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Scottish independence: Welfare reforms 'possible but potentially costly' Scottish independence: Welfare reforms 'possible but potentially costly'
(about 1 hour later)
Independence would give Scots the opportunity for radical reform of pensions and benefits, according to a think tank. Independence would allow Scotland to reverse recent "poorly-designed" reforms to the UK's welfare system, according to a think tank.
But the Institute for Fiscal Studies (IFS) has warned that an ageing population could bring additional costs in the future. The Institute for Fiscal Studies (IFS) said independence - or the devolution of benefits policy - would enable "radical reform" to be carried out.
It also compared the effect of UK government tax and benefit changes. But its report on benefits and pensions warned Scotland's population was aging faster than in England and Wales.
The IFS calculated they have reduced incomes in Scotland by less than the rest of Great Britain. This could bring "somewhat burdensome" welfare costs in the future, it stated.
The IFS said benefit spending in Scotland was 2% higher than the average across Great Britain in 2011-12, although the gap has been shrinking in recent years. The IFS looked at the total spending on welfare in Scotland, and examined the effect of UK government tax and benefit changes.
They said this is partly explained by Scotland's population profile, which is older than the rest of GB. Slower rate
But researchers struggled to explain why spending per person on disability benefits in Scotland is 22% higher than the average across Great Britain. Its report said: "If Scotland becomes independent, or if benefits policy is devolved to Scotland within the United Kingdom, there would also be an opportunity for its government to reconsider a number of recent poorly-designed reforms.
'Fits Scotland's needs' "These include the 'benefits cap'; the capping of increases in local housing allowance rates at the rate of CPI inflation; the decision that support for low-income families in paying their council tax is to be kept separate from universal credit; and the way in which child benefit is withdrawn from families containing someone with a high income.
The IFS concludes independence would give the opportunity for "radical reform" of the benefits system but warns that the country's increasing number of older citizens "could place a greater burden on Scotland's finances than it will on Great Britain as a whole". "In each instance, it seems likely that a better-designed policy affecting a similar group of people could save a similar amount of money."
The report found that the amount spent on benefits per person had increased at a slower rate in Scotland than in Great Britain as a whole.
Benefit spending per person in Scotland was estimated to have been £3,238 in 2011-12, which was 2% higher than the average across Britain.
But this was still less than the amount spent per person on welfare in Wales, the North East of England, the North West of England and the West Midlands.
In 2005-06, the gap between Scotland and the rest of Great Britain was 7%.
Total benefit spending in Scotland amounted to £17.2bn in 2011-12, the last year for which full figures were available.
This was about 30% of all government spending in Scotland and 11.4% of GDP
The three most expensive benefits in Scotland were the state pension (£6.3bn), child and working tax credits (£2.2bn) and disability living allowance and attendance allowance (£1.9bn).
For Great Britain as a whole, the third most expensive benefit was housing benefit.
Expenditure on disability benefits per person in the population was 22% higher in Scotland (£593) than in Great Britain as a whole (£485).
Spending per person was also 4% higher on old-age benefits such as the state pension.
'Major redesign'
On the other hand, spending per person on housing benefit in Scotland was about 12% lower, and spending on child benefits and tax credits 9% lower, than the average for Great Britain as a whole.
The report concluded: "Given the concentration of benefit spending on the elderly, this relatively rapid ageing means, all else equal, that spending on benefits would rise more quickly in the coming years in Scotland than in Great Britain as a whole.
"This means that funding the benefits system in the decades ahead may prove somewhat more burdensome for an independent Scotland.
"However, independence - or the devolution of benefits policy - would also provide Scotland with an opportunity to redesign its benefits system to reflect the priorities of the Scottish people, and to reassess some aspects of current UK policy that make little economic sense.
"But any major redesign of the system would either require Scotland to spend rather more on benefits than is spent now or else create large numbers of losers, who will typically have fairly low incomes."
The Scottish government has said it would abolish what it calls the bedroom tax, which sees housing benefit payments reduced if the government decides spare rooms are being subsidised by the taxpayer.The Scottish government has said it would abolish what it calls the bedroom tax, which sees housing benefit payments reduced if the government decides spare rooms are being subsidised by the taxpayer.
It has also promised to match a current coalition pledge to protect pensioner benefits with a so called triple lock - where pensions increase by the rate of the Consumer Prices Index (CPI) or 2.5% after the introduction of a flat-rate state pension. It has also promised to match a current coalition pledge to protect pensioner benefits with a so-called triple lock - where pensions increase by the rate of the Consumer Prices Index (CPI) or 2.5% after the introduction of a flat-rate state pension.
The IFS warn this "would become costly in the long term". But the IFS report's author David Phillips stated he did not believe a "slightly more generous" system, such as that envisioned by the SNP, could be sustained in the long term without "discretionary tax rises or further cuts to spending on public services."
Reacting to the report, Finance Secretary John Swinney said: "Social protection, which includes expenditure on welfare, is currently more affordable in Scotland than the UK as a whole.Reacting to the report, Finance Secretary John Swinney said: "Social protection, which includes expenditure on welfare, is currently more affordable in Scotland than the UK as a whole.
"With the boost to the working population that can be delivered by using the full economic levers of independence to grow the economy we can ensure Scotland's welfare policy fits Scotland's needs.""With the boost to the working population that can be delivered by using the full economic levers of independence to grow the economy we can ensure Scotland's welfare policy fits Scotland's needs."
In April, Works and Pensions Secretary Iain Duncan Smith warned an independent Scotland faced higher bills in the future to fund state pensions. Secretary of State for Scotland Michael Moore said: "We've had a tough few years, but what this report really nails is the fact that, under independence, there would be huge cost pressures on an independent Scotland, particularly as our population is aging, and particularly because of the challenges we have in raising the money to pay for that increasing bill".
He told an Edinburgh conference: "In today's terms, in 50 years time, it will cost each working age person in the UK £700 more per year to pay for state pensions and other pensioner benefits than it does now.
"In Scotland, the position is much worse - it will cost another £1,100 per working age person to pay for pensioner benefits."