The Scottish Fiscal Commission recently released its Fiscal Sustainability Report and it makes clear that if Scotland remains part of Brexit Britain, the Scottish population will dwindle by almost half a million by 2073. The report serves a similar purpose to the UK Government’s Office for Budget Responsibility ‘Fiscal Risks and Sustainability Report’, in that it attempts to provide a long term forecast of Scotland’s finances and its economic outlook. Within the report, the Fiscal Commission forecasts changes in the Scottish population for the next 50 years. Due to low birth rates, the Fiscal Commission forecasts that the population of Scotland will fall by approximately 400,000 by 2072-73.
In addition to this, the demographic makeup of Scotland is predicted to shift significantly. Given the low birth rate and an ageing population, the proportion of the population aged 65+ is expected to rise from 22% in 2027-28 to 31% by 2072-73. This rise in those aged 65+ is met with a sharp fall in those aged between 16 and 64 as well as those aged under-16.
Demographic shifts of this magnitude will have a profound impact on the Scottish economy. Firstly, due to the rising proportion of those aged 65+ there will be added demand for healthcare services, whilst the lower proportion of young people will see a reduced demand for education.
Most significantly however, the lower proportion of those aged 16-64 will shrink the labour force from two directions. As the younger population shrinks, so does the pool of those able to work, while increased demand for unpaid care work due to an ageing population will pull some of those able to work out of the workforce due to caring responsibilities for older family members. Lower labour participation rates will stunt labour productivity growth, which is the main driving force of long-run economic growth. Due to this, the Scottish economy is forecast to grow only 1.2% per year over the next 50 years.
At the same time, the Scottish economy will be met with the need to increase spending on healthcare, whilst simultaneously experiencing lower tax receipts from its labour force.
Causes and remedies
The Child Poverty Action Group estimates that the cost of raising a child from birth to the age of 18 in 2022 was roughly £160,000 for couples and £200,000 for lone parents. It is no surprise then that when asked why they don’t want to have children, cost ranked near the top of the list.
Further work by the Child Poverty Action Group shows that the cost of raising a child in Scotland has been reduced by as much as 31% for low-income families due to the policies implemented by the Scottish Government, such as the ‘baby box’ and plans to extend free school meals to all primary school children. However, as the research from the Fiscal Commission shows, this has not been enough to increase the fertility rate up to replacement levels.
A number of prospective parents’ worries could be remedied by improving the economic system from the costs of childcare to the inability of younger generations to get on the housing ladder. The UK government has even been taking notes on Scotland’s approach, with Chancellor Jeremy Hunt announcing an expansion of free childcare provision to cover children from 9-months to when they start school, which coincidentally is similar to Scotland’s new First Minister, Humza Yousaf’s recent proposal to expand free childcare to 1-2 year-olds in Scotland.
Concerns over the cost of having children could be solved by ending the fifteen years of stagnant wage growth in the UK economy, which was revealed to have been responsible for wages being £11,000 lower than they would have been if pre-2008 wage growth had continued.
Direct policy intervention in order to raise birth rates have been shown to increase birth rates slightly but they are largely ineffective at moving birth rates up to replacement levels. It is therefore through improved economic conditions that we must incentivise people to have children.
Falling populations are not solely caused by falling birth rates but also by the net outflow of people from a country. Scotland is therefore in a unique position to attack this issue from two fronts. Firstly, we must increase the economic attractiveness of Scotland as a place where skilled people want to come to live, work and raise families. Secondly, we must make it as simple as possible for people to relocate to Scotland. We used to be part of a system just like that and it is time we should be again.
Through independence, and the Wellbeing Economic Approach, which Business for Scotland has championed, leading to a new cabinet position for Wellbeing Economics to be overseen by Neil Gray MSP, Scotland can and will rejoin the EU. With renewed access to the largest single-market in the world, Scotland will experience a surge in exports and inward investment.
Through the adoption of the Wellbeing Economic Approach, Scotland will become an attractive place to live and work, with higher wages and a better standard of living for all. Taking our place once again in the EU will allow us to reinstate free movement, giving Scottish business access to a talent pool of more than 500 million people. This will quickly fill the labour shortages left behind by Brexit and put our population and economy back on the path to growth. Only through independence can we achieve this.
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