WELL CAN WE?

A GUEST ARTICLE FROM TIM RIDEOUT OF THE SCOTTISH CURRENCY GROUP.

Can Scotland Afford to pay the State Pension?

In summary:

Scottish state pensions will be more than covered by Scottish National Insurance.

Annual NI receipts = £11476m

Annual Pensions = £8517m

Leaves £2959m surplus for other benefits.

Source Table 1.1 & Box 3.2 GERS 2021

Full explanation:

Blackford and the First Minister skipping carefree into the pension minefield comes about from failing to answer the four key Indy questions over the last 8 years. Currency, Pensions, Europe and Borders. 

The law of the Continuing State (Vienna Conventions 1978 etc) is clear that rUK gets the assets (embassies, gold, Falklands, etc) and the liabilities (UN fees, IMF fees, pensions, National Debt, etc), while Scotland gets what is physically located in Scotland or its territorial waters. rUK would be entitled to remove items from Scotland such as military vehicles and aircraft, paintings in military bases, etc where they can be shown to belong to rUK). For the avoidance of doubt the territorial waters are defined by the UN Law on the Sea, and not by any line drawn by Tony Blair.

Pensions, of course, are a liability. However, there are two distinct types – UK Gov employment pensions (UK civil service, army, diplomatic corps, etc) and the UK state pension. The first the UK absolutely has to pay in full. So that would be anyone resident in Scotland who served in the military or worked for a rUK central department such as HMRC, Foreign Office, Dept of Work & Pensions, and the like. Those will be paid in sterling and those people will have an exchange rate risk. There isn’t an easy way to avoid that. 

The second is different – it is a pay as you go welfare entitlement and there is no ‘fund’ behind it (whatever the name, the National Insurance Fund never has more than £20 billion in it because the Treasury clears it out). As ScotGov will be taking over all the tax revenues and NI, then it is obvious and reasonable that ScotGov take over the payment of the entitlements, i.e. the state pension. This should be a very easy deal. Also, since we are relieving the UK of a very large liability there has to be a quid pro quo, such as no discussion of taking any share of the so called ‘National Debt’. Can ScotGov ‘fund’ the pension? Of course as we would get the tax (not that tax funds anything specific). In fact because our life expectancy, especially for men, is less than in England then it is likely we could increase the Scottish Universal Pension at no extra cost. Some calculations I have done suggest workers in Scotland currently subsidise pensioners in England on average precisely because we die younger but all pay the same NI. 72 for a man in Easterhouse vs 90 for a man in Chelsea. We should also look at increasing the SUP to the EU average, but that requires we have our own currency. Getting that currency is, of course, why the Scottish Currency Group exists.

Can Scotland afford the State Pension? The answer is Yes and we can use the Brit Nat bible of the GERS date to show that. Table 1.1 in GERS 2021 puts National Insurance collected in Scotland at £11,476 million, which is 8% of the UK total. NI is more regressive than Income Tax as Scottish income tax is only 6.6% of UK total. The State Pension (in Box 3.2) is given as £8,517 million. So it covers the State Pension in Scotland with £2,959 left to go towards other welfare payments. Universal Credit is put at £3,170 so our NI receipts essentially cover both the State Pension and Universal Credit. Housing Benefit (£1380m) does not come out of the NI Fund. HMRC Child and Tax Credits (£1864m) also not from the NI Fund. Scottish Social Security (£3897 m) is separately paid out of the block grant. So just leaves ‘Other DWP Social Security’, whatever that is, of £2593 m. That may or may not have anything to do with the NI Fund, most likely not, if it is e.g. pensioner TV licences, winter fuel and cold weather payments, and things like that.

The position in regards to the present UK State Pension is really no different to other National Insurance entitlements such as Unemployment Benefit (I know it doesn’t really exist, but Scotland certainly needs to get back to a proper scheme – it was never means tested and it was no questions asked for 6 months so long as you had two years NI payments). Scotland will take over all those in work entitlements and in just the same way it will take over the rUK State Pension. That will be for folk domiciled in Scotland on Indy Day, perhaps with some residency qualification such as 1 year prior to Indy, either in receipt of the rUK state pension at that point or via transfer of their NI record for those not yet getting a pension. As we plan to increase the SUP to the EU average you don’t want to encourage of rush of pensioners from England moving north just before Indy Day in order to qualify for a higher Scottish Pension.

After Independence there are existing mechanisms for transferring state pension entitlements between some countries which we could negotiate with rUK (for example Scots moving to England could transfer into the rUK state pension and the same in the other direction with a net payment one way or the other depending on how many and how many years of entitlement). Otherwise standard rules would be Scotland pays out entitlements to the SUP regardless of where you now choose to live, and rUK pays out their entitlements even if the pensioner chooses to move to Scotland.

