Scottish Government plans to review the proposed increase in the state pension age if the country votes for independence could increase public spending by as much as £550m, according to a new economic analysis.
The Institute for Fiscal Studies today published figures examining the cost of independence. It concluded that the Holyrood administration's commitment to revisit the rise of the pension age would lead to more spending on both the state pension and other benefits.
Under current UK plans, the pension age will rise from 66 to 67 between 2026 and 2028.
The Scottish Government's independence white paper stated that, as life expectancy for both men and women in Scotland has consistently remained below the UK level, it was committed to reviewing the proposal.
However, the IFS stated this would not be enough to make the change affordable.
'Its cost will be determined by the fraction of people reaching 66 in the late 2020s and early 2030s. At 1.3% of the population that is forecast to be slightly higher in Scotland than in the rest of the UK (1.2%),' the report concluded.
David Phillips, a senior research economist at the IFS and one of the authors of the report, said Scotland faced a deficit of around 5% of economic output in 2016/17 if it became independent. This would not be sustainable for a prolonged period, and extra costs such as cancelling the rise in pension age would need to be paid for by tax rises or spending cuts elsewhere, he said.
'While the white paper contains some measures that could help balance the books, the spending increases and tax cuts pledged or hinted at are substantially larger.
'In a difficult fiscal context, such giveaways make the job of restoring the public finances to health more difficult, and would require bigger spending cuts or tax rises in other areas. Thus, underlying the seemingly attractive policies outlined in the white paper are difficult, unmentioned, decisions for other public services, benefits and taxes.'
Today's reports -Policies for an independent Scotland? Putting the Independence White Paper in its fiscal context and Taxation, government spending and the public finances of Scotland: updating the medium term outlook - are the latest to examine the affordability of Scottish pensions after independence.
The Institute and Faculty of Actuaries has already urged the Scottish Government to set out more details of its plans for spending on the state pension if the country votes yes on September 18.
Responding to the report, a Scottish Government spokesman said Scotland is one of the wealthiest countries in the world, more prosperous per head than France, Japan and the UK, but needed independence to enable that wealth to be shared and to build a fairer society.
'An independent Scotland's finances in 2016-17 will be similar to, or stronger than, both the UK and the G7 industrialised countries as a whole, and even on the IFS's projections, Scotland's public finance balance sheet in the first year of independence will be healthier than the UK's was in the most recent financial year.'
