Richard Parry discusses the arguments made by the campaigns on welfare and pensions.

Threats to the continuity of payment of pensions and benefits are among the most potent of arguments against constitutional change, but remain a muted theme in the current Scottish debate.  After a long gestation the Department of Work and Pensions’ contribution to the Scotland Analysis series appeared on 24 April.

DWP has faced two handicaps in making its pro-union argument: Scotland’s social protection spending per head is barely above the UK average (2%, with the gap narrowing), and so the traditional argument about an independent Scotland having to pay for high welfare bills is weak; and the UK system to be defended is the one that brought ‘triumphs’ like child support, universal credit and the bedroom tax. This lends what seems to me like a half-hearted quality to the argument, filling out the paper with descriptive sections on the history of social security and the structure of the labour market and giving only a brief and routine defence of what Iain Duncan Smith is trying to do.

Much of the DWP case rests on demographic and economic projections that are contestable enough to lack secure validity as a basis for a referendum decision. Migration, life expectancy, rate of disability and housing rents are variables that have hitherto balanced out to leave Scotland’s welfare spending comparable to the UK.  A similar comparability is evident in public finances as a whole and so we are in a rather astonishing situation of losing the normal economic structuring of territorial arguments – that the potential seceding portion is richer or poorer than the whole and so has something to gain or lose.   The latest Government Expenditure and Revenue for Scotland data (12 March 2014) showed that in 2012-13 the current budget deficit including oil turned to Scotland’s disadvantage, a difficult moment for the SNP.  Debate continues between the Scottish and UK governments on the likely future receipts from oil. The latest Fiscal Sustainability Report of the UK Office for Budget Responsibility (10 July 2014) at least attempts a detailed justification (p 109-120) of why it has now turned pessimistic on future oil production, prices and revenue. ‘Where you stand depends on where you sit’ is a great political adage.

The DWP paper is less forthcoming in presenting its own information on cross-border benefit delivery than the Scottish Government’s Expert Welfare Group. Scotland is an exporter of delivery services for both DWP and HM Revenue and Customs; it might be possible to toss in the grenade of shutting down these jobs and offices in short order but the paper declines to do so.  Equally, some services are run from England – crucially record-keeping on entitlement to state retirement pensions, but also some disability-related benefits such as attendance allowance (proposed for devolution in recent devolution commission reports from both Labour and Conservatives).  This mixed pattern cries out for co-operation and agency arrangements.

DWP’s line is that they would not jeopardise the security of delivery to clients in the rest of the UK, but they too have an interest in co-operation (not least to ensure that the independent Scottish government would carry through its promise to take over payment of the state retirement pension to those living in Scotland). DWP uses the phrase ‘highly unlikely’ about sharing administration, the same one applied to currency union until the UK government hardened its position (p79). The argument against independence leading to a loss of economies of scale can be used in many contexts, and the paper quotes my colleague Nicola McEwen selectively (p80) to make its point that co-operation constrains differentiation. But while losing economies of scale in a well-working system is a penalty, escaping from a badly-working one is a gain. The record so far of the big UK project on tax and benefits issues (Universal Credit) has been poor and shows signs of scaling-up the wrong kind of policy performance.  

Following the UK Government’s general line, the DWP paper is keen to look for unaffordable spending promises by the SNP. A promising candidate – the triple lock on retirement pension increases – became unavailable when UK party leaders matched Alex Salmond’s pledge to maintain it. The SNP’s reservations about increasing the state pension age to 67 (though not 66) are talked up into a firm policy not to do so, which it is not.  Suggestions that not implementing Universal Credit would cost money are unconvincing. SNP policy on the new single state pensions closely mirrors the UK’s. The SNP’s pledge to resume index-linking of working-age benefits pensions is not mentioned.

What remains is the accusation that the SNP is offering a non-reformed and static welfare policy with marginal but unaffordable greater generosity. The role of prudent protector of present entitlements passes from a UK government seeking to freeze benefits spending to a more cautious and pragmatic Scottish administration no less keen on economic growth - a world away from the 1970s SNP promises of  higher pensions paid for by oil. This vision is set out with some eloquence in the second report from the Scottish Government’s Expert Working Group (4 June 2014)- but it too has failed to ignite debate. Vital, but too boring? 

Photo credit: Lending Memo