Exclusive:How Scotland needs to buck global anti-immigration trend to ease pressure on public services

Politics may have been at play when John Swinney set out plans to allow overseas students to stay and work in Scotland after graduating this week - but there is a real and pressing need for action to solve an impending ageing population crisis.

Scotland has never had a bigger population, with the latest statistics suggesting that almost 5.5 million people call the country home.

But over the next 50 years, the working age population of Scotland is forecast to plummet by around 15 per cent, while the UK-wide pool of workers is expected to grow by 0.5 per cent.

Rhetoric from some has claimed that letting more people into Scotland will put more pressure on public services, but the opposite is likely to be true.

A leading economist has told Scotland on Sunday that public services will be put under increasing pressure in the next 10 to 15 years without a solution.

Graeme Roy, professor of economics at Glasgow University’s Adam Smith Business School, said: “Our population is ageing quite rapidly and there will be a big squeeze on public finances over the next 10 to 15 years.

“As a country, we will need to have a conversation because some really tough choices will be needed.”

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Professor Roy, who is also the chairman of the Scottish Fiscal Commission, stressed that “typically, public services are paid for by those who are working from tax receipts”, but stressed that “we demand more public services when we are older”.

He added: “If there are fewer people of working age, that puts a squeeze on our public finances.”

Fertility is seen as a key way to reverse an ageing population trend, but Scotland has a declining birth rate - which dropped to its lowest level on record for 2023.

Dr Sarah Christison, from the University of St Andrews, who specialises in fertility and population change, said “Scotland has a lower fertility rate compared to England and Wales, and Northern Ireland”.

She added: “While we only have a limited understanding of why Scotland’s fertility is lower compared to other UK nations, our analysis suggests that it is likely due to smaller family sizes rather than higher rates of childlessness.”

She pointed to the Scottish Government’s population strategy, published in 2021, which placed an importance on “creating a ‘family friendly nation’ to create the conditions in which people feel able to have the number of children they desire”.

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Dr Christison added: “This is framed as a particularly important strategy to overcome Scotland’s demographic challenges within the context of a post-Brexit UK where Scotland has no devolved powers to introduce policies related to migration.”

This week, First Minister John Swinney set out the challenges facing Scotland’s population in a keynote speech on the economy at JP Morgan Chase’s campus in Glasgow.

Pointing to the demographic challenges facing Scotland, Mr Swinney warned that “for the wellbeing of our society and the future success of our economy, this trend is simply unsustainable”.

He added: “Have no doubt, right now we need people to come here to live and work to bolster our working-age population.

“We need them to address skills shortages and to increase our productivity and our innovation.”

Professor Roy pointed to action the Scottish Government could do to try to reverse the trend.

He said: “We have to be honest that our population is ageing and that’s going to put pressure on public services and lead to questions over where we can make efficiency savings elsewhere. But we cannot be looking for a magic wand.

“They can improve things in terms of the number of people of working age, supporting people into work and supporting people to stay in the workforce for longer.

“There are things they can do to try and reduce demand on public services, such as improving health services or focusing on prevention. The Scottish Government may also look at some family policies to encourage people to have bigger families, things like childcare we know has been a priority.”

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Asked whether the tax divergence between Scotland and the rest of the UK, where taxpayers on higher salaries pay more north of the Border, could be putting off working age people relocating to Scotland, Professor Roy stressed that “we just don’t know yet”, adding that “those things tend to take time”.

But he added: “People do not make decisions to relocate on one tax policy.

“Over the last few years, there has been an influx of taxpayers into Scotland.”

But David Phillips, head of devolved and local government finance, at the Institute for Fiscal Studies (IFS), said that since 2017-18, SNP ministers have “substantially increased the income tax paid by those on higher incomes relative to the rest of the UK”.

Mr Philips said: “For example, someone on £125,000 a year now pays around £5,200 a year more in income tax than elsewhere in the UK – a difference equivalent to around 7 per cent of their tax-home income.

