An independent Scotland would face a more acute challenge in paying for an ageing population than the UK as a whole, the Department for Work and Pensions warned today
Its Scotland analysis paper looked at some of the long-term costs that would accrue to the Scottish Government if current Scottish National Party policies, such as a single-tier state pension of £160 a week, were enacted.
'[These changes] would add further costs that would rise to £210 per working-age person per year in Scotland over next 20 years resulting in a total increased cost of £410 per working-age person per year on pensioner benefits over the next 20 years,' it stated.
Extra expenditure on pensioners in Scotland would rise to around £1.4bn over the next 20 years, it added.
'These are massive spending commitments by any standards. Such expenditure would normally require increases in taxes, cuts in pension/benefit payments, significant reductions in other areas of expenditure or need to be absorbed into a budget deficit,' the report argued.
It asserted that the current devolution settlement gives Scotland the 'best of both worlds', allowing risks to be shared across the UK but for services to be tailored to local circumstances.
It added that the current pan-UK labour market, benefit system and pensions arrangements generally works well. This means that, wherever people go in the UK, they receive the same benefits, regardless of the peaks and troughs of local economies, or difference between local populations.
But an independent state would have to set up its own systems and services, the DWP paper said.
'The unpicking of a complex and integrated infrastructure to pay benefits and pensions would incur costs to develop and set up new systems, while running costs could increase given the loss of economies of scale.'
'The UK faces its own demographic challenge, as the number of working-age people shrinks relative to the number of pensioners, with cost pressures increasing accordingly.
'An independent Scottish state would face a more acute challenge than the UK as a whole, both in terms of the demographic change, and its ability to absorb the impacts from a narrower tax base.'
Commenting on the DWP paper, Martin Potter, leader of the Scottish board at the Institute and Faculty and Actuaries, said the report showed in detail that the UK and Scotland were both facing the challenges of an aging society.
But he added 'In Scotland, the number of working-age people is projected to increase more slowly than the UK. This means it is likely that pensions for the growing pensioner population will require a greater proportion of government expenditure in Scotland in decades to come.
'The work undertaken by the government, outlined by the paper, offers new data and analysis demonstrating the amount and value of benefits provided to people in Scotland and across the UK.'