Maintaining a robust economy is the best way of dealing with an ageing population, Minister for Finance Brian Cowen has said in response to an EU report on the impact of an older population on public spending.
The report warns economic growth in the EU will decline over the next four decades as healthcare costs increase and the working population shrinks.
Mr Cowen said keeping debt low was a key way of ensuring a healthy economy. He added: "The best way of financing this [ an ageing population] is to keep public finances in order."
The report, which was presented to a meeting of EU finance ministers in Brussels yesterday, says the number of people in the EU aged over 65 years will rise by 77 per cent or 58 million by 2050. This means that while there are currently four people of working age for every elderly person, by 2050 the ratio will be reduced to two people of working age for every elderly person.
If changes are not made, economic growth in the original 15 EU member states will decline from 2.2 per cent in the period 2004-2010 to 1.3 per cent in 2031-2050. In the 10 EU member states which joined in 2004, average growth is expected to decline from 4.3 per cent in the period 2004-2010 to 0.9 per cent in 2031-2050. Ireland's growth rate is projected to fall from 5.5 per cent in the period 2004-2010 to 1.6 per cent in 2031-2050.
In the original 15 EU members and the euro zone area, age-related public spending is projected to increase by some 4 percentage points between 2004 and 2050. The report notes falling spending on education and unemployment benefit, will not be enough to offset the projected increase in spending on pensions and healthcare.
Mr Cowen said the Government was implementing policies at home which would offset the negative impact of the ageing population on the economy.
These included extending the retirement age of public servants, assessing changes through the national pensions review and the proposal to allow people on lower incomes to invest money from their SSIAs in special pension schemes.
He added that the report did not take into account changes in technology which would in future reduce spending on caring for the elderly, and changes to the population due to continued immigration. "We have four decades to try to adapt. The report is based on the present position, assuming there will be no change," Mr Cowen said.
He added: "These scenarios need detailed thinking and policy . . . we can meet the demands and ensure responsibility [ for the care of the elderly] is being shouldered in an appropriate way."
