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We updated this release on 8 April 2025, to correct an error in the annual budget gap between 2030-31 and 2049-50. It was stated as 1.6 per cent, where it should have been 1.5 per cent.

The Scottish Fiscal Commission has today said that the challenges in funding healthcare will become more acute over the next twenty‑five years leading to significant pressures on Scotland’s fiscal sustainability.

Health is the largest area of spending in the Scottish Budget and it is projected to grow faster than any other area. This is because of an ageing population, growing demands as society becomes wealthier, less scope for saving on labour in the health sector than in the wider economy, and a rise in the prevalence of long‑term health conditions.

The fastest demographic growth in Scotland will be in the older age groups, with the population aged 85 and over projected to almost double over the next twenty‑five years. Since health‑related spending increases with age this will result in higher healthcare spending.

This ageing in Scotland over the next twenty‑five years will be earlier than in the rest of the UK. As a result, we project Scottish Government spending across all areas will exceed funding by an average of 1.5 per cent each year between 2030‑31 and 2049‑50.

The Commission’s Chair, Professor Graeme Roy, said:

“Our assessment suggests that future Scottish Governments will face significant challenges funding devolved public services as a result of an ageing population and rising health pressures.

“The Scottish population ageing earlier than the rest of the UK will result in health spending over the next twenty‑five years growing faster than the funding provided through the Barnett formula.

“Improving the underlying health of Scotland’s population would lead to benefits to the public finances through lower spending and higher tax revenues and help to address the long‑term fiscal sustainability challenges.”

Rising health costs and an ageing population are not unique to Scotland, and also affect the UK public finances. The Office for Budget Responsibility has shown that the long‑term path for the UK public finances is not sustainable. The Scottish Government’s spending would be far greater than their funding if the UK Government were to take action to reduce its debt. The projected difference over the period 2030‑31 to 2074‑75 would increase from an annual average of minus 1.2 per cent to minus 11.1 per cent.

1. The Commission’s paper, Fiscal Sustainability Report – April 2025, is available now. This report provides projections of the Scottish Government’s long‑term spending and funding. An accompanying spreadsheet contains the data for tables and charts.
2. The Commission uses updated projections for population and economic growth as the basis for its analysis of spending and funding. These use the 2022‑based projections of the UK and Scottish populations published by the ONS in January 2025. The projections expect the population of Scotland to increase to 5.8 million by 2074‑75. The population is also ageing, with the median age in Scotland projected to increase from 43 in 2029‑30 to 49 in 2074‑75. The number of people in the age groups 65 and over increases over the next fifty years. The fastest growth happens over next twenty‑five years with a 26 per cent increase for people aged 75 to 84 between 2029‑30 and 2049‑50, and an increase of 95 per cent over the same period for people aged 85 and over. At the same time both the under‑16s and 16 to 64 age groups are falling in size. 
3. We measure the Scottish Government’s fiscal sustainability using the annual budget gap. It shows the difference between funding and spending in each year as a share of Scottish devolved public spending. A negative annual budget gap measures how much in spending cuts or tax rises would be required each year to balance the Scottish Budget. In our baseline projection the average annual budget gap is minus 1.5 per cent over the first twenty years of the projection (from 2030‑31 to 2049‑50) and minus 0.9 per cent in the other twenty‑five years (from 2050‑51 to 2074‑75). This is equivalent to minus £1.3 billion in in the first twenty years, and minus £1.1 billion in the second twenty-five years (2024-25 prices). Over the whole forty‑five-year projection the average annual budget gap is minus 1.2 per cent, equivalent to £1 billion in 2024‑25 prices.
4. After accounting for an assumed UK Government response to address this challenge, the average annual budget gap in Scotland between 2030‑31 and 2074‑74 is minus 11.1 per cent, equivalent to £14 billion worth of spending each year in 2024-25 prices.
5. The Commission published its first Fiscal Sustainability Report in March 2023. That report included projections of the Scottish Government’s long-term spending and funding.
6. The publication of a fscal sustainability report was recommended by the OECD in its evaluation of the Commission and by the Parliament’s Finance and Public Administration Committee. The Scottish Fiscal Commission publishes updated projections and reports every two years. In other years we publish reports looking at fiscal sustainability with a specific focus, such as climate change.
7. The Scottish Fiscal Commission is the independent fiscal institution for Scotland, established by the Scottish Fiscal Commission Act 2016. Our paper represents the collective view of the Scottish Fiscal Commission, comprising the Commissioners: Professor Francis Breedon, Professor Domenico Lombardi, Professor David Ulph, and the Chair, Professor Graeme Roy.