Holyrood’s Finance & Constitution Committee warns of strong evidence of a demographic risk to the size of Scottish budget

07.11.2018

There is strong evidence of a demographic risk to the future size of the Scottish budget, says Holyrood’s Finance & Constitution Committee. This has the potential to impact upon public spending in Scotland.

In its pre-budget scrutiny report for 2019-20, the committee says the demographic risk raises two fundamental questions:

• Whether the Scottish Government has sufficient policy levers to address the risk?

• Whether the Fiscal Framework sufficiently recognises demographic divergence between Scotland and the rest of the UK?

The committee recommends that it is essential these questions are fully considered as part of the review of the Fiscal Framework.

The committee draws attention to Scotland’s working-age population (ages 16-64 years) being set to fall from 2018 onwards, while the rest of the UK’s is set to grow. This, according to the Scottish Fiscal Commission, is expected to place a drag on GDP growth in Scotland.

The Scottish Government’s Fiscal Outlook states that while an ageing population is not new, it “is set to accelerate from 2021 onwards and is happening at a faster rate than in the rest of the UK.”

The Scottish Government identifies two dimensions to this:

• a big increase in the number of people aged 75 and over;
• an ageing working population with fewer younger workers and more aged 50 and over.

The committee’s report also notes that given the way in which the Fiscal Framework operates there is a real risk to the size of the Scottish Budget if there is a fall in Scotland’s working age population due to a disproportionate decline in immigration relative to the rest of the UK.

The Committee recognises that migration policy is a reserved matter and that the UK Government does not agree with the need for a specific migration policy for Scotland.

However, within the context of Brexit and a different demographic dynamic within Scotland relative to the rest of the UK, the Committee recommends that the review of the Fiscal Framework should fully consider the impact of immigration policy following the UK’s departure from the EU.

Finance & Constitution Committee Convener Bruce Crawford MSP said:

“The demographic risk identified in our report raises two fundamental questions: whether the Scottish Government has sufficient policy levers to address the risk and whether the Fiscal Framework sufficiently recognises demographic divergence.

“Our committee recommends it is essential that both of these fundamental questions are fully considered as part of the review of the Fiscal Framework.

Mr Crawford added:

“The bad news is that while our ageing population is not new, it is set to accelerate from 2021, and this is happening faster than rest of the UK. In the longer term, all future Scottish Governments will need to respond to the pressures this creates.”

Background information

The Fiscal Framework will be reviewed following the Scottish elections in 2021 and will be informed by an independent report with recommendations presented to both the UK and Scottish Governments by the end of 2021.”

Read the committee’s full report.

The committee’s webpage and work programme.

Media contact
Eric MacLeod

 

 

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