• More pensioners than schoolkids in three years' time, it is estimated • Teachers numbers may fall as a result • Future policy may see more changes to Scots society Key quote "We are looking at the impact of Scotland's changing demographics and other issues which impact on long-term policy. We want to make sure we have the right policies for the future." - Executive spokesman Story in full SCOTLAND'S demographic time-bomb will explode in three years, when the number of pensioners north of the Border overtakes the number of children in school, the Executive has been warned. A team of civil servants working on strategic plans for the country's future has told ministers that by 2009, the number of pensioners will exceed the 650,000 young people predicted to be in primary and secondary education. The stark warning that the demographic changes will hit home sooner than many had expected has prompted moves to end the Executive's "target culture", which could see the ditching of its commitment to employ 53,000 teachers. The population predictions are contained in analysis prepared by the Executive's strategy and delivery unit, which answers directly to Scotland's most senior civil servant, John Elvidge, the permanent secretary. Last night, local government sources said it proved the rigid policy commitment on teacher numbers - championed by Peter Peacock, the education minister - was "daft" and that councils should be given more flexibility to move resources to areas such as the care of old people. Council leaders have become increasingly frustrated by the number of targets imposed upon them by ministers. One senior source cited the example of Orkney, which would be given 13 new teachers under the plan to increase numbers. The source said: "We have falling school rolls, and yet Peter Peacock says that we have to have 53,000 teachers. Even if we needed that number today, we will not need it in 2007 and beyond, because school rolls are falling. If Orkney was forced to take the extra 13 teachers, they'd have to build a new school to house them. It's just daft. "There will probably be more people who need care in homes or in their homes than in schools and yet councils do not have the flexibility to reflect this reality. We should be able to direct resources to where they are needed," the source said. Tom McCabe, the finance minister, has been working with the Convention of Scottish Local Authorities (COSLA) on "outcome agreements" to replace target setting. Under these, the Executive would set broad policy objectives in areas such as education and elderly care, but councils would be able to allocate resources as they saw fit to deliver the agreed outcomes. Pat Watters, the COSLA president, was more cautious than some, arguing that ministers had to provide enough funds for the 53,000 teachers and to provide care for older people. "There are competing priorities, but if the Executive says that pupils will benefit from smaller class sizes and provide the money for the extra teachers, that is welcome," he said. "But we also need funds to cope with the growing number of old people. We need this money as well as money from teachers. It is not an alternative." A spokesman for Mr McCabe said: "We are looking at the impact of Scotland's changing demographics and other issues which impact on long-term policy. We want to make sure we have the right policies for the future. In parallel with that, we are working on outcome agreements which local government is very enthusiastic about and which would give councils more flexibility." He said the target of employing 53,000 teachers - agreed between Labour and the Liberal Democrats when they signed their coalition agreement in 2003 - remained. Derek Brownlee, the Tory finance spokesman, said: "The target of 53,000 teachers was becoming almost an end in itself. It is far better to look at what it is you want to deliver in terms of education rather than impose a set number of teachers. Any step away from arbitrary targets and their associated bureaucracy is to be welcomed though there is a danger that outcome agreements might be set in a way which is too prescriptive." Nicola Sturgeon, the SNP leader at Holyrood, said: "There has to be some very serious thinking done on how we pay for this scale of demographic change. I'm not sure it's as simple as switching resources from education to social work, but making sure long-term social care can be sustainably funded is vital." Mr McCabe yesterday left the door open for increased council funding in 2007, the year of local government and Holyrood elections. Responding to claims by COSLA of a 1 billion black hole in council finances, he said he was prepared to reopen the settlement for 2007-8 based on councils' performance and efficiency, which he said were "very good indeed".