Transcript of Steve Webb's evidence to the Scottish Affairs committee

 00:03

could i
00:04
welcome everybody to this meeting of the
00:05
scottish affairs select committee
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as you'll probably be aware we are
00:10
conducting
00:11
a series of hearings into various
00:14
aspects of the consequences of
00:15
separation
00:17
today we're looking at the government's
00:19
scotland analysis paper
00:21
work and pensions and we've got with us
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um as ever david mondale from the
00:27
scotland office and he's got a special
00:29
friend
00:30
uh with um today another special friend
00:34
uh steve webb who's dealing with
00:37
pensions she's dealing with big
00:38
questions
00:40
right i wonder if i could start off then
00:42
just by saying that asking about one of
00:44
the key arguments in the paper
00:46
is that higher social security in
00:48
scotland is more affordable
00:50
if we remain part of the united kingdom
00:52
could he just clarify
00:54
why you believe that's the case
00:57
um thank you chair so um clearly one of
01:01
the things about social security
01:02
is it is done well at scale particularly
01:06
given
01:06
the cyclical nature of the demand for
01:08
working age social security so you know
01:10
we have
01:11
recessions we have growth spurts we have
01:13
banking crises and all the rest of it
01:15
so simply the bigger the base on which
01:17
you are trying to build a system the
01:18
more robust it is the more stable it's
01:20
going to be
01:21
for the citizens so trying to do
01:23
anything on a population a tenth the
01:25
size simply gives you greater volatility
01:27
i think that's the first thing
01:29
i think the second therefore is on on
01:31
the pension side which obviously more my
01:33
area
01:33
is the whole infrastructure that we put
01:35
in place
01:36
for uk pensions policy works at scale
01:40
so we have a pension protection fund
01:42
when companies go to the wall to protect
01:44
your pension
01:45
doing that at the scale we can means if
01:47
a big firm goes to the wall it kind of
01:48
bounces off
01:49
it's it's small relative to the whole
01:50
thing trying to do it at a tenth the
01:52
scale if a big scottish employer goes to
01:54
the wall and you have a scottish
01:56
protection fund
01:56
it's much more volatile has a much
01:58
bigger hit so i think risk pooling risk
02:01
sharing and scale
02:02
is a key advantage for the citizens of
02:04
the united kingdom
02:06
can i just clarify i mean a world like
02:08
volatility
02:10
um doesn't necessarily mean a great deal
02:12
to people
02:13
in the industry what is what does
02:15
volatility
02:16
uh mean in that context so for example
02:19
if you have
02:22
a sudden downturn across the uk
02:26
the economy as a whole can absorb that
02:27
so taxes don't suddenly have to go up or
02:29
benefits don't suddenly have to be cut
02:31
you can take the long-term
02:32
view but if you are operating at a tenth
02:35
the scale then
02:36
if something goes wrong if there's a hit
02:38
if there's a big company goes down
02:40
suddenly there's a big hole in the
02:41
finances relative to the tax base
02:43
so that could mean a sudden tax increase
02:45
or sudden cutting spending somewhere
02:47
else
02:47
just to keep things on an even key right
02:49
okay
02:50
great right thanks cher good afternoon
02:53
gentlemen
02:54
what about the argument that sometimes
02:55
given that in an independent scotland
02:58
pensions would be
02:59
cheaper because the life expen
03:01
expectancy of pensioners is actually
03:04
less compared to the rest of the uk
03:06
how would you respond to that sure um so
03:10
the baseline taking account of the point
03:12
that you've made given
03:14
lower average life expectancies in
03:15
scotland which of course vary hugely as
03:17
you know across scotland
03:19
the baseline is that scotland has a
03:22
slightly higher proportion of pensioners
03:23
to begin with than the uk as a whole and
03:26
then
03:27
the worldwide factors of increasing
03:29
longevity are
03:30
at least as true in scotland as for
03:32
example in england so for example
03:34
a man at 65 over a period say from
03:38
2010 where we are now to 2013 2010 the
03:41
most recent figures to 2030.
