Financial Times February 15 th, 2022
Population Changes provide UK with Unexpected boost to PublicFinances
It all started four weeks ago when the Office of National Statistics(ONS) issued a new forecast for the UK population. It represented a significant shift in assumptions. As reported in the financial times:
Forecast Fertility Net Migration Life Expectancy
Made In Male Female
2014 1.89 185,000 84.1 86.9
2016 1.84 165,000 83.4 86.2
2018 1.78 190,000 82.6 85.5
2020 1.56 205,000 82.2 85.3
Source: Financial Times and Office of National Statistics.
The table shows the main assumptions behind each forecast when it was made. The most surprising number is the revised assumption on fertility. In the 2014 forecast they were assuming 1.89 children in the lifetime of each female. They maintained a number close to that until this latest forecast. They then cut it dramatically to1.56. They seem to have recognized that the current trends will continue.
A later article looked at the implications of this new forecast for the UK public finances. The ONS now expects there will be 11.6m children of schoolage (under 16) by 2030. This is 1.5m less than the forecast made in 2014. It will be only 10.7m by 2080. Previous ONS forecasts had assumed a resurgence in fertility by then. A school age population of 14.7m was predicted. The good news for the Government is that the education costs will be less than expected. The bad news is that they will need to close schools and reduce the number of forms. No one knows how to do that.
The Government budget is also helped because improvements in life expectancy are slowing. Remember this is the expectancy at birth. It assumes no improvement in medical science during the life time. There will be less older people to support. The Financial Times suggests that theGovernment will only need to raise taxation by £13Bn a year in the next decade to cover the costs of the old and the children . This is only 0.4% of national income. The previous forecast had a number five times higher.
The point at which deaths exceed births has also changed. The ONS hadexpected that point to be reached in 2043. They have now reduced that by 15 years to 2025-26. This is a massive change since the 2018 forecast. After 2025-26, UK population growth will be entirely dependent on immigration. Don’t forget that immigrants help Government finances. They are usually young and their tax helps pay for care for children and the aged. The ONS still assumes at least 200,000 immigrants per year.