Hope that helps,

Tim

Dr Tim Rideout

Director


BEAT THE CENSORS

Sadly some sites had given up on being pro Indy sites and have decided to become merely pro SNP sites where any criticism of the Party Leader or opposition to the latest policy extremes, results in censorship being applied. This, in the rather over optimistic belief that this will suppress public discussion on such topics. My regular readers have expertly worked out that by regularly sharing articles on this site defeats that censorship and makes it all rather pointless. I really do appreciate such support and free speech in Scotland is remaining unaffected by their juvenile censorship. Indeed it is has become a symptom of weakness and guilt. Quite encouraging really.

FREE SUBSCRIPTIONS

Are available easily by clicking on the links in the Home and Blog sections of this website. by doing so you will be joining thousands of other readers who enjoy being notified by email when new articles are published. You will be most welcome.

43 thoughts on “WELL CAN WE?

  1. Then again, the SNP knew this but chose to muddy the waters and opened up the attack line for the media/unionists. Or do they know this? Having done nothing around Indy policy for 8years, you have to wonder.
    So rather than being on the front foot and promoting this, they are on the back foot and reactive.
    The traction has gone to the unionists, again!

    Liked by 20 people

    1. Since Sturgeon made her capitulation speech in January 2020, I have not considered her interested in regaining our independence. Prior to that, my doubts concerned her capability (given the total absence of strategy including any robust rebuttal of GERS). Subsequently I have regarded her as a devolutionist, ie a unionist. Since she became leader of the SNP, there is not an iota of evidence to the contrary. I have no idea what brought about a change that might be described as unionist ‘capture’. Perhaps one day we shall find out, similar to the McCrone Report revelations.

      Liked by 21 people

  2. Thank you, Tim. Everyone campaigning for the restoration of Scottish self-determination should have this information at their fingertips … whether in respect of conversations with friends and relatives or on doorsteps.

    Liked by 14 people

  3. Even if pensions are regarded as a ‘welfare entitlement’ rather than a ‘liability’ I was of the understanding that those who had built up an entitlement to a UK state pension in retirement, is that these would be paid via the Scottish Government administration service. Even George Osborne, as reported by the BBC in 2014 stated that

    “The UK government have agreed that if you’ve been building up an entitlement to a UK pension, that will be honoured, but it might be dished out via the Scottish Pensions System rather than the UK one.”

    This implies that residents in an Independent Scotland who have paid National Insurance contributions whilst working in any part of the pre-Indy UK would be entitled to a state pension financed by the British state. There is, of course, no pension ‘pot’ or ‘piggy bank’ – NI contributions get pooled into general taxation out of which all government spending is financed. State pensions comprise part of this expenditure with any shortfall funded by government borrowing.

    Of course, for those who pay taxes in an independent Scotland the Scottish pension to which they have built up an entitlement would be paid out of (Scottish) government spending funded by (Scottish) general taxation and, where appropriate, (Scottish) government borrowing. This would be as per the UK government scenario for entitled persons.

    I’d appreciate it if Tim could correct or clear up any of the above, in particular the part about the entitlement built up by contributors whilst part of the UK – i.e. was George Osborne wrong in 2014 when he said that the UK Government would ‘honour’ state pension payments to eligible contributors in an Indy Scotland?

    Liked by 9 people

    1. Scotland will take it over and pay the pensions. There is no fund, assets, investments or anything. Since we will collect the NI we can easily pay the state pensions.

      Liked by 10 people

      1. I realise there is no ‘pot’ or ‘piggy bank’ – pensions come out of general government revenues (of which National Insurance contributions comprise a component part).

        So your response seems pretty clear that an independent Scottish government pay pensions to all Scottish entitled residents. (By ‘entitled’ I mean age-qualified plus have attained any threshold of NI contributions set by the Scottish government).

        However, for the avoidance of doubt I have a few supplementary queries:

        1. Who would pay qualified Scottish pensioners holding a Scottish passport but not living in Scotland?

        2. Who would pay qualified Scottish pensioners not holding a Scottish passport but not living in Scotland?

        3. For those already in possession of a British state pension and live in Scotland at the point of Independence does this liability transfer to the Scottish government?

        4. For those already in possession of a British state pension and move to Scotland after Independence does this liability transfer to the Scottish government?

        I just to be crystal clear so that I can refute any challenge from the usual pension scaremongers.

        Thanks in advance.

