis separate from ageing as a cause.” He noted that the crisis also made it far harder to plan ahead. If the eurozone breaks up the affordability of the state pension will have to be revisited. People will find it much harder to save, and the value of their pension pots will be affected.
He suggested that public spending on health, care and support, and “myriad other entitlements” have got to be looked at. He also said that society will also have to invest in adapting the public space to our ageing population.
There were other indicators for preparedness according to James Lloyd – for example, adapting workplaces to help older workers.
He also said that it was instructive to note the differences in countries across the EU. Each country will approach the question in their own unique way. The UK is in a relatively strong position he said, adding that “there’s a case to say that every country in the EU needs an Adair Turner.” At least on the fundamental point of the pension age, he said, there is agreement, noting that “in France there is no such unity of purpose.”
James Lloyd went on to talk about social care. This, he said, was the “really worrying thing.” There are disparate responses across European countries. ”Social care is the issue where you can see how far countries are progressing – Germany is doing well, the UK is still in the starting blocks.”
He said he believed that “the best strategy is to ring fence and protect some areas of spending, rather than renegotiate on all. By default we are doing that in the UK, the state pension is being set up as a protected pillar going forward, as is the NHS. Other things like social care, winter fuel payments, etc., are liable to be reviewed over the next decades.”
He concluded by saying that “we worry about population ageing in the UK, and despite this, the biggest asset of most older households is completely untaxed,” asking “is that tenable?”
Sir Graham Watson, (MEP for the South West of England), Vice President of the European Liberal Democrat and Reform Party, started by saying that “no continent has a higher proportion of people than Europe. One in five of Italian and German citizens are over 65. That combined with the decline of reproduction rates gives us a serious problem.”
He went on to say that “in three years, the number of people of working age on the continent will begin to decline.”
He spoke of a meeting between Wen Jiabao, the Chinese premier and Jose Barroso, the head of the European Commission, where Wen said to Barroso that “Europe will become a theme park, full of elderly people, relying on tourism.” Watson said that the USA and others have managed this problem by welcoming migration, noting that “for most of the last 300 years we have been a continent of net emigration, and only one of net immigration over the last 30 years.” That, he said, was a massive cultural shift.
He went on to that we need greater tolerance of immigrants and that Europe needs to specialise in high skilled jobs and accept that low skilled jobs will go east, and that we “need a commitment to life long learning.”
In terms of what the EU could do, he noted that it did not have any power in this area, however that the EU was “looking at common work in various areas like social cohesion and healthcare.”
He concluded by saying that the biggest problem was one of economic prosperity. He said that we already have a “labour shortage economy” and that by 2050 the working population of Italy and Germany combined will have fallen by 45%, the UK and France will have fallen by 20%, but that the USA’s would – on current and predicted trends – be up by over 40%, saying that “some estimate that over half of our economic growth comes from population growth.”
The last speaker was Steve Webb MP, the Pensions Minister. He started by talking about life expectancy in Portugal. Improvement in life expectancy at birth between 1993 and 2009 life went up from 71 to 76.5 for men. The UK was pretty similar, having gone up four years over 16 years.
Sir Graham Watson MEP, Prof Steve Webb MP, Paul O'Hagan
He said that a typical EU man draws a pension for 17 years and a woman for 20, noting that “we are ageing like an express train.” He said that Britain has already legislated to raise the pension age to 68 by the mid 2040s, but that this was still not high enough. It showed, in his view, the scale of the challenge facing society.
He said that the challenge in terms of politics was that people “want notice” but government wants to keep decisions “as late as possible.” He also said that until April of 2011, it was a crime to sack a person just for being 65. The retirement age had been 65 for a century he noted.
Compared to the UK, France found it difficult to go from 60 to 62 he said. He also observed that most state pensions systems are unfunded – so that today’s pensioners are paid for by today’s workers.
He ended by saying that times had moved on since the Beatles sang “will you still need me, will you still feed me, when i’m 64.” Our attitudes to older people had to change, and people were staying active for far longer, concluded by saying that “giving older workers jobs do not take away from job opportunities for younger people.”
During the discussion, Steve Webb noted that it is perfectly possible to have phased retirement. A representative from Action on Hearing Loss asked about prevention and Steve Webb agreed that it was an important point. He went on to say that the lack of discussion in the media was often related to the relative youth of the producers on the programmes.
Tim Leunig made the point that the wage rate is relevant; we should accept that as people get older, it isn’t necessarily true that wages should go up. Also, it is unfortunately true that ageing – like for example mental health – is not as glamourous as youth. Great Ormond Street Hospital finds it extremely easy to fundraise, but organisations that deal with those other areas find it extremely difficult, for example.
Graham Watson said that one of the things that the EU did best was the exchange of best practice. Steve Webb noted that older workers tend to be more reliable and less likely to move after a short period of time.
Steve Webb noted that the average age that people become grandparents is 49.
The debate was moderated by Paul O’Hagan, Deputy Director of BNE.