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Future Demand For Public Services, Driven By An Aging Population, Will Cost The Canadian Government An Additional $93 Billion(1) By 2025, According To New Accenture Report

Stocks in this article: ACN

TORONTO, Nov. 13, 2012 /CNW/ - Costs primarily associated with an aging population are estimated to require the Canadian government—at the federal, provincial and territorial levels—to spend an additional $93 billion (4.1 percent of GDP) to fund public services 2 by 2025, according to a new report by Accenture NYSE: ACN, Delivering Public Service for the Future: Navigating the Shifts.

Accenture asked Oxford Economics to project total government spending on public services 3 through 2025 in 10 countries—Australia, Brazil, Canada, France, Germany, India, Italy, Singapore, the United Kingdom and the United States. The Canadian cost is projected to total $745 billion, 32 percent of GDP, by 2025. Oxford analyzed the impacts of projected economic and demographic changes on the costs of delivering all public services, including federal, provincial and territorial spending (except debt interest payments and unemployment-related benefits).

Aging Population The primary driver of the projected expenditure increase is the rapidly aging Canadian population. In 2011, 14.1 percent of the population was 65 years or older. That is projected to increase to 20.6 percent by 2025. The majority, 71 percent, of health spending was funded by the government in 2010. 4 In 2008, (the latest available year for data broken down by age group), provincial and territorial governments spent an average of $10,742 per person age 65 and older, compared to just $2,097 for those between age 1 and 64. 5 Other factors in the analysis included wealth effects 6 —assumptions based on historical evidence that suggests as countries get richer, governments spend proportionally more per person on public health services.

Expenditure Gap Demand-driven spending estimates were compared against the current trajectory of public-sector spending to identify the 'expenditure gap' in each country by 2025, along with its percent of GDP.

Closing the Expenditure Gap The research also establishes estimates of labour productivity in the public- and private-services sectors in eight of the countries (where the information was publicly available) to help inform estimates of the efficiency savings that are required in the Canadian public sector to help close the expenditure gap.

Improving efficiency is a key factor that supports both labour productivity and total productivity across economies. Increasing efficiency and productivity will enable public-sector services to deliver desired outcomes at lower costs.

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