        Liked by 3 people

      2. What happens with UK pensioners who have retired to France, Spain, etc ? Do they have to choose between UK citizenship & pension and Scottish ? Or can they keep both citizenships and choose which pension to take ?

        Liked by 1 person

  4. Thank you Tim for describing in laymen’s terms what will happen to our pensions. For years now the Scottish government has failed to properly explain what’s going to happen for pensioners and this should be something all old people should be told. I believe this was one big stumbling block at the last indyref because old people are afraid they will lose the little they’ve got. The inertia of our government is quite alarming, especially when we see prices rising horrifically every day. Basic things like butter or bread have taken a hike (why do things not rise by 5p in the pound when inflation is running at 5%). Is this supermarket greed? I fear for the poor, the homeless and the pensioners who barely scrape by at the moment. Meanwhile Ireland has been rated the 3rd best place in the world to chose to live. They must be laughing their socks off and celebrating that they got out of this dreadful Union.

    Liked by 14 people

  5. With Tim sitting on the SNPs nNEC surly the high heed yins should be aware of Tim’s information, is it being ignored?
    Really disappointed that the other issues which lost us independence last time round haven’t been looked at after the EU vote.

    Liked by 10 people

    1. I am not on the NEC. Just the Policy Development Committee. The FM has never spoken to me (nor anyone from her office).

      Liked by 13 people

    2. Oh they know all about Tim, he very successfully won the debate on currency at the SNP Conference a couple of years ago. The members voted for a Scottish currency on a much quicker timescale than the leadership wanted. So they just ignored the membership. It has become a habit these days, who needs members?

      Liked by 14 people

      1. Who needs members indeed iain.

        They are just an impediment and get in the way of the ruling party clique. And whilst their money is helpful with short and indeed dark money, members money is not essential

        Liked by 8 people

  6. This is extremely helpful from Rim Rideout. However surely present pensioners ( having paid into the system for the required 30 years it so ) should continue to receive their pensions from the UK ( or some kind of a setoff agreed) and I seem to remember a letter from the pensions office agreeing that this would be the case in an independent Scotland

    Liked by 4 people

    1. Scotland will take over all the state pension system and pay those pensions. The quid pro quo for taking over that £8.5 billion a year cost is we are not even going to discuss paying towards the UK National ‘Debt’.

      Liked by 17 people

      1. Exactly! If we are expected to take over the pensions as an Independent country, why should we pay another country’s debt? We are Independent!
        There might be discussions or negotiations, but the rUK seem to think Scotland is a colony and they ‘as world leaders’ will tell us what we have to pay them. We start with no debt!

        Liked by 15 people

      2. Is there a calculation which included NHS costs Tim. When I was a member of Buisness For Scotland I constantly pressed Gordon McIntire Kemp to produce a projected set of accounts for an independent Scotland including a balance sheet which would show the asset position. He went partly along that line with the “ Scotland the Brief” publication. What you are doing is more in line with a full set of accounts. I think that is what we need, you explain it extremely well in Simple terms

        Liked by 10 people

  7. Excellent article which got me thinking.

    Would Scotland be entitled to transit costs if the Norwegian gas pipe line to England runs through Scottish territorial waters?

    I can’t find a map which shows the route of the pipeline with territorial waters.

    Liked by 9 people

  8. “perhaps with some residency qualification such as 1 year prior to Indy”

    It has to be much longer than that. Indy wouldn’t happen the day after the referendum/plebiscite. To prevent people moving just for a higher pension and more social benefits (the latter of course already happening) it would need to be at a minimum residency one year prior to the date of VOTING for indy not indy happening.

    Others have mentioned that Treasury already assumed responsibility for current pensioner payments. As they should, it is not Scotland’s fault that Westminster did not set aside a separate fund. Nor is it Scotland’s fault that an oil fund was not set up. If rUK wants to be the successor state, then they have the c£2 TRILLION debt and they must pay current pensioners in the same way that pensioners abroad get paid. I believe the latter don’t get the yearly increases in which case Scotland should top up for Scottish citizens.

    Liked by 11 people

    1. The state pension is not a worthwhile cause to have a big bust up with rUK over. Save that for e.g. the nukes or the National Debt. We want to win the referendum which means an answer which does not depend on rUK doing something.

      Liked by 11 people

      1. I think there is a difference between picking your battles and conceding things that aren’t true. iScotland could say existing pensions are legally the rUK’s responsibility. However we are willing to take this on to ensure a “insert relevant issue here”.

