Pensions Costs (Independence)

– in the Scottish Parliament on 24 September 2013.

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Photo of Gavin Brown Gavin Brown Conservative

1. To ask the Scottish Government what the main cost implications are of the policies outlined in “Pensions in an Independent Scotland”. (S4T-00454)

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

The financial implications of the policy commitments that are made in “Pensions in an Independent Scotland” are set out in annex B to that paper. The cost of delaying the United Kingdom Government’s planned increase in state pension age to 67 from 2026 will depend on the specific recommendations of the expert commission proposed to be established in the first year of an independent Parliament. I remind members that independence is the only way to ensure that the future of state pension age in Scotland is determined according to specific Scottish circumstances and not imposed by Westminster regardless of Scottish circumstances.

I remind members that, according to the most recent figures for gross domestic product per head, an independent Scotland would be the eighth richest country in the Organisation for Economic Co-operation and Development and well able to afford a high-quality pension system.

Photo of Gavin Brown Gavin Brown Conservative

Helpfully, I have annex B to the document in front of me. What would be the cost of setting up a separate Scottish pensions regulator?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

As I assume Gavin Brown knows, an independent Scotland would not only have to take a share of the liabilities of the UK but would be entitled to a share of its assets. The paper sets out in some detail how we would seek to work with the Pensions Regulator in a transitional way, while of course intending to set up a separate Scottish regulator to oversee pensions to ensure that people in Scotland get access to good-quality protection for their pensions.

The problem for those on the no side of the argument is that they fail to recognise that, right now in the UK—including in Scotland—there is a pensions crisis, caused by many years of bad decision making by successive Westminster Governments. I know that Gavin Brown’s party is not specifically responsible for Gordon Brown’s raid on the pensions industry, but the benefit of independence is to ensure that we get the decision-making powers here in Scotland to ensure that not only can we continue to pay people’s pensions in full and on time, as set out in the paper, but we can take decisions that protect people for the future and ensure that we have a decent pension system for generations to come.

Photo of Gavin Brown Gavin Brown Conservative

That was a rather long and, if I may say so, rehearsed answer to a fairly simple question: what would be the cost of a separate Scottish pensions regulator? The cabinet secretary pointed me specifically to annex B. I have annex B in front of me and the answer is not there, so I ask her again: what would be the cost of setting up a separate Scottish pensions regulator?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

As Gavin Brown is aware, right now the Pensions Regulator covers not only Scotland but the rest of the UK. We would negotiate with the regulator for a transition that would lead to the establishment of a separate, Scottish regulator. The costs of that would be covered and would be negotiated in the context of the transition. Gavin Brown ignores the fact that, right now, people in Scotland contribute to the cost of UK bodies. Such bodies are not provided free gratis by the UK Government; the cost of all these things is met through Scottish taxpayers’ money. We want to ensure that we in Scotland have the ability to use Scottish taxpayers’ money to provide the kind of pensions and protections for pensions for our older people that people in Scotland have a right to expect—protections and assurance that they do not currently have in the UK.

Photo of Gavin Brown Gavin Brown Conservative

I am not sure that that answer was any clearer than the previous one.

The Scottish Government sets out 30 policy proposals in annex A and claims that four of them are costed in annex B, to which the cabinet secretary referred. By my reckoning, only one proposal has any numbers or costings attached to it. Does the cabinet secretary think that for the Scottish Government to be taken seriously it is acceptable that only one of the 30 proposals that it has published is costed?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

If Gavin Brown goes through the proposals, he will see that they cover a range of things, including doing what UK Governments currently fail to do and giving people access to the information that they need if they are to plan their pensions for the longer term. Our sensible recommendations mean that we can plan properly for a decent pension system, in which not just this generation but future generations can have confidence.

The spending implications of the paper are set out in annex B. I am proud that, for example, the Scottish Government, unlike the UK Government, wants to maintain savings credit. The current UK Government wants to take savings credit away from older people, which would affect the lowest-paid pensioners in Scotland.

We have produced a comprehensive paper, which sets out how we can do things better in an independent Scotland, not just on the state pension but on public and private pensions. If Gavin Brown had the ambition to have a decent system, instead of meekly accepting UK Governments’ cuts to and erosion of people’s pensions, he might engage with the paper, as opposed to offering the kind of nonsense that we have just heard from him.