03:43
in england the life expectancy of that
03:46
man will rise by two and a half
03:48
in scotland it will rise by 2.6 years so
03:50
in a sense
03:52
that the the cost pressure is just as
03:55
great if not more
03:56
on the demographic side and the working
03:59
age base to pay for it
04:01
is less favorable because of the adult
04:04
population in scotland
04:05
working age a lot are in the 50 to 65
04:08
bracket
04:08
so you're going to lose those people out
04:10
to the working age population so
04:12
it's both the cost pressure is just as
04:13
great and the tax base to fund it is
04:16
less robust
04:18
okay that's very easy can i just
04:22
clarify in addition to that i mean it
04:25
has been argued that it's just simply
04:27
more affordable in scotland to drop the
04:30
pension level because people die
04:32
quicker now that that seems in the face
04:34
of it to be a not unreasonable point
04:36
i mean surely you can have a a lower
04:39
starting age
04:40
if you're having to pay it for a less
04:42
long period
04:43
surely it would be feasible then for
04:45
scotland to drop the pension age as
04:47
compared to the rest of the uk in those
04:48
circumstances
04:50
so what we're saying is if you look
04:51
across the whole social security
04:54
spending
04:55
in scotland compared with the uk then in
04:58
the current system taking account of
05:00
lower scottish life expectancies
05:01
we're already paying slightly more per
05:03
head in working age in scotland than we
05:06
are in the rest of the uk
05:07
so there's a whole raft of different
05:08
factors going on and that baseline
05:11
situation will deteriorate substantially
05:13
so
05:14
in a sense the uk government to meet
05:16
those long-term demographic pressures is
05:18
having to do things like race state
05:19
pension ages
05:20
if scotland didn't do that then they
05:23
would have to find
05:24
far more money from the working age
05:25
population in a sense it's
05:27
starting from where we are scottish life
05:29
expectancy will improve just as fast as
05:31
in the rest of the uk
05:32
and our abilities and scotland's ability
05:34
to pay will not
05:35
improve relative to just the uk right
05:38
okay can i just clarify though whether
05:41
or not
05:42
um your argument is that
05:45
it would be possible for the pensions uh
05:48
themselves
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and within isolation to be treated
05:52
differently
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it's the taking all the other benefits
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um together with the pensions that would
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make
05:59
dealing with the pensions separately
06:01
different difficult um
06:03
there are just ring fencing pensions
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which is your question
06:07
there are pressures arising on the state
06:09
pension side
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but there are also pressures arising on
06:13
the public service pension side
06:15
which again if you were to because we're
06:17
linking public service pension ages to
06:19
state pension agents if you eased off
06:22
or reduced scottish state pension ages
06:24
that would have a knock-on effect on the
06:25
public service
06:26
pension schemes as well and they are
06:28
already in deficit in scotland and if i
06:30
may
06:31
just give you a couple of figures which
06:32
i've dug out specifically for scotland
06:35
if you look at the nhs and the teachers
06:38
pension scheme
06:39
and the scottish members of that scheme
06:41
both of those as the committee will know
06:43
are
06:43
unfunded there is no pot today's working
06:45
teachers and nurses
06:46
are paying for today's retired teachers
06:49
and nurses
06:49
so the year just ended 2013-14
06:52
the westminster government subbed the
06:55
scottish teachers and nurses 300 million
06:58
pounds
06:58
so westminster government paid out or
07:01
the schemes paid out
07:02
two billion pounds to scottish retired
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teachers and nurses but got in 1.7
07:07
billion
07:08
from the workers and their employers so
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there's a 300 million hole
07:11
last year by 2018 that hole will be
07:14
double will be 600 million pounds now in
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the uk context
07:18
the uk exchequer will have to find that
07:21
if it's in a scottish context well
07:23
either that's unfunded promises or
07:25
scottish teachers and nurses have to pay
07:26
more
07:27
or the scottish nhs or schools will have
07:28
less money for schools and
07:30
nurses so that's just a so if you look
07:33
at
07:33
all of that together these these
07:34
unfunded pressures means that reducing
07:36
or not increasing the state pension age
07:38
would be completely unsustainable
07:39
because of all those pressures
07:41
can i just clarify that the point that
07:43
you made there that there being a
07:45
300 million pounds hole yeah which is as
07:47
you put it is subbed
07:49
from the treasury um is it only scotland
07:52