“Evidence both internationally and from the first stages of Scotland’s reforms, when the difference for someone on £125,000 was about a third as large as now, finds such increases reduce net immigration. High-income individuals are particularly mobile as their skills are often in demand globally, and the amounts of tax involved can make it worth the hassle moving.”

He added: “Looking ahead, if it is serious about attracting more high-skilled individuals to Scotland, the Scottish Government should develop a coherent set of policies to make it more attractive. That could come into conflict with its intention to focus resources on those in poverty or ill-health.

“A focus on basic public service performance – including in the NHS, and schools – which matters to families across the income distribution must be part of the mix. And the Scottish Government should remember it’s not just income tax which can be used to raise revenue progressively.

“Reform of council tax to make it more progressive has long been promised with little sign of progress. Shifting the tax a little from incomes to property wealth could help the Scottish Government continue to raise revenues progressively, while being a more attractive proposition to high-income, high-skilled individuals.”

The First Minister has proposed a visa policy that would allow overseas students to remain in Scotland for two years after graduating from Scottish universities and colleges in a bid to boost the working age population.

Mr Swinney acknowledged this is not a new idea.

Two decades ago, under Jack McConnell’s administration, the Scottish Executive set up the fresh talent scheme in collaboration with the Labour UK government - a post-study visa route for international students in Scotland.

The First Minister said he could “see no reason why this cannot happen again”.

He added: “I stand here ready to work with the UK government to develop a tailored visa route for international graduates from Scottish universities or colleges who want to stay here in Scotland.

“This Scottish graduate visa would be linked to a Scottish tax code and be based on a requirement to live and work in Scotland.”

The fresh talent scheme was somewhat overshadowed by the expansion of the EU. But Brexit has had a huge impact on Scotland’s ability to attract key workers.

Professor Roy said: “There has been a fall in EU migration, particularly in the skills element and key sectors.

“People who want to spend a summer in Scotland in hospitality or agriculture - we do know that that has decreased since Brexit.

“We did see a significant increase in EU migration in the early 2000s up to Brexit. That was always going to ease off but Brexit has been a circuit breaker on that.”

Mr Swinney’s proposed visa scheme was swiftly rejected by the UK government, with an insistence that there “are no plans to introduce a visa route specific to Scotland”.

A senior Scottish Labour source suggested the Scottish Government had “rushed into the plans” when the Home Office is examining UK-wide immigration issues.

It is seen as a non-starter to propose a Scotland-specific scheme while the Home Office looks at the challenges facing the entirety of the UK.

Scottish Labour leader, Anas Sarwar, has spoken to his party colleagues in the UK government about helping Scotland’s specific immigration needs.

He told Scotland on Sunday: “What we made clear during the election campaign and in our manifestos in Scotland and across the UK, was that we wanted to maintain the integrity of a single border agency, we wanted to maintain the integrity of a single Home Office and a single UK-wide immigration system, but recognise that there are different immigration needs and different challenges in different parts of the country.

“One of the levers that the Home Secretary spoke about during the election campaign is how we reform the Migration Advisory Committee to make sure that there is adequate representation for Scotland and for different sectors across the country so that decisions could be made reflective of the challenges in different parts of the country.

“That was a commitment that was made in the election, that's what the Home Secretary continues to pursue and that's the right approach.”

Mr Sarwar said the fresh talent scheme “shows the power of collaboration and cooperation”.

He added: “I'm pointing to that as an example of if you act in good faith and you collaborate, there are options available which I will be keen to explore.”

But Mr Swinney has suggested that the Labour government’s pressure and pledges to cut overall migration is having an impact on Scotland’s chances of encouraging people to come and work.

The First Minister said: “The current dominant political narrative in the United Kingdom, which in turn drives policy choices within the UK Government, is only making matters worse.

“If we are to make the most of Scotland’s economic opportunities, we need an immigration system that understands Scotland is different from the UK as a whole.”

Professor Roy warned that “if we set aside the politics of it, it will require a careful design of a policy”.

He added: “There are lots of nuances in that. You could tie it to a Scottish tax code, but for example, what if their employer wanted to move them somewhere else.

“It would be possible to design something but we would need the UK government to design it and it’s not likely to be top of a list of priorities for them.”