Advice Paper (1 6–04) February 2016

House of Commons Scottish Affairs Committee Inquiry Demography of & the Implications for Response from The Royal Society of

Summary European Commission and Parliament. This advice is always offered on a non-partisan basis • Scotland’s population is projected to grow during and is based on the expertise and knowledge of the 25 year period to 2039 by 7%. our diverse Fellowship. • The projected population growth is predicated 2 The RSE is pleased to have the opportunity on inward migration from elsewhere in the United to respond to the consultation by the House Kingdom and also international migration (including of Commons Scottish Affairs Committee and from other EU countries). would be happy to provide a witness to the • The overall age dependency ratio in Scotland is due Committee if requested. to rise, primarily due to a projected increase of 28% in the post-retirement age population. Scotland’s Demographic Trends • The increase in the post-retirement population is 3 • As projected by the National Records of likely to lead to increased resource demands for Scotland in its publication “Projected health and social care services Population of Scotland ”i, key aspects of the • Consideration could be given by the UK Government projected population are as follows: to allowing the the opportunity • The population is projected to rise from 5.35 to introduce a system similar to the earlier “Fresh million in 2014 to 5.51 million in 2024, then to Talent Initiative” to seek to attract and retain well 5.7 million in 2039 – an overall increase of 7%. educated international graduates. During this same period the population of • The fiscal framework just agreed between the UK is projected to increase by 17%, Government and the Scottish Government seems to by 10% and by 6%. have resolved the issue until 2022 and the proposal • Within this projected increase in Scotland, the to establish an independent body to advise on fiscal number of children under sixteen is expected arrangements is welcome, however considerable to increase by 1%, the population of working work will be needed to reach a long term agreed age by 1%, and the number of people of framework. pensionable age by 28%. • Overall this would result in the dependency The Royal Society of Edinburgh ratio rising from 58 per 100 of the working 1 The Royal Society of Edinburgh (RSE) is population in 2014 to 67 per 100 in 2039. Scotland’s National Academy, established in 1783 The overall UK dependency ratio for 2013 was by Royal Charter and also a Scottish Charity. 54 per 100. ii As part of its Royal Charter, the RSE is • Life expectancy at birth has been rising across committed to the Advancement of Learning all four of the countries of the UK over recent and Useful Knowledge . The RSE seeks to fulfil decades. Of the four countries Scotland has this Charter requirement in many ways, including the lowest life expectancy at 76.5 for males providing advice on public policy issues to: and 80.7 for females, against 79.0 and 82.8 for the Scottish Government and Parliament; England (2010 – 2012). iii the UK Government and Parliament; and to the

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4 The population projections depend on a number experienced in the early part of this century was of variables including fertility, mortality, internal largely as a result of economic migration from migration and international migration. The the accession countries – net inward migration projections can also be influenced by public policy from outwith the UK is the single biggest growth issues. Of these factors international migration factor in the main population projection outlined is particularly difficult to predict and can be by the National Records of Scotland. influenced by external factors as well as public 8 The Higher Education system in Scotland policy issues. The level of migration into Scotland international students. Using UK wide figures just and the UK after the accession of several eastern under half of international students wish to live in European countries early in the last decade was the UK after graduation, with just under a quarter not accurately predicted. A high inward migration wishing to do so five years after graduation. If, as projection for Scotland would see its population has been proposed by some, there were to be a rise to 5.97 million by 2039, while a low migration reintroduction of the “Fresh Talent” initiative, projection would see the population grow to allowing non-EU international students to remain only 5.43 million. The difference between the in Scotland for a period after graduation this high-migration and low-migration projections is might help to retain more of these well qualified larger than the population of Edinburgh. This people. Between 2004 and 2008 over 8000 illustrates the uncertainty associated with non-EU international students in Scotland were current methods of forecasting migration. accepted onto the scheme. It was then incorporated into a UK wide initiative. vi 5 The most recent population forecasts for Scotland cover the period 2012 to 2014. Already 9 Both internal UK migration and international out of date, these may have been influenced by migration will be influenced by factors such as factors such as changing student flows in the success of the Scottish economy, the response to fees policy, the effect of the recession employment opportunities that exist and also by and subsequent recovery on the labour market issues such as relative taxation rates between and uncertainty caused by political developments Scotland and the rest of the UK. Higher relative in Scotland and the UK. Whether these effects levels of taxation in Scotland compared with the have been significant and, if so, whether they will rest of the UK, if significant, could act as a persist into the future, is impossible to determine disincentive for inward migration and also lead to based on current information. high earning, mobile taxpayers migrating from Scotland to other parts of the UK. How can the Scottish Government or UK Government influence Scotland’s 10 To seek to maximise the working age population in Scotland, the Scottish Government could seek demography? to develop a programme of marketing Scotland 6 The most significant way in which Scotland’s as a place to live and work aimed at people from demography can be influenced in in relation to elsewhere in the UK, the EU and international immigration policy. The recent increase in the migrants who seek to settle in the UK. Quality of Scottish population since 2000 has mainly been life and cost of living could be key selling points. driven by migration, both internal within the UK However, such a policy is likely to be a success and international. Clearly immigration policy only if economic opportunities are available – in remains the reserved responsibility of the UK particular for higher earning potential migrants, Government. providing that these are such as to outweigh any possible disincentives of the kind referred 7 If the UK remains a member of the European to earlier. Union and the economy continues to perform well in relation to many EU countries, Scotland and the UK are likely to remain attractive destinations for migrants from lower wage countries within the EU. The rise in population that Scotland

