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Towards a new age: The future of the UK welfare state

Population ageing is likely to have profound implications for us all. At the International Longevity Centre, we are concerned with understanding what these implications might be and how best to mobilise public policy, industry endeavour and individual action in order to make the most of the opportunities as well as to mitigate the risks. Insofar as ageing poses a challenge, we think it important to understand its different dimensions through collaborative, multidisciplinary research and analysis.

In this context,this book attempts to explore two of the biggest questions of our time:

• How might population ageing impact on the wide array of policies and institutions we call the UK welfare state?
• What reforms to the welfare state might be necessary in order to ensure long run sustainability and maximise wellbeing?

The past 30 years have been punctuated by occasional articles and debates about the so called “crisis of the welfare state”. Threats to the state are typically believed to emanate from two sources: globalisation and population ageing.

On the one hand, globalisation is deemed to pose a risk to the welfare state by inducing a race to the bottom on taxation in order to attract business investment at the expense of social spending. But such a future is not inevitable : globalisation can actually play an important role in sustaining the welfare state by supporting economic growth, while social policy decisions are at the very least tempered by a government’s desire to secure support from the electorates they serve.

Demographic change on the other hand, is deemed to pose a risk to the welfare state by reducing the number of workers relative to the number of non-workers thereby implying either increased tax burdens on the working population or a reduction in welfare spending per head. But such a future is also not inevitable – the average age of leaving the labour force might extend way beyond 70, while technological change may drive up the productivity of the workforce in ways that Keynes first envisaged over 80 years ago.

Today these arguments appear more relevant than ever. It is now eight years since the Great Recession and there is a growing realisation that we have entered a new phase in our development characterised by ageing societies, lower global growth and stagnating living standards. Yet in a complex, globalised world, where people and capital can move across borders, it is almost impossible to understand how best to manage the transition to older societies at a local, national and global level.

In this regard, this book focuses specifically on the ageing component of the challenge and how the UK welfare state can respond. Our view is that we are not
yet in the midst of a crisis but that unless we properly understand the challenges posed by ageing and consider the potential solutions, we are heading in that direction. Simply hoping that longer working lives or technological change will be sufficient to address the challenge of ageing is equivalent to burying ones’ head in the sand. Unlike the 1970s and 1980s when much of the developed and developing world was banking its demographic dividend and experiencing bumper GDP growth, today we stand on the precipice of a new demographic and economic reality. Not only is the UK ageing but so is the rest of the world, and at a significant pace . This is the future, it will shape us profoundly, and we must adapt in order to make the most of it.