The contribution of EEA citizens to Scotland: response to the Migration Advisory Committee call for evidence

Chapter Three: Economic, Social and Fiscal Impacts

The previous two chapters highlight the critical role that EU citizens, and migrants from the rest of the world, play in the Scottish economy and in meeting our wider demographic needs. They identify the contribution of workers from other EU countries to the Scottish labour market and the ongoing need for employers to be able to easily recruit the right workers that they need. The contribution made by EU workers is felt right across the private, public and third sector, across all skill levels, and in both predominantly urban and rural sectors.

There is no doubt that the contribution of these workers to the Scottish labour market is fundamental. EU citizens making their lives here in Scotland also make a vital contribution to our wider economy, including through their fiscal contribution.

Fiscal

New macroeconomic modelling has been undertaken to investigate the contribution of EU migrants to the Scottish economy, modelling EU migration as an increase in the labour supply. The scale of increase in labour supply is based on a one year inflow of EU migration into Scotland equal to around 7,800 additional employed EU nationals.

It is estimated that on average each additional EU citizen working in Scotland contributes a further £34,400 in GDP. As there are approximately 128,400 EU citizens employed in Scotland, the analysis implies that the total contribution by EU citizens working in Scotland is approximately £4.42 billion per year.

The economic modelling also shows the fiscal contribution made by EU migrants. It is estimated that on average each additional EU citizen working in Scotland contributes £10,400 in Government Revenue.

Supporting rural communities

The Scottish Government is equally clear that EU citizens should not be seen only as workers. Their contribution to the communities in which they live, and to wider Scottish society and culture should also be recognised. EU citizens and their families also play a vital role in supporting essential population growth in Scotland, and in supporting and maintain rural communities and services.

Scotland is significantly more rural, and less urbanised, than the rest of the UK. Scotland represents a third of the UK's landmass but only 8% of the UK's population, with most people living in the central belt.

The average population density across Scotland is 65 persons per square kilometre, but this conceals dramatic differences between urban and rural areas - from a population density of 3,298 persons in the Glasgow City Council area to just 8 persons per square kilometre in the Highlands Council Area ^[94] .

Within Scotland there are specific challenges faced by many of our rural and island communities. Population growth is uneven across communities. Many Local Authority areas, particularly those which include Scotland's Islands, are expected to experience population decline over the next 25 years. For example the latest population projections show that the population decline in Na h-Eileanan Siar is projected to be 14%. This is followed by decline of 12% in Inverclyde, 8% in Argyll & Bute, and 7% in North Ayrshire. This presents a huge challenge in sustaining rural and island economies and societies.

This pattern of distribution, and the depopulation trends in remote and rural areas means that the value of migrants to these areas is more than the skills they bring to gaps in the labour market; their presence in rural areas makes a contribution to the demographic and economic sustainability of rural and remote areas, which is critical for these communities to survive and thrive.

While a higher proportion of residents of rural Scotland, compared to the rest of Scotland, rate their neighbourhood as a "very good" place to live and fewer residents experience neighbourhood problems (e.g. litter and graffiti) or crime, the challenges associated with more rural areas, include transport and the availability and accessibility of services ^[95] . More people in rural areas are outwith a reasonable drive time to key services (e.g. GPs and shops) compared to the rest of Scotland and fewer people are satisfied with the quality of the public transport services delivered. Residents of rural Scotland spend more a month on fuel for cars, with over 60% of residents reporting to spend over £100 a month in 2013, compared to 47% in the rest of Scotland ^[96] .

Case study two: The Highlands and Islands

The Highlands and Islands covers 40,000 square kilometres, more than half of Scotland's landmass including all of its 94 inhabited islands. Around 100,000 of the 468,000 people who live in the region are island residents. Fewer than 10% of Scotland's population lives in this north western half of the country - making it the most sparsely populated ( NUTS2) region in Europe south of the Arctic Circle, and an order of magnitude more sparsely populated than any other part of the UK. Population Density for the Highlands and Islands is 12 inhabitants km ², the equivalent figures for Scotland and the UK being 69 and 271 respectively.

The Scottish Government Urban/ Rural Classification 2013/14, indicates 29% of the Highlands and Islands population living in 'very remote rural' areas (i.e. areas that are more than a 60 minute drive time from a settlement with a population of 10,000 or more), compared to less than 1% of the population in the rest of Scotland.

In a UK context, the region covers one sixth of the country but is home to only around 0.6% of the population.

However, the population of the region has grown in each decade since the 1960s - following more than a century of continual decline - demonstrating a turnaround in the region's fortunes.

Over the past two decades, lower levels of unemployment have been a magnet for further in-migration, driven in particular by growth in tourism and in the food and drink sector. Despite this in-migration of economically active people, the long-term trend remains one of an ageing demographic - out-migration of indigenous young people in search of educational and employment opportunities presents a perennial challenge for policymakers. Population projections for each of the local authority areas that make up this region all point to a decline in the working age population and a significant increase in the proportion of the population aged 75 and over. Long-term economic and societal sustainability will require a continuation of the in-migration trend seen in recent decades - implementing policies that attract and retain young people through support for education, housing, transport, and both job and career progression opportunities. Given the scattered nature of settlements across the region and the proliferation of small communities on islands it is important that new-comers are attracted to every part of the region - not just the larger population centres.

A key driver for positive population and economic growth trends in the Highlands and Islands over the past two decades has been increased levels of in-migration to the region. Between 2005 and 2015, the region's population increased by some 4.7% (to 468,400).

Recent data on non- UK born Highlands and Islands residents is limited for most parts of the region, but figures from ONS for Highland Council estimate that the number of non- UK born residents increased from 7,000 to 10,000 in the ten years to 2015 - accounting for around 20% of total estimated population growth in the local authority over that period.

EU citizens account for a large majority of all new migrant workers to Scotland, and in the Highlands and Islands the proportion has been higher still. For example, last year in Scotland some 74% of all national insurance number registration for migrants were from EU citizens, while in the Highlands and Islands the share was 86%, according to figures from the UK Department of Work and Pensions.

Highlands and Islands businesses feel that free movement of people is important both for their business and for Scotland as a whole:

• Almost two fifths (39%) of businesses felt that free movement of people across the EU was important for their business, rising to 54% for businesses with 25+ employees, 53% for account managed businesses and 57% for tourism businesses ^[97] ;
• Three quarter (75%) of businesses feel that free movement of people is important to the Scottish economy, rising to 81% for tourism businesses ^[98] ;
• 23% of businesses with staff employed non- UK EU nationals; 91% of these being permanent staff. Larger businesses and tourism businesses were more likely to do so ^[99] ;
• The mean number of non- UK EU staff employed was 2.7 - the mean number of all employees was 30.2. (almost 10% of H&I workforce are EU citizens) ^[100] .