What does Britain’s population growth mean for future generations?

New figures released this week show that Britain’s population is continuing to grow rapidly – so what does this mean for future generations? David Kingman suggests some answers…Surprised baby

A fact which is often overlooked in discussions about what life will be like for future generations is that – at least in Britain – they are likely to contain significantly more people than are around today.

Britain currently has a growing population, and new figures which were released this week confirmed how rapidly this trend is accelerating.

More babies than any year since 1972

The most striking statistic contained in the Annual Mid-Year Population Estimates for 2011 and 2012 released by the ONS was that 813,200 births occurred between 30 June 2011 and the same date a year later. This is more than in any year since 1972.

Overall, the UK population grew by 0.7%, or almost 420,000 thousand people, to reach 63.7 million. The positive difference between births and deaths (so-called “natural increase”) accounted for 61% of the growth, while the remaining 39% was due to net immigration of 165,600.

Although the ONS attempts to draw a neat distinction between population growth caused by natural increase and immigration, in reality the relationship between them is more complicated. Foreign-born mothers now account for more than quarter of all births in England and Wales, so if net immigration declined the rate of natural increase would probably be lower, while it has been observed that the descendents of foreign-born mothers from certain cultural groups tend to maintain higher fertility rates than the UK average for several subsequent generations.

The ONS figures also revealed that 17% of the UK population is now over 65 (10.8 million people). Greater longevity will also cause the population to rise, even if the rate of natural increase remains flat, simply because more people will be alive at the same time.

The UK now has the third highest population of any country in the European Union, behind only France (65.4 million) and Germany (80.4 million). The UK population witnessed the largest population increase of any EU country in absolute terms, giving further credence to the projection made by the US-based think tank the Population Reference Bureau in 2010 which said that the UK will be Western Europe’s largest country by 2050.

What impacts will population increase have?

As is usually the case whenever the ONS releases new figures which show that Britain’s population is increasing, the response has been divided between the pessimists (who raise familiar arguments about overcrowding and the threat posed by immigration) and the optimists (who see a higher population equalling more taxpayers and a bigger overall economy).

Nobody knows for sure what the impacts of population increase are. Unfortunately, given the large (and complicated) role by played by immigration in causing population growth, it doesn’t appear to be possible to have a serious debate about population which does not become ensnared in highly controversial territory.

One example of such a controversy came earlier this summer, when the long-term Fiscal Sustainability Report released by the Office of Budget Responsibility – which projected that population ageing will push Britain’s national debt towards 99% of GDP over the next 50 years – appeared to argue that with no net immigration Britain’s debt-to-GDP ratio would be 40% higher over this period.

A full explanation of their argument from Jonathan Portes of the National Institute of Economic and Social Research is available here – but in a nutshell, they were essentially arguing that immigrants make a larger net contribution to the public purse than UK-born taxpayers do over the course of their lives, because the country doesn’t have to pay for their education at school and they are less likely to claim benefits as adults. Of course, they are still likely to retire here and need pensions and long-term care, so while having more people is better for the public finances in the short-term, over the longer-term it raises familiar challenges.

This highlights the real issue with population growth in intergenerational terms. The fact that so many of our liabilities are unfunded – especially pensions and the national debt – mean they resemble a Ponzi scheme because they rely on more taxpayers belonging to each new generation than belonged to the one before in order for the promises which have been made to still be affordable. The ageing of the baby boomer generation is starting to expose the cracks in these arrangements, because for the first time a smaller cohort of working age taxpayers has to support a larger generation of retirees.

Some optimistic commentators argue that population growth will make these burdens easier to bear by increasing the size of the working age cohort, but this ignores the fact that one day these people too will need to be paid for as they grow old. In order for these arrangements to remain sustainable, even more working-age people would be needed after that.

Population growth may provide some welcome relief to help us manage the burdens of an ageing society, but it is far from a perfect solution. If we want to improve the lot of future generations, the best thing we can do would be to reform how we fund our promises so that less of a burden needs to be handed on in the first place, and we stop constantly kicking the can down the road.