        As for nukes and national debt – again is there an argument? Treaties prevent new countries being nuclear powers. Are the rUK happy with iScotland being an equal successor state? rUK are desperate to retain permanent security council place. How could they justify that if there are two successor countries and they were the non nuclear of the two. Does Scotland want to be a successor state? National debt – argument that Scotland is not responsible for running this up, that North sea oil payments already made have more than covered this never mind debt interest attributed to GERs (which obv is just paper accounting and bad accounting at that). New countries aren’t responsible for previous debt and given the size of it I’d trade successor state status for that.

        I realise politics and diplomacy are different from legalities. However one of the first things we need to sort out is are we looking for successor state status or not because I feel that changes how the issues are viewed and resolved.

        I’m not for taking on a lot of QE debt owed to BoE that will never be repaid just to be seen as “nice”. But I acknowledge I’m a laywomen and not an economist!

        Liked by 5 people

      2. I’m opposed to the nukes but think we can give rUK a 10 year lease 3 billion a year for eg and we can use the money to reinvest in Scotland.

        Like

      3. Tim: agree completely that nothing in any of the assertions made can rely on the rUK doing anything. The very successful tactic in 2014 was to demand answers from us that required the agreement of Westminster. The answers given were then discredited by withholding the needed agreement – currency/debt was a head line example of that.

        Thank you for this very clear explanation.

        Liked by 1 person

  9. «The law of the Continuing State (Vienna Conventions 1978 etc) is clear that rUK gets the assets (embassies, gold, Falklands, etc) and the liabilities (UN fees, IMF fees, pensions, National Debt, etc), while Scotland gets what is physically located in Scotland or its territorial waters. rUK would be entitled to remove items from Scotland such as military vehicles and aircraft, paintings in military bases, etc where they can be shown to belong to rUK). For the avoidance of doubt the territorial waters are defined by the UN Law on the Sea, and not by any line drawn by Tony Blair»
    Wouldn’t be too sure that leaders of a future sovereign Scottish state would accept elements of that. The political climate of the UK’s ending might well be frosty, given that even the very notion of restoring Scotland’s sovereignty sends the British state’s ambient temperature plunging towards absolute zero.
    The idea of «rUK» is a handy notional convenience but as the British state would be fracturing, effectively a unitary state created by treaty in dissolution, the English, Welsh and Northern Irish state, for convenience EWNI, getting all the assets, as well as the debt, is just too cosy an arrangement. EWNI gets all, plus potentially a bit extra, no way is that going to go down well, Scotland having been a significant actor in the UKGB, British identity project.
    We are talking about a liaison that began with the personal union of 1603 with James VI taking the English crown. The Scotland/England relationship is unlike that of the ethnic lands composing the former Czechoslovakia, Yougoslavia, Austria-Hungary. A historically unique situation requires more than a rubber stamp solution according to the terms of a late 20th century convention based on a different set of variables.
    Scotland and EWNI are set for a head to head sometime in the near future. Current auguries indicate a velvet divorce is unlikely. We will be in territory which even Chatham House considers indeterminate.
    I doubt the present SNP leadership,possesses the foresight, skill, nous, wisdom and chutzpah to deal with that. As for the Westminster government? What you see is what you’ll get.

    Liked by 6 people

  10. We’ll not be bothering about pensions too much if the USA and it’s lap dog the UK get their way and occasion either a bit of and shooting war and or global economic sanctions regime on Russia.

    Physical warfare has its obvious consequences. One only need to look at the Middle East to see the fun that can ensue from that. However, global economic sanctions will have immense consequences and one only need think about gas and oil alone and how supply shortages in resources like this will play out.

    On a domestic note the geo political crisis has been a godsend for the big balloon Boris Johnson to make a clown of himself on the world stage. Having the UK military threaten what his party describe as the projection of Global Lethal Power the chief clown most certainly plays fast and loose with these resources. No doubt the sinking of a British frigate would be a cause for an outburst of national pride and rousing national anthem singing.

    But I digress, we were talking about pensions, which in the event of a conflagration, will be the least of anyone’s concerns. Russia, China, Iran versus the USA and UK. Get the popcorn out!

    Oh and last small point a team of our SNP MPs have recently made a government funded trip to Ukraine to fact find as part of a Westminster fact finding team. They’ve certainly settled in haven’t they.

    Liked by 6 people

  11. 1. Who would pay qualified Scottish pensioners holding a Scottish passport but not living in Scotland?

    The Scottish Universal Pension will be an entitlement arising from having the right number of years of contributions, so it does not matter what citizenship / passport you will have. If somebody who has that entitlement leaves Scotland after Independence then ScotGov will pay them and it won’t matter whether you stay in Scotland or retire to Spain or whatever. We will not vindictively freeze pensions if you live in the wrong country as the UK does at the moment.