that is subbed from the treasury
07:54
i mean or is the rest of the uk sub from
07:56
the treasury as well
07:58
so that's the scottish share of the sub
07:59
from the treasury to the whole uk
08:01
right yeah but is the scottish sub
08:03
bigger
08:04
proportionately than the rest of the uk
08:06
some
08:07
because we can understand the argument
08:09
if everybody's sub then
08:11
that the argument would be that scotland
08:13
separated would not be comparatively
08:15
worse off
08:15
leaving aside the issues about sharing
08:17
and so on yes
08:18
um i'm pretty sure that the the doubling
08:21
that i mentioned in five years
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is particularly acute because you're
08:26
doubling from 300 million
08:28
to 600 million i'm pretty sure that i i
08:30
will
08:31
supply the committee with the uk wide
08:32
figures but i'm pretty sure it's
08:33
particularly acute
08:34
for the reasons we've talked about the
08:36
the faster aging of the scottish
08:38
population
08:39
five thanks alan yes in the event of
08:42
separation how would you decide who
08:46
is whose pension will come in the future
08:49
from
08:49
the scottish government and whose
08:50
pension will come from the uk government
08:52
state
08:56
so we already have rules
09:00
about what happens to pensions where
09:02
somebody has for example served sometime
09:04
in the uk
09:05
and spent some time working say in
09:07
another eu country
09:08
and they are complicated so you know if
09:11
you worked in france some of your french
09:12
contributions count a bit and some of
09:14
them don't and it's
09:15
messy and complicated so there would
09:17
have to be a negotiation a conversation
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about that
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the classic issue would be people who've
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worked in both countries
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you know i've worked in scotland i've
09:25
worked in england i retire in one or the
09:27
other
09:27
how are the rights i built up in the
09:29
other scheme valued transferred
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you know that would all have to be
09:33
negotiated and for me
09:35
one of the things people want about
09:36
pensions is certainty they want to be
09:38
able to plan ahead for their retirement
09:39
they want to know what they're going to
09:40
get and when they're going to get it
09:41
and for me creating separation
09:44
casts a whole lot of uncertainty and
09:46
doubt on people's retirement planning
09:48
and it's all subject to the outcome of
09:50
negotiations and we just don't know
09:52
but what about somebody that they could
09:54
have worked all their working life
09:55
based in scotland but for a company
09:57
whose head office
09:59
was in england and their and their
10:02
paycheck would
10:03
come from that head office i mean how do
10:05
you
10:06
uh work out earlier pension companies
10:08
that's very good question and i mean
10:10
obviously
10:10
companies which our headquarters say in
10:12
england and you've worked in scotland
10:14
in the company side of it would be
10:16
cross-border schemes
10:18
and uh the european union looked at this
10:22
issue there was some suggestion they
10:23
might back off and they didn't
10:25
on the rules on funding cross-border
10:27
schemes so there is a rule that says
10:30
from the point of creation within two
10:32
years those schemes have to be fully
10:34
funded
10:34
and of course if you work for a firm
10:36
that suddenly has to fill a hole in its
10:37
pension scheme
10:38
where does that money come from so
10:40
that's potentially
10:41
uh employers suddenly having to find
10:44
money to fill gaps in their pension
10:46
scheme or close pension schemes
10:47
again it's just a cost and uncertainty
10:49
that i'm sure scottish workers would
10:50
rather not
10:51
face but in terms of the state pension
10:53
is what you're saying
10:54
is that there are no rules there are no
10:57
guidelines
10:58
it would simply be two governments
11:01
sitting down
11:02
and negotiating yes i mean if you
11:05
leave the uk and retire to spain say
11:08
we pay you your uk pension in spain
11:10
that's that's that's not problematic
11:12
but if you've done some of your working
11:14
life in spain and some of your
11:16
contributions of spanish contributions
11:18
there's all sorts of convoluted rules
11:19
which can differ
11:21
between eu and non-eu and all the rest
11:23
of it so it is it's convoluted and
11:25
difficult and the outcome of those
11:26
negotiations is unclear to me but
11:30
looking at the state pension aspect of
11:32
the the person who
11:33
worked in scotland but for a company who
11:36
was based in england
11:38
um i mean you you as the uk pension
11:41
service
11:42
will not know where that will have no
11:44
record saying where that person's
11:46
place of work was so how do you decide
11:49
who's responsible for his state pension
11:52
that's right i mean um they will have
11:55
put national
11:56
uk national insurance contributions into
11:58
a pot we don't currently record or have
12:00
