Last month the Scottish Fiscal Commission published its Fiscal Sustainability Report. Unlike the vast majority of SFC publications that focus on short-term financial analysis, this report considers the structural barriers and long-term pressures facing Scotland over the next few decades. The report poses significant challenges for future governments, and while it includes forecasts up to the 2070s, the steps we must take to address these fiscal issues starts right now with our new First Minister.
The SFC observe that the most considerable challenge facing the Scottish economy in the future is changing demographics. Specifically, the population will continue to age, and the birth rate is not sufficient to keep up, meaning the overall population will gradually decline over the next 50 years. While the rest of the UK will face similar challenges, the consequences will be felt worst in Scotland where the birth rate and migration are lower.
The most obvious ramification of an ageing population is the pressure on healthcare. Health spending currently accounts for 33% of budget expenditure but after 50 years of low birth rates this will substantially rise to half. Worse still, the height of this pressure is expected in the next 10-15 years. Future problems for health expenditure include the development of more advanced technology which will drive up the cost of healthcare provision.
The most immediate requirement for the Scottish Government to counter this impending financial drain must be to encourage rapid economic growth so that we can fund an increasingly costly health service.
Readers will rightly recognise this means a total change of policy direction for the Scottish Government, increasingly under the influence of the anti-growth agenda of the Greens. We have recently witnessed disastrous examples of these policies which include the Deposit Return Scheme, rent freezes, and making Scots pay the highest rates of tax anywhere in the UK.
What this report demonstrates is the need to shift the conversation to the long-term implications on all our policy decisions. When considering concepts like migration it is important to consider both spending and funding. While migration might increase the population and thus the tax base, it also increases the number of people relying on public services and thus the cost to government. The type of migration is therefore important, we want to attract young working age people who will contribute most to the economy. Some of this will come from adjustments at the UK level, some of it will be decisions unique to Scotland. Both will play a role in Scotland’s fiscal sustainability going forward and these governments need to work together to address these issues.
During Humza Yousaf’s first, First Minister’s Questions I had the opportunity to ask about the economic priorities of the new Scottish Government. Needless to say, the answer I received from the new First Minister was disappointing and the public deserve an answer to the serious questions raised by the Fiscal Commission regarding the magnitude of Scotland's fiscal gap. The new Scottish Government is set to continue on as recklessly as before and Humza Yousaf should reflect on the words of his erstwhile leadership rival, Kate Forbes, who said current SNP policies simply “won’t cut it”.