    2. Who would pay qualified Scottish pensioners not holding a Scottish passport but not living in Scotland?

    See answer to Q1. Your passport is not relevant.

    3. For those already in possession of a British state pension and live in Scotland at the point of Independence does this liability transfer to the Scottish government?

    ScotGov will take over the payment of the state pensions to all those living in Scotland on Independence Day (and who satisfy a residence test to avoid folk moving north because they think they might get more in the future).

    4. For those already in possession of a British state pension and move to Scotland after Independence does this liability transfer to the Scottish government?

    For anyone that moves north after Independence Day who has a rUK pension entitlement then that will remain the responsibility of rUK. Just the same as if that person was to retire to Spain.

    Liked by 7 people

    1. Ok. So my takeaway – the deal is:

      a) Scotland takes on the payment of pensions at point of Independence for all entitled residents

      in return for

      b) Zero share of UK debt

      Liked by 2 people

      1. Yeh, England can keep alive the chimera of being a world power by being the successor state of the UK and concomitantly keep the UK’s seat on the UN security council and its debt.

        We in Scotland are reduced to looking after our retired and providing them with a decent pension and avoiding war with Russia -which Mark Urban in his book the Edge thought that NATO could lose in a conventional war with Russia nevermind England-. Seems like a fair deal to me.

        The really sad thing about the demonisation of Russia, whatever her faults and abuses, is that we forget the depth of gratitude that is owed to her for WW2. If the Russians had stopped at the Polish border in 1944 the Germans may still have had the resources to beat the Western allies even after Overlord.

        Liked by 5 people

      2. “The really sad thing about the demonisation of Russia, whatever her faults and abuses, is that we forget the depth of gratitude that is owed to her for WW2. If the Russians had stopped at the Polish border in 1944 the Germans may still have had the resources to beat the Western allies even after Overlord.”

        Yes – 41M Soviet citizens died in WWII versus 400,000 British Empire subjects AND armed trrops.

        Liked by 4 people

  12. I believe we ought to cease invoking the usage «rUK», however convenient. Scottish independence creates a new scenario. A unitary state ceases to exist. Two new states emerge and one of them will have to style itself anew, as the United Kingdom of Great Britain, the England & Scotland united «treaty» state will be no more. There will be no «rUK», despite the protestations of certain jingoist commentators. Certainly, legal/diplomatic implications, among many, will be profound.
    As I intimated above I am not convinced that the SNP or the Westminster governments appreciate just how profound.
    The centuries old British project will be history.

    Liked by 4 people

    1. London already declared in 2013 that they would be the ‘Continuing State’. You do not need permission from anyone for that – you just tell the rest of the World that you are and you pick up the liabilities and keep paying the bills.

      Liked by 5 people

  13. Tim I remember pushing for an appeal of Scottish independence under the Vienna Convention on the Law of Treaties 1969 , I was informed I forget by whom that the 1707 TOU was too old to be included in the Law Of Treaties under the Vienna Convention the relevant law was only applicable for treaties after 1969 , if this is true why would The law of the Continuing State Vienna Conventions 1978 etc qualify or be applicable to the same TOU

    Liked by 2 people

    1. I’m very interested in that too – I believe there is a separate group that handles ancient treaties. Given the very obvious abuse of the ToU and the corruption surrounding its inception there seem many options to dismantle it. Westminster will not like any of them. I’d welcome Tims view on this area I have long wondered about.

      Liked by 1 person

    2. should add: I see it the insurmountable problem for Westminster is that through the long years of abuse Scotland has managed to retain her status as a country. We are registered with the UN as a country – just not currently sovereign.

      Liked by 3 people

    3. Because London declared it would be the ‘Continuing State’ back in 2013. Naturally without consulting anyone. They also want their cake and eat it since they want to be the continuing state for all the assets but not for the liabilities, but it does not work like that. The trouble with the Treaty of Union is there is no international policeman and there are no sheriff officers to enforce anything. So International Law is mostly ‘might is right’. In 2021 the UK lost a case at the International Court over the occupation of the Chagos Archipelago (British Indian Ocean Territory as was), and lost it in the UN General Assembly. So the UK is required to return the islands to Mauritius (from which they were taken in 1968). The UK has declared it has no intention of taking any notice of either the International Court or the UN on this issue. XYZ Maps are in the process of updating our World Maps to remove the British Indian Ocean Territory and replace with ‘(occupied by UK)’. So not just Putin and Crimea! 🙂

      Liked by 3 people

Comments are closed.

%d bloggers like this: