Ageing and unhealthy Scots pose ‘twin challenge’ for future budgets, says report

Scotland could be facing an average budget gap of £16 billion a year over the coming decades – with experts saying this could be the “worst scenario” if Holyrood ministers fail to improve the health of the country’s increasingly elderly population at the same time as Westminster seeks to tackle the UK debt.

The Scottish Fiscal Commission said even in a “better health scenario”, there could still be a “negative average annual budget gap” of £9 billion a year over the period 2030‑31 to 2074‑75 as a result of “fiscal consolidation” by UK ministers.

The figures were revealed as the expert body published its latest fiscal sustainability report – which takes a long-term look at the nation’s finances over the next five decades.

Noting that in the next 25 years Scotland is forecast to see a 26% increase in the number of people aged between 75 and 84, and a 95% increase in the number of people aged 85 and above, the report warned this “ageing population leads to upward pressure on health spending”.

The report also said based on current trends, spending on health is forecast to grow from accounting for just over a third (34%) of devolved public spending in 2029-30 to 47% by 2074-75.

The report warned: “This will lead to budget pressures in future, as total spending will grow faster than funding.”

The SFC “baseline scenario” sets out that on average, Scottish devolved public spending would have to be reduced by 1.2% each year – about £1 billion in current prices – compared to projected spending to balance the budget.

But if the health of the population worsens, the SFC projects the annual budget gap could reach minus 4% by 2074-75.

It went on to warn of the impact of “fiscal consolidation” by the UK Government as it seeks to deal with the national debt.

The report said if this was applied evenly across all areas of spending, taking in both reserved and devolved budgets, this could see a “considerably higher annual budget gap”.

SFC chairman Professor Graeme Roy said: “With this budget gap the Scottish Government can’t borrow. So that budget cap means cuts to public spending or increased taxes.

“Scotland faces a real challenge in terms of its overall fiscal sustainability because of this twin challenge of an ageing population and also an unhealthy population.”

He explained the “worst case scenario” the report looked at was one where there was “no real improvement in healthy life expectancy, increases in disability prevalence and no real closing of gap of life expectancy between Scotland and the UK” – adding this would be “really bad news for the public finances”.

He said: “It’s not just bad news for our health, it’s not just bad news for society, it is actually bad news for our public finances, because more demand will be going through on public spending and that will significantly outweigh the overall funding that is flowing through.”

But he said if the Scottish Government “can turn this around” and make improvements to the nation’s health, “the situation becomes much more positive”.

Prof Roy continued: “If we can improve life expectancy, crucially if we can improve healthy life expectancy – so people are demanding less healthcare through their lifetime – that does reduce demand on the health service.”

While there are obvious limits to long-term projections of this nature due to our rapidly changing world, we are cognisant of the anticipated change in Scotland’s demographics

Here he stressed the “real importance of policy makers of all political colours thinking about the need to essentially transform Scotland’s health record, not just because of the negative health outcomes… but actually also in terms of the underlying public finances”.

He added: “Investing in prevention, investing in improvement in health outcomes isn’t just important for health, it is actually fundamentally important for the Scottish budget.”

Responding, Health Secretary Neil Gray said: “We note the SFC’s analysis and outline projections for the coming 25 years.

“While there are obvious limits to long-term projections of this nature due to our rapidly changing world, we are cognisant of the anticipated change in Scotland’s demographics.”

Mr Gray said the Government plans to “strengthen Scotland’s NHS including measures to make it easier for people to see a doctor, alongside increased investment to improve access to treatment and to work proactively with people to prevent illness”.

He also said ministers are working with leaders at local government body Cosla to “prioritise prevention”, adding the Government’s medium-term approach to health and social care reform will be published by the summer.

The Health Secretary added: “This Government has delivered a balanced budget every year while taking forward action to improve the overall sustainability of the public finances for the future.”

However Conservative public finance spokesman Alexander Stewart said the report is “another damning verdict on the SNP Government’s inability to live within its means”.

The Tory MSP added: “The nationalists’ failure to get a grip on public spending threatens Scotland’s future financial sustainability and with it the funding of our public services.”