2 The Overall Context
5. It is an inevitable consequence of
separation that Scotland would no longer participate in the pooling
of risk and sharing of resources that underlies the UK welfare
state. Scotland would be independent of that and separate from
it. Significant consequences follow, but are consistently ignored
by the Scottish Government. A central problem is the failure to
acknowledge the full costs of the demographic challenge Scotland
faces after separation and how to pay for the pensions and welfare
policies they would seek to implement. As already mentioned, many
countries face rising costs associated with an ageing population
and the UK as a whole is not excluded from this. Indeed, Scotland
faces a particular challenge because it will have fewer working-age
people for every pensioner than the rest of the UK does.[5]
Taking the less favourable demographic outlook into account and
adding up the various pledges on social security made by the Scottish
Government, UK Government analysis has found that Scotland would
face additional costs of nearly £1.55 billion more per year
over the next 20 years in today's terms, which amounts to around
£450 per working-age person per year.[6]
6. Nor is it just the UK Government
pointing out rising costs in Scotland. In his evidence, David
Phillips of the Institute for Fiscal Studies, warned that
…our research at the IFS would
suggest that funding the Scottish state in the long term—not
just welfare but also other public services—will require
tax rises or spending cuts because of the ageing population and
falls in oil revenues. That affects the UK as well. It looks likely
to be a bit harder in Scotland.[7]
7. This point about declining oil revenues
is particularly important because it highlights the way in which
the UK represents a much larger risk pool than Scotland taken
on its own, enjoying a broader tax base. The UK-wide social security
system is better able to absorb economic fluctuations in particular
sectors or geographical regions than an equivalent system within
a smaller economy reliant on a smaller number of industries.[8]
8. The potential problems of disentangling
Scottish pension and benefit claims from UK systems are also largely
overlooked in the Scottish Government's publications. As the Minister
of State for Pensions Steve Webb MP pointed out in his evidence,
this could prove a difficult and time-consuming business, particularly
given that not all the data that might be needed for such a task—such
as an individual's place of work—are currently recorded.[9]
Following a 'yes' vote in the referendum, Scotland would face
the prospect of establishing its own social security infrastructure,
with significant start-up costs for major IT projects. While the
Scottish Government also says that it intends to share IT systems
with a continuing UK during a transition period, this could prove
highly problematic if it seeks to pursue markedly different policies.[10]
9. The Scottish people deserve a more
realistic assessment of the likely costs of the social security
system the Scottish Government envisages, and where additional
money would come from, particularly given the demographic projections
and economic structure of Scotland. We therefore call on the Scottish
Government to provide more information on costs. In addition,
we urge them to provide greater detail about the pensions and
welfare settlement they envisage for the longer term and how it
would be afforded. In their proposals, a great deal of emphasis
is placed on halting or reversing certain UK policies, such as
the Bedroom Tax or Universal Credit, in the short term, while
little is said about the longer-term system beyond general statements
of principle. For example, given that information already exists
about future demographic changes, we call on the Scottish Government
to make a decision on what the State Pension Age would be if Scotland
were to leave the Union and become a separate state, rather than
delaying the decision on whether or not it should rise to 67,
as proposed in the White Paper.[11]
Such information will help create greater certainty and clarity
on this most important of policy areas and provide reassurance
for the people of Scotland.
5 HM Government, Scotland Analysis: Work and pensions,
pp. 35-36 Back
6
HM Government, Scotland Analysis: Work and pensions, p.14. Back
7
Oral evidence taken on 29 April 2014, HC (2013-14), Q5333 Back
8
Scotland Analysis: Work and Pensions, p.7. Back
9
Oral evidence taken on 6 May 2014, HC (2013-14) Q5460 Back
10
Q5564 Back
11
Scotland's Future, p.142. Back
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