Scotland would face huge demographic problems if it votes for independence, putting significant pressure on the country’s public finances.
On the Scottish Government’s own estimates, the next 20 years will see the proportion of those aged 75 and over increase by 82% by 2035. This would mean an independent Scotland would see the share of working-age people decline, and thus also the financial support required to sustain a growing elderly population.
According to the UK Treasury, in order to keep the share of dependents (those who are not paying taxes into the system) as a proportion of Scotland’s total population at 2010 levels would require “the equivalent of adding the population of Edinburgh to the Scottish population” over the next two decades.
First Minister Alex Salmond, the leader of the Scottish National Party, has said that he wants to increase net immigration to 24,000 in order to hit this target. The UK Treasury, however, believes the average number is likely to be closer to 15,500 while the independent Institute for Fiscal Studies (IFS) thinks the long-run number could be as low as 9,000. The actual figure for 2012 was 14,000.
These numbers seem small but they are “net” numbers after Scottish emigration. Scotland hemorrhages workers. In the 20th Century, Scotland lost about 2 million workers — the entire current population is only 5.3 million.
Missing Salmond’s immigration targets would pose huge challenges for a future independent Scottish Government. It would require a massive tax increase, for one thing. According to the IFS, even under optimistic scenarios for both immigration and North Sea oil revenues, the country:
… would need to introduce tax rises of the order of around 8 percentage points to the basic rate of income tax or 7 percentage points to the standard rate of VAT. Alternatively, reducing total public spending by 1.9% of national income would require a 6% reduction in spending, or an 8% reduction to public service spending if benefit spending were not reduced.
One major challenge Salmond will face is shifting public opinion in favour of his targets. Research for the Oxford Migration Observatory last year found that over 40% of those surveyed thought that an independent Scotland “should be less open” to immigrants even though they appear to acknowledge they it is likely to be more so.
Salmond will need to get his electorate on board if he is to have any hope of overcoming what the Scottish Parliament calls “the most significant challenge facing the public finances in Scotland”.
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