Solving financial challenge of ageing population

The municipal finances are stronger than ever, according to the 2019 annual report from the Municipalities Association.

But things will get tougher in the coming years. Not only has the corona lockdown had a big financial impact, but demographic changes with an ageing population will place great pressure on the municipal finances over the next decades.

Big expenses for elderly care

According to the annual report, if no significant structural changes are made, the financial sustainability of the municipalities will decline by an amount equivalent to about DKK 600 million over the next 40 years.

“Projections show that the workforce will remain unchanged, but the number of citizens aged 80 or above is expected to triple in the next decades,” says Eyðun Christiansen, the head of the Municipalities Association.

The annual report proposes five strategies for meeting this challenge.

Possible solutions

One is to restructure elderly care in a way that reduces the number of people residing in institutions. Another is to introduce cost-saving measures and higher charges for elderly care.

A third option is to increase the old age pension and early retirement benefit payments and make them fully taxable.

The report also proposes that municipalities are handed part of the natural resource payments collected by the state, allocated according to the number of elderly people in each municipality. The fifth option is a gradual termination of council tax discounts.

If none of these strategies are implemented, the only way the local councils can meet the changing demographic challenge is to increase council taxes by 5-6 percent, according to the report.

Translated by prosa.fo