This article builds on CapX’s ‘The Age Trap’ article, written by Karl Williams.
Introduction
As we stand at the crossroads of demographic change, Britain is grappling with a monumental challenge—the impact of an ageing population on its political and economic landscape. In this piece, we delve into the intricate dynamics of what we term the ‘gerontocratic transition’—a shift that will see a majority of voters in most constituencies over the age of 55 by 2024. This unprecedented shift not only poses a significant economic threat but also reshapes the political landscape, steering policy decisions toward the interests of the elderly at the expense of the younger generation.
The Demographic Dilemma
Britain’s demographic landscape is evolving rapidly, with the proportion of the elderly in the population steadily increasing. While the ageing process has not been as drastic as in some other developed nations, the challenges are undeniable. By 2072, the potential worker-to-pensioner ratio is projected to plummet to 1.9, down from 3.3 in 2022. This demographic shift, coupled with rising per capita spending on pensioners, presents a daunting challenge for sustaining living standards and welfare provisions.
The Gerontocratic Transition Unveiled
The gerontocratic transition, marked by the increasing political power of the elderly, is a turning point in British democracy. By 2024, constituencies will witness a historic shift as the majority of voters, factoring in turnout rates, will be aged 55 and above. This shift in voting demographics underscores the need for policymakers to address the reality that the interests of the elderly are gaining prominence in policy formulation.
The Electoral Impact
Analyzing the weight of the ‘grey vote,’ we find that by 2072, those aged 65 and above will constitute 33% of the electorate, holding 40% of the weighted vote share. This shift is not just a statistical anomaly; it has tangible consequences on the electoral map, with grey constituencies gaining prominence over younger, urban-centric ones. The 2019 election results highlight how the Conservative landslide depended on securing grey seats, influencing policy decisions.
The Fiscal Fallout
The economic consequences of an ageing population are stark. Public spending on the elderly, encompassing state pensions, pensioner benefits, social care, and healthcare, is projected to rise from 10.1% of GDP to 21.3% by 2072. The triple lock on state pensions and the ageing healthcare needs of the population contribute to this fiscal challenge. Meeting these financial demands will require a substantial increase in taxes, potentially stifling economic growth.
Growth Imperative
Escaping the tax and spend vortex necessitates robust economic growth. Unfortunately, current growth projections are grim, with the OBR estimating an average of 1.4% over the long term. To counterbalance the rising costs associated with the elderly, the ‘grey growth target’ is set at 3.0% per annum for the next 50 years. Achieving this ambitious goal demands not only unprecedented productivity growth but also poses a paradox—implementing structural reforms is hindered by the very demographic wielding increasing political power.
Conclusion
Britain stands at a critical juncture, facing the profound challenge of an ageing population. As we navigate the gerontocratic transition, the need for innovative policy solutions and structural reforms becomes evident. The upcoming series will delve into specific policy areas to chart a course that reconciles the politics and economics of this demographic shift, rejuvenating our political economy and averting a potentially unsustainable fiscal future.