Photo of Jim Eadie Jim Eadie Scottish National Party

Can the cabinet secretary confirm that, according to the Office for National Statistics, which is a more reliable and robust source of data than the Office for Budget Responsibility, Scotland’s older population is growing more slowly than the UK’s and our dependency ratio—the number of children and pensioners per 1,000 members of the working population—will increase at a lower rate, at least until 2030, which means that pensions are not only affordable but sustainable in an independent Scotland?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

Like most countries in the western world, Scotland has an ageing population—I actually think that we bemoan that far too much when it is, in fact, a good thing. In any case, those who try to perpetuate the myth that Scotland’s population is somehow uniquely ageing or ageing faster than that of the rest of the UK are simply wrong. According to the figures, between 2010 and 2035 the number of people at state pension age will increase by 28 per cent in the UK and 26 per cent in Scotland. Let us put this in context and have some accurate facts and figures in this debate instead of the figures that the parties on the other sides of the chamber want to put forward.

Scotland can more than afford a decent pension system. I repeat the point that I made in my opening response: an independent Scotland would be the eighth richest country in the OECD. The question is whether we are going to access our country’s wealth to provide decent pensions for our older people. That, in my view, is the benefit of being an independent country in charge of its own affairs.

Photo of Kenneth Macintosh Kenneth Macintosh Labour

In May, the First Minister told me that an independent Scotland would not try to secure any opt-out from European Union pension regulation. However, in August, he told The Sunday Post that the reverse was true and that he would seek a derogation. Will the Deputy First Minister clarify which of those conflicting options is true? What is she doing to secure the best outcome?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

I suggest that Ken Macintosh reads the pensions document and the extensive material that it contains on the European cross-border directive, because it sets out the commonsense position that it would be in the interests of not just the Scottish Government but, overwhelmingly, the UK Government to have sensible transitional arrangements in place. Those on the other side of this argument who say that that would not be possible have to confront the fact that that would be as much of a problem for the UK Government as it would be for the Scottish Government, given that cross-border schemes, by definition, relate to both sides of the border. The paper not only sets out in detail that commonsense position but repeats the call that we have made before and which echoes the call made by the Institute of Chartered Accountants in Scotland for the UK Government to enter into sensible discussions now with the Scottish Government and the European Commission to ensure that we can reach an agreement on this matter, which is something that I imagine everyone in the chamber would welcome.

Photo of Willie Rennie Willie Rennie Liberal Democrat

Given that we might expect this and future Governments to make some progress on life expectancy in the next 20 years and that Ireland, for example, has a pension age of 68, is it possible that her expert group might report back with a higher pension age?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

That would be unlikely to the point of inconceivable, given the current lag in life expectancy in Scotland. As a former health secretary, I bow to no one in the view that we should be doing everything possible not just to improve life expectancy in Scotland but to narrow the gap in life expectancy between different parts of Scotland and between Scotland and other parts of the UK. However, as everyone knows, these things take time, and the question for Mr Rennie’s party, the Conservatives and particularly for Labour, which left office with a commitment to a pension age of 67 in 2035 but now finds itself parroting the Tory-Liberal policy, is this: why should people in Scotland, who contribute the same to pensions, get less out because of a lower life expectancy? With independence, we will be able to look at this issue through an expert commission and set proposals for the appropriate rate of increase of pension age in Scotland instead of having an increase imposed on us by Westminster, regardless of the circumstances that we in Scotland find ourselves in.

Photo of Drew Smith Drew Smith Labour

On that very point, did the Scottish Government not attempt to suggest yesterday that an earlier retirement age could be afforded without providing any evidence of how that would be paid for? How can the Deputy First Minister determine that something is affordable without knowing what it would cost? Specifically on the £6 billion figure that has been quoted by experts and which the Deputy First Minister has described as exaggerated, how does she know that a figure is exaggerated if she has no figure in mind?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

First of all, we base our comments on the affordability of pensions on what we know in the here and now, and we know that, right now, pensions are more affordable in Scotland than they are in the UK and that they take up a smaller proportion of our national wealth.

I do not think that this should challenge anyone in the chamber, but it stands to reason that if I am saying that we need an expert commission to look at the appropriate pace of the increase in the retirement age beyond 66, the precise cost of that will depend on the specific recommendations that are made—in other words, the number of years the increase in retirement age beyond 66 is delayed by.

I say with the greatest respect that the credibility problem for Labour on this issue is massive. The other day, I saw comments from Alistair Darling criticising the Scottish Government for not wanting, or for having grave reservations about, an increase in the retirement age to 67 by 2026. When Alistair Darling was Chancellor of the Exchequer, he supported a policy that would not have raised the retirement age to 67 until 2035. When did the policy change? When did Labour start simply parroting the policy of the Tories?

It is not simply that Labour defended the Tory right to make such decisions for Scotland; Labour is now meekly accepting whatever the Tories say the decisions should be. That is being met with dismay throughout the country. The sooner Labour finds the ability to speak with its own voice on these issues, the better for everybody.