#Gers in a nutshell: Scotland is running short of taxpayers

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This article by Alison Payne first appeared in The Times on 23 August 2019.

This week #Gers was trending across Scotland. Not another football discussion but a reference to politicians and commentators discussing the publication of Government Expenditure and Revenue Scotland, a report containing a great deal of financial information about Scotland’s wellbeing.

Unfortunately, all too often the debate that follows is a mudslinging match in which each side claims that some subsection of the statistics backs their constitutional outlook and there is little discussion of problems and solutions. This week was no different. Some highlighted how much more money Scotland spent than it raised. Others pointed out that the notional deficit had fallen compared with last year. Dig a little deeper, though, and there are many warning signs we need to start thinking about before they become big problems: Scotland’s ageing population, for example.

The headlines highlighted that we had a higher expenditure per head than the UK as a whole. The biggest spending area was social protection which, in 2018-19, accounted for 32 per cent of all public expenditure. Within that, the state pension was by far the single biggest expense. Expenditure on the state pension increased by 3 per cent over the past year. For the UK as a whole it increased by 1.3 per cent. In fact, Gers highlighted that state pension spending in Scotland had increased by 11 per cent in four years. It is obviously to be celebrated that we are living longer, but over the next 25 years the number of births minus the numbers of deaths is projected to be negative.

Scotland’s fertility rate is below that of every other region and nation of the UK. All the projected increase in Scotland’s population will be thanks to migration. Today’s taxpayers pay the state pensions of today’s pensioners. Paying national insurance does not mean you contribute towards your own retirement pot; it is another form of taxation to pay for expenditure. As the number of pensioners grows at a faster rate than the number of taxpayers, this puts a strain on the public purse. Although the dependency rate is increasing across the UK, it is happening at a far faster rate in Scotland.

Brexit and changes to immigration policies at Westminster may present even more challenges to the task of attracting more people to Scotland, but regardless of whether we are in or out of the EU or in or out of the UK, Scotland needs more taxpayers and therefore must have policies to help attract those much-needed people to come and settle here.