2 Advice Paper 16 –04 Life expectancy and policy principle and the UK Government emphasising implications “taxpayer fairness”. An analysis of the positions of the two Governments published just before 11 Increasing life expectancy will lead to increased agreement was reached is explored in the Blog demands on health and social care services. by David Bell, David Eiser and David Phillips More significant, though, than simply the on Adjusting Scotland’s Block Gran tvii . This increases in life expectancy is the dependency indicates that, at the time of writing, the gap ratio of people of pensionable age to those of between what the two Governments proposed working age. Policies to respond to this need to was relatively small in percentage terms be more sophisticated than simply considering (+/- 1 % of the budget after fifteen years), life expectancy, as many people of what used to but would amount to +/- £0.2 – 0.3 billion at be regarded as pensionable age are either current prices. financially independent due to their pension income, or are still working. Although there 14 The Scottish Government’s preferred position may be years of good health immediately to set the future level of the block grant seeks post-retirement age, in relation to health to protect the Scottish budget from Scotland’s and social care services the number of years lower population growth and lower per capita of poor health in later years is of more relevance income tax take – this method is referred to as in preparing these services to meet the likely the Per Capita indexed Deduction (PCID). increased demands. Detailed research into the 15 The Treasury’s initial position was to argue for a projected level of the high dependency elderly “Levels Deduction”, which would result in population is essential. Scotland receiving no further redistribution of income tax revenues from other parts of the To what extent are Scotland’s UK. This was subsequently refined to protect the demographic forecasts successfully Scottish budget from its initial lower per capita captured by public policy? income tax take. 12 The demographic forecasts are clearly available 16 We now know that at the eleventh hour to the Scottish Government and others agreement was reached between the two responsible for developing public policy, Governments, the effect of which, we understand, including the NHS and local authorities. It is is to base the calculations on Scotland’s ongoing probably for these bodies to indicate to the grant on the methodology advocated by the Scottish Affairs Committee the degree to which Treasury, with an adjustment payment that will these projections have been built in to medium to guarantee the Scottish Government a level of long term policy and public service planning. It is funding till 2022 that will result in “no detriment” to be hoped that this is the case and that as fresh to the Scottish budget during this period. An data becomes available the policies are reviewed independent system of considering the on an ongoing basis. appropriate funding from 2022 onwards will be established. This will provide advice to both Should demographic trends be a Governments, following which there will need to be a further agreed settlement. It would be factor in determining the funding sensible beyond this to build in a bi-partisan settlement across the UK? review of the funding formula every 5 or 10 years 13 How the new fiscal framework between the UK and also to jointly commission research into the Government and the Scottish Government effects of population trends against tax receipts operates to underpin the implementation of the and borrowing. new powers flowing from the Smith Commission is largely a political decision, for which there are rationales on both sides – the Scottish Government focussing on the “no detriment”

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Additional Information Consultation responses are produced on behalf of RSE Council by an appropriately diverse working group in whose expertise and judgement the Council has confidence. This Advice Paper has been signed off by the General Secretary.

Any enquiries about this response should be addressed to Bristow Muldoon, Head of Policy Advice (Bmuldoon @royalsoced.org.uk).

All responses are published on the RSE website (www.royalsoced.org.uk).

Advice Paper (Royal Society of Edinburgh) ISSN 2040-2694

i National Records of Scotland (29 October 2015) http://www.nrscotland.gov.uk/files//statistics/population-projections/2014-based/pp14.pdf ii Index Mundi http://www.indexmundi.com/facts/united-kingdom/age-dependency-ratio iii Office for National Statistics http://www.ons.gov.uk/ons/guide-method/compendiums/compendium-of-uk-statistics/population-and-migration/find-out-more/index.html#4 iv National Records of Scotland, Table 8, p36. http://www.nrscotland.gov.uk/files//statistics/population-projections/2014-based/pp14.pdf v ESRC Centre for Population Change Briefing 27 (September 2015) http://www.cpc.ac.uk/publications/cpc_briefing_papers/pdf/BP27_International_study_for_an_international_career.pdf vi Scottish Government (2008) http://www.gov.scot/resource/doc/235857/0064664.pdf vii Centre on Constitutional Change (23 February 2016) http://www.centreonconstitutionalchange.ac.uk/blog/adjusting-scotland%E2%80%99s-block-grant-options-table

The Royal Society of Edinburgh (RSE) is Scotland’s National Academy. It is an independent body with a multidisciplinary fellowship of men and women of international standing which makes it uniquely placed to offer informed, independent comment on matters of national interest.

The Royal Society of Edinburgh, Scotland’s National Academy, is Scottish Charity No. SC000470

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