Scotland analysis: work and pensions paper
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
What Scottish independence would mean for social security, pensions and helping people into work.
The broad shoulders of the UK help to spread risks and pool resources to provide greater certainty and security for people in Scotland, according to the latest paper in the Scotland analysis series: Scotland analysis: work and pensions.
The paper says that in 2012 to 2013, benefit spending per head of the population in Scotland was 2% higher than for the UK as a whole (in the past it has been 9% higher) but that by pooling the resources of the UK economy, this cost was spread across the whole UK.
Find out more about the Scottish independence referendum.
The paper also shows that Scotland has the best of both worlds – housing and skills policy is devolved so that local solutions can be found for local issues, but employment and social security policy is reserved so employers and jobseekers can benefit from a Great Britain-wide network of jobcentres and the same levels of support, wherever they live.
The latest Labour Market Statistics show that employment in Scotland is up 138,000 since 2010 – close to the size of a city like Dundee, with the number of people claiming Jobseeker’s Allowance down 30,200, and the numbers claiming the main out-of-work benefits down by 42,120.
The work and pensions paper says that an independent Scottish state would need to decide if it wanted to provide a similar level of active labour market support as the UK government provides with Great Britain-wide schemes including the Work Programme, New Enterprise Allowance and Youth Contract which includes the wage incentive for employers and apprenticeships.
The costs of this based on the current claimant count would be in the region of £200 million per year.
Over the last 20 years, investment by the UK government has reduced the number of pensioners on very low incomes right across the UK and it has fallen fastest in Scotland.
The UK government is introducing the new single tier state pension and provides a ‘triple lock’ guarantee on increases each year. Spending on pensions, benefits and public services in Scotland is more affordable as part of the UK.
Over the next 20 years however, an independent Scotland would face additional social security costs rising to around £1.55 billion per year as a result of an ageing population and the policy commitments of the current Scottish government. That’s the equivalent of around £450 for every working age person, every year.
As people live longer the costs of providing pensions and benefits are predicted to go up and these costs are better absorbed by the bigger, more diverse UK economy – with more taxpayers and less reliance on oil revenues – than an independent Scotland.
Currently spending on pensioners is proportionally higher in Scotland than the UK average. Over the next 20 years, the proportion of pensioners in Scotland is expected to increase faster than the rest of the UK. And the current Scottish government are committing to spending more without saying how they’ll pay for it.
Our system works. It makes around 3 million payments every working day and supports over 30 million people across the UK regardless of where they live.
If an independent Scotland wanted to do things differently than the UK, it would need to introduce a wholly new system. IT set-up costs alone would be £300 to £400 million and it would take many years to develop.
If an independent Scotland wanted to negotiate to use the UK’s system it would have to follow the UK’s policies and would not be able to make changes to existing social security policy or processes or to opt out of Great Britain-wide reforms.
Reconfiguring the current system to meet the demands of 2 governments with different policies would introduce additional costs and risks. This would not be in the interests of the government of the continuing UK.
Work and Pensions Secretary, Iain Duncan Smith said:
This country has a long history of a strong welfare state, which we can rightly be proud of. As part of the UK, Scottish people benefit from this resilient and unified system – which delivers the same support everywhere irrespective of peaks and troughs in economies of the nations or demographic differences.
Proposals by the Scottish government would risk the wellbeing of vulnerable people who are currently supported by this system. On top of the ageing population – which is increasing faster in Scotland than the rest of the UK – the Scottish government are committing to spending even more on wider welfare without saying how they’ll pay for it.
The Secretary of State for Scotland, Alistair Carmichael said:
The UK labour market is resilient, adaptable to changes in economic conditions, and responsive to new opportunities and challenges. As part of the UK, Scotland benefits from the policies that have created these conditions.
Both the UK and Scotland have flexible labour markets with a wide variety of jobs and working patterns available. With record employment in our country people can move across other parts of the UK, to where there are labour shortages or where they can find a job that better matches their skills, ambitions and aspirations.
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