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Future Demand for Public Services, Driven by an Aging Population, Will Cost the Canadian Government an Additional $93 Billion(1)

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 
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. 
With the looming expenditure gap, the demand to improve public- sector 
efficiency has never been greater. Canada could save as much as $95 billion in 
annual expenditures by 2025 by increasing public- sector efficiency by less 
than 1 percent (.92%) a year — more than enough to close the gap. 
"Ninety-three billion dollars in projected additional costs for Canadian 
public services by 2025 leaves government leaders—at the federal, provincial 
and territorial levels—with a difficult new reality," said Claudia Thompson, 
who leads Accenture's Health & Public Service business in Canada. "We believe 
increasing efficiency in the public-sector must be part of the solution; it 
gives government leaders an option beyond just the traditional choices of 
cutting services and raising revenue and, as our research showed, citizens 
want government to provide services in a more cost effective way." 
Citizen Satisfaction
Accenture also surveyed citizens on their satisfaction with public services. A 
poll of 5,000 people, conducted across the same 10 countries by Ipsos MORI, 
showed that 54 percent of Canadian respondents said they are satisfied with 
the services they receive from government, compared to a global average of 36 
percent. 
Canadian citizens were asked what they considered most important for 
government to focus on to improve public services in the future and the 
majority of respondents cited, "provide services in a more cost effective way" 
(44 percent) and "plan for the long-term, not just the next few years" (38 
percent), as their top priorities. Interestingly, Canadian citizens were far 
more likely than the global average (24 percent) to choose planning for the 
future as a priority, indicating that the high costs of public service 
delivery occupies a top place in the mind of the Canadian public. 
Canadians are evenly split in terms of their confidence (49 percent 
confident/47 percent not) that their government will be able to deliver public 
services that meet people's needs and expectations over the next five years. 
That confidence decreases with age as 56 percent of people under 35 years old 
are confident that government can deliver compared to 44 percent of those aged 
35 or older. 
Navigating the Shifts 
Delivering Public Service for the Future is part of an on-going series of 
research studies Accenture is developing to analyze key issues and trends that 
affect global governments. The Accenture report provides examples and 
practical advice for governments to enhance public-sector productivity by 
embracing four major structural shifts from: 


    --  Standardized services to personalized services—tailoring
        public services to the specific needs of each citizen to drive
        better outcomes at sustainable costs.
    --  Reactive to insight driven—using information and
        technology to identify and solve problems.
    --  Public management to public entrepreneurship—leveraging
        the scale and assets of government for maximum impact in the
        economy.
    --  Piecemeal efficiency to whole-of-government mission
        productivity—taking actions across all government
        agencies/ministries to eliminate duplication and rethink how
        public services are designed and delivered to improve
        efficiency.

Learn more about Accenture's work with governments Delivering Public Service 
for the Future. 




Methodology
The Oxford Economics modeling framework considered the long-term impacts of 
economic and demographic changes on the future demand for public services in 
10 countries: Australia, Brazil, Canada, France, Germany, India, Italy, 
Singapore, the United Kingdom and the United States. A demand- driven 
projection of public-service delivery expenditure is produced using 
demographic projections from the United Nations, anticipated price inflation 
for healthcare goods and services, combined with the impact that the rising 
wealth of a nation has on government expenditure.

Public-service delivery expenditure is total public-sector expenditure 
conducted at the national and sub-national level -- after the deduction of 
debt interest payments and unemployment-related payments. It is the amount of 
funding available to deliver public- sector services defined by 
theClassification of the functions of government, (COFOG), which was 
developed (in its current version) in 1999 by theOrganization for Economic 
Co-operation and Developmentand published by theUnited 
NationsStatistical Division as a standard classifying the purposes of 
government activities.

The expenditure gap is calculated by comparing the demand-driven projection 
with the current trajectory for public-service delivery expenditure. The 
current trajectory is based on existing public-sector delivery models 
operating within existing and planned austerity measures, and a more 
sustainable growth path for government expenditure given projected 
country-level demographic, GDP, jobs and revenue growth. The trajectory 
assumes that government economic policy moves towards delivering a more 
sustainable budget deficit over the longer-term by reducing the deficit to a 
level that stabilizes debt compared to GDP by 2025.

The estimate of the annual efficiency savings required to close the 
expenditure gap by 2025 is defined as the difference between the growth rates 
of the demand-driven projection and of the current trajectory for public 
service delivery expenditure in the period 2010 to 2025.

The research also compared labour-productivity growth for the public- and 
private-services sectors in eight of the countries (where the information was 
publicly available). Labour productivity is defined as the value added 
contribution to an economy per given labour input (i.e. employment).

Ipsos MORI, a global market research company, conducted a survey of 5,000 
people in 10 countries in February 2012 as part of its omnibus survey Global 
@dvisor.

About Accenture 
Accenture is a global management consulting, technology services and 
outsourcing company, with 257,000 people serving clients in more than 120 
countries. Combining unparalleled experience, comprehensive capabilities 
across all industries and business functions, and extensive research on the 
world's most successful companies, Accenture collaborates with clients to help 
them become high-performance businesses and governments. The company 
generated net revenues of US$27.9billion for the fiscal year ended Aug. 31, 
2012. Its home page is www.accenture.com.

______________________________

(1) All figures in local currency unless indicated. Currency conversions 
from U.S. dollars in economic modelling used 2010 conversion rates 
(2) 
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Glossary:Classi
fication_of_the_functions_of_government_(COFOG) 
(3) Public services expenditure is defined here as total government spending 
at the federal, state and local levels, less debt interest payments and 
unemployment related benefits 
(4) http://www.oecd.org/els/healthpoliciesanddata/BriefingNoteCANADA2012.pdf 
(5) 
http://www.cihi.ca/CIHI-ext-portal/internet/en/Document/spending+and+health+wor
kforce/spending/RELEASE_28OCT10 
(6) The wealth effect is modeled by estimating the GDP increase per head and 
resulting effect on public sector health spending 
(7) Public services expenditure is defined here as total government spending 
at the federal, state and local levels, less debt interest payments and 
unemployment related benefits 

Image with caption: "Public Service Expenditure by 2025 by Country in U.S. 
Dollars and Local Currency (CNW Group/Accenture)". Image available at:  
http://photos.newswire.ca/images/download/20121113_C7277_PHOTO_EN_20520.jpg

Image with caption: "The current trajectory of Canadian spending on public 
services could total an additional $93 billion or US$90 billion by 2025. The 
current trajectory for public service delivery expenditure reflects government 
spending and economic growth, which consider existing and planned austerity 
measures and assumes that governments revert to a more sustainable level of 
spending relative to GDP by 2025. (CNW Group/Accenture)". Image available at:  
http://photos.newswire.ca/images/download/20121113_C7277_PHOTO_EN_20522.jpg

Image with caption: "Canadian public-sector labour productivity - a measure of 
value added to an economy per given labour input - has decreased 0.2 percent 
per year, on average, since 2001, well below productivity growth seen among 
the private services sector at 1.1 percent. (CNW Group/Accenture)". Image 
available at:  
http://photos.newswire.ca/images/download/20121113_C7277_PHOTO_EN_20524.jpg

SOURCE: Accenture

To view this news release in HTML formatting, please use the following URL: 
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CO: Accenture
ST: Ontario
NI: ECO ECOSURV 

-0- Nov/13/2012 12:00 GMT


 
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