Economic Policy

Brexit and the ageing population: how Britain has changed since 2004

  • Published: Sep 21, 2017
  • Author: Peter Kenway
  • Category: Economic Policy

Many factors lie behind Brexit. Boris Johnson’s recent 10 point plan for a successful Brexit has been heavily criticised for its reference to that figure of £350 million a week but taken as a whole, his article was an attempt to replay the line that he took during the referendum campaign, that Brexit meant freedom. The influence of this idea runs deep. For example, when Labour council leaders console themselves with the thought that Brexit will mean a relaxation in the rules governing state aid to industry, it’s the freedom of their increased room for action that they’re thinking of.

One of Johnson’s freedoms is to create “an immigration [system] that suits the UK”. In his intervention in the Brexit debate a few days earlier, Tony Blair had proposed immigration controls on EU citizens as part of a settlement which would allow Britain to remain within the EU. Blair knew his proposal would be compared unfavourably with his government’s decision in 2004 to allow citizens of the “A8” central and east European countries who joined the EU that year access to work in the UK like anyone from the other 14 member states.[1] When the A8 joined, existing members had the right to restrict the new EU citizens’ access to their own labour markets for seven years. The UK was one among just three members who decided not to do that.

To deal with the charge of inconsistency, Blair justified the earlier decision on the grounds that at that time, “the economy was strong [and] the workers were needed”. He then moved to head off the comparison altogether by insisting that the “real point is that the times were different; the sentiment was different; and intelligent politics takes account of such change”.

Fair enough, but if that is so, what has happened since 2004 to mean that times are now “different”? That’s the question we concerned with here. Measured by the number of people living in the UK who are “foreign-born”, migration to the UK is at the heart of this discussion. Its purpose, however is to set this migration in the wider context of the changes within the UK. A detailed discussion of the migration statistics themselves can be found here.

At first sight, Blair’s claim that “the economy was strong and workers were needed” is unremarkable. There are two parts to it. As we have argued before, the first, about the economy is wrong – but also instructive. 2004 was the year it became clear that the economy was not recovering properly from the dotcom bust at the turn of the millennium. Northern Rock crashed ten years ago this month. The recession did not begin until a year later. The reason why those events were so serious was that they struck an economy which had been ailing since 2004. Since what is wrong now is linked to what was wrong then, it is going to be worth having another look at 2004 in due course.

For now, we will focus on the second part of Blair’s claim, that “workers were needed”. Why would politicians have thought this in 2004? Figure 1, which shows the UK’s population in 2004-05 and again in 2016-17, gives a clue. The place to focus is the top slice of the two population bars which shows the number of people in the UK aged 65 and above. Over the 12 years, the size of this group grew by almost a quarter, up 2.2 million from 9.4 million to 11.6 million. Growth on this scale in this part of the population was wholly foreseeable.

Figure 1: the UK population by age band and (for 16 to 64s) country of birth[2]

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The concern about this growth from that policy maker’s perspective is that the elderly are deemed to be a part of the population that is “economically dependent”, mainly retired and as age takes its toll, placing a high demand on the health service and social care. As employment among the over the state retirement age grows 65s grows, so this particular statistic becomes less accurate as a measure of the “economically dependent” population. But it is still a decent and widely-used proxy, especially when the rate of growth is as large as it is here.

The headline measure of economic dependence is the ratio of the populations aged under 16 and 65 and above – “non-working-age” – to the population aged 16 to 64 – “working-age”. The higher the ratio, the greater the number of people of non-working-age there are to be “supported” by those of working-age. Over the 12 years, the number of under 16s rose by 0.7 million and the number of 16 to 64s by 2.6 million. Putting the numbers together shows that the ratio went up from 0.54 to 0.58.

The key to Blair’s claim lies in the extra detail that figure 1 provides about the working-age population which is divided between those who were born in the UK and those who were not. The net increase of 2.6 million in the size of the working-age group is made up of an increase of 3.3 million in the part of it born abroad – up from 4.2 million to 7.5 million – and a decrease of 0.7 million in the part born in the UK. Even with an increase of almost three-quarters in the number of foreign-born people of working-age, the dependency ratio rose. Without that increase, the rise would have been greater still (to 0.61, assuming no rise in the number of foreign born in the dependent population). In short, a concern about the economic consequences of Britain’s ageing population provides a basic justification for the decision to take advantage of the A8 countries’ accession to the EU in 2004 to attract more workers into Britain.

“Foreign-born” obviously does not just include those born elsewhere in the EU. What has happened since 2004 is not the result of unfettered migration but of a combination of relative easy internal EU migration and completely controlled immigration from outside the EU.

But if the growth in the foreign-born population of working-age is a sensible economic response to the UK’s aging population, the combination of the two effects has done something extraordinary to the overall population. Over the 12 years from 2004 to 2016, the UK population grew by 5.7 million people, almost 10 per cent. Figure 2 compares that rate of growth with three previous 12-year periods, up to 2004, up to 1992 and (slightly overlapping) up to 1983. The 9.5 per cent since 2004 is over twice the 4.1 per cent between1992 to 2004, more than four times the 2.2 per cent rate between 1980 and 1992 and more than 12 times the 0.7 per cent in the 12 years from 1971 to 1983. When we bear in mind that this unprecedented rate growth is associated with at least two major shifts in the composition of the population, namely the ageing of the UK-born and a rising share for the foreign-born, what we have been experiencing since 2004 is social change on a grand scale.

Figure 2: growth of the UK population over four, 12-year periods[3]

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In the next blog, we will look at a range of data about how key public services have fared over those 12 years. This more tangible evidence will offer a way to link the social change observed here to some of the discontents beneath Brexit.

For now, we can draw two conclusions. First, the years since 2004 have been a period of both rapid and deep population change in Britain. Second, while a much higher number of foreign-born people, mainly among those of working-age, is a key element of this, the driver of change has been the ageing UK population. This identification of ageing as the driver reflects both the fact that it has to be taken as a “given” by government and the judgement that the resulting rise in the economic dependency ratio merited a relaxed attitude towards immigration from the A8 countries who joined the EU in that year.

Looking back, the question this poses is whether more should have been done to prepare for, and manage, the change that was taking place. Would there have been merit in a slower pace of change? Would a justification based on more than the economic interest – workers were needed – have provided a stronger explanation for such a potentially significant change? Looking forward, if the answers to either of these questions is yes, then might that not apply to Brexit too?

[1]           Czech Republic, Slovakia, Hungary, Slovenia, Poland, Lithuania, Latvia, Estonia – along with Malta and Cyprus

[2]           Source Annual Population Survey, via Nomis.

[3]           Source: Population estimates, local authority based by five year age band, via Nomis. The data only goes back to 1971, hence the overlapping periods at the beginning.

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