Scotland faces a £3bn funding gap in projected spending on older people. So why aren't public bodies planning accordingly?
There are more of us, we’re getting older and not only that we’re becoming more expensive. Scotland’s population that is. The most recent report of the Scottish Parliament’s Finance Committee sets out the risks to the public purse as a result of Scotland’s demographic changes and its ageing population.
The report reveals how Scotland’s population of more than 5 million has increased steadily over the course of 100 years. Amidst a number of quotable statistics in the report, the fact that the proportion of people over 65 years of age has grown from 5% to 17% of the population, stands out.
This age group will make increasing ‘demands’ on the public purse. But it’s not just older people who are dependent. The term dependencies is applied to those under 16 as well as those over 65 and then measured against the working populaton. Overall, the dependency ratio is expected to increase from 60% to 64% by the year 2035.
But where the picture becomes mixed is when a closer look is taken at not only how the population will age but where. Scotland’s male population already has the lowest healthy life expectancy of any part of the UK. Within Scotland itself, a male living in the east of Glasgow can expect to live a healthy life until the relatively young age of 56 while a few miles away a male can expect a healthy life expectancy up to 70 years of age.
All very interesting, but the remit of the Committee’s inquiry was to find out what impact all of this would have on public expenditure in the area of health and social care, housing and pensions.
The evidence provided to the Committee resulted in the identification of a £3billion funding gap between the expected costs of services for older people and the expected funding available. A gap that is being addressed in part by service redesign, further efficiencies and the longer term move to preventative spend.
To explore further how the gap was being tackled, the Committee quite properly inquired about long term financial planning amongst Scotland’s public sector bodies. What emerged was the difference in planning and funding cycles - in particular between local government and health bodies - which could limit the practical ability of these bodies to work together.
There was some evidence to indicate that long term financial planning was in fact undertaken by local government; in at least one case there was a ten year long-term financial planning cycle. Health bodies however expressed frustration at their inability to undertake longer term planning.
The main issue was the uncertainty over the funding envelope, which is known only on a yearly basis. In evidence, it was pointed out that the consequence of this is that health bodies have to resort to reactive spend in what is an annual process.
When asked if the current system of allocating resources could be changed to assist longer term planning, the Cabinet Secretary in evidence considered that both health and local government bodies should be able to plan for a three year period. The Cabinet Secretary also acknowledged that government had no fixed long term period for its own planning.
So to sum up, local authorities seem to financially plan for anything up to ten years, health bodies largely plan on an annual basis while government considers they can plan for three years - but itself sets no firm planning period.
Although we can project demographics confidently forward to 2035, that same confidence is not translated into the long term financial planning that will be necessary to meet the demographic challenge.
Don Peebles is policy and technical manager at CIPFA in Scotland
