Post-independence pensions analysed

Mar 7 2013

Detailed work on the provision of state pensions in an independent Scotland is being carried out by the Scottish Government.

A group of economists has already examined pensions as part of its work into the issues the country would face if it left the UK. Scottish Government officials are now carrying out more detailed work on provision of the state pension, and are expected to publish their findings in due course.

It comes after a leaked cabinet discussion paper warned that the bill for providing both state and public sector pensions will rise because of the ageing population. The paper was published by Better Together, the cross-party group campaigning to keep Scotland in the United Kingdom.

"Demographic pressures will increase the demand for existing public services, particularly but not exclusively in health," it stated. "Spending on state pensions and public sector pensions is also driven by demographics and is set to rise."

Members of the working group, a sub-group of the Council of Economic Advisers, were expected to "consider the affordability of state pensions" as part of their work looking at the economic issues Scotland would face if it leaves the UK.

A Scottish Government spokeswoman said: "The Fiscal Commission working group have already considered pensions as part of their detailed report on a macroeconomic framework for an independent Scotland, published last month, which shows that demographic changes in Scotland are projected to be similar to those in the UK as a whole.

"Detailed analysis shows that state pensions in an independent Scotland will be more affordable than they are in the UK. The official figures on spending for the last year show that only 38% of Scottish tax revenues were spent on social protection, which includes the state pension, compared with 42% for the UK as a whole."

The discussion paper was prepared last year, and the spokeswoman said: "Since the discussion paper was considered by the cabinet, detailed work on pensions has moved on. The Deputy First Minister has since taken responsibility for the constitution and, as such, Scottish Government officials and experts will report to her on work they are doing covering welfare and pensions in an independent Scotland. We look forward to publishing proposals on these subjects in due course."

The leaked paper highlights the volatility of oil revenues, saying the UK Government reduced the amount the North Sea is forecast to raise over the period 2011-12 to 2015-16 from £61.3 billion to £44.1 billion.

"Given the relative importance of North Sea revenues to Scotland's public finances, these downward revisions have resulted in a deterioration in the outlook for Scotland's public finances," it stated. In an independent Scotland "this would have important implications for budget setting". The paper also claimed that "meeting interest payments on inherited debt will be a significant feature of Scotland's budget after independence".