any reason to record on our systems
12:02
the location of the workplace the
12:04
location of the head office we don't
12:05
need that information
12:06
so trying to disentangle all of that
12:08
would be exceptionally difficult
12:11
but if if there are no guidelines
12:13
clearly
12:14
um each party to the negotiations is
12:17
wanting to
12:18
come out of those negotiations paying
12:21
out as little as possible
12:22
but um have you any
12:26
viewers to how those negotiations
12:30
would be conducted i'm guessing
12:34
david i'm guessing i'm not the first
12:35
witness to this committee who said i
12:37
have a feeling that the lawyers will
12:38
have a field day
12:41
you know they will just be so you know
12:42
if if anybody thinks they've perhaps got
12:44
a smaller pension they would have done
12:46
or or something like that
12:49
i mean if somebody who's living in
12:51
scotland for example
12:53
wants to keep their uk citizenship does
12:56
that have any
12:57
impact on their pension or is it or is
13:00
the pension purely
13:01
to be determined by where they work so
13:04
at the moment
13:05
the only thing that determines how much
13:07
pension you get is how much national
13:08
insurance you've paid in
13:09
right so you don't have to be british to
13:11
get a british pension
13:12
you can be anything if you paid british
13:15
national insurance you satisfy the
13:16
minimum contribution rules you get a
13:18
pension from the uk government whether
13:20
you're a uk citizen or not so
13:21
citizenship
13:22
doesn't matter from the point of view of
13:24
paying pensions but
13:26
for winter fuel payments presumably
13:27
citizenship does matter
13:30
and obviously we are we have reviewed
13:33
the rules on winterfell payments and
13:35
it's where
13:35
where you live is part of that story as
13:37
well um
13:39
we have excluded um very hot places
13:41
which may be less of an issue in this
13:42
context i guess
13:43
um but yeah but yes i mean the
13:45
winterfell payments i guess is a tiny
13:47
fraction of the total budget there so
13:48
the
13:49
big budget item is the statement right
13:51
so but if
13:52
um people in living in scotland
13:56
chose to keep uk citizenship
14:00
would they then be entitled to a uk
14:03
winter fuel payment
14:05
well my assumption would be that winter
14:07
fuel payment policy will be a matter for
14:09
the continuing uk government for its own
14:10
citizens and the scottish government
14:12
will decide whether it wants to have a
14:13
winterfell payment system and wants to
14:14
pay for it according to people living in
14:16
scotland when they reach the eligible
14:17
age
14:19
right so in summary we prefer to say
14:21
it's all very complicated and
14:23
you have to go there ahead of me as to
14:25
how these negotiations will go
14:28
okay i wonder if absolutely if i could
14:30
just come back and seek
14:32
clarification a couple of points i mean
14:34
it seems to me that there are there are
14:36
two areas of of uncertainty one is the
14:40
question of
14:41
once the pension is settled who pays for
14:43
it whether or not it comes out of
14:45
scotland's
14:46
pot or comes out of the rest of the uk's
14:48
pot and you've
14:49
that's that's deeply boring and and you
14:52
get people in your department who will
14:53
specialize no doubt in these sorts of
14:55
things
14:56
um i'm not clear whether or not there
15:00
that then has any direct impact upon
15:02
individuals
15:04
other than one remove in the sense of
15:06
how much money is then available
15:07
i mean unless i'm mistaken it doesn't
15:09
what i'm not entirely clear about is
15:12
whether or not
15:13
there would be any impact as a result of
15:15
this uncertainty about the rules
15:17
upon the amount that the individuals
15:19
received
15:20
as distinct from the question of who's
15:22
paying for it can you maybe clarify for
15:24
us
15:25
whether or not there would be
15:26
justifiable anxiety
15:28
about what the amounts that people might
15:30
receive would be yeah
15:32
so the continuing uk has a set of rules
15:35
for converting past national insurance
15:37
contributions
15:38
into pension entitlements
15:41
in the event of separation first
15:43
question any years
15:45
of service after separation how do they
15:48
convert into state pension rights
15:50
that will be a matter for the future
15:51
scottish government so so what they do
15:53
with those
15:54
we won't know um clearly people who stay
15:57
in the uk
15:58
um we will continue to apply our rules
16:02
but
16:02
um
16:06
you'd have to have a conversation
16:07
clearly about the way that that past
16:09
national insurance service turned into a
16:10
pension right for people who
16:12
i mean clearly if you if you
16:15
as i said you don't have to be a uk
16:16
citizen to get uk pensions so we will
16:18
obviously for the people who have put
16:20
insurance into our system we would pay
16:22
them a pension wherever they lived
16:24
so in so separation wouldn't affect that
16:27
but what happened
16:28
post-separation would be a matter for
16:31
them
16:31
yes post-separation going forward i can
16:34
see yes that the scottish government
16:36
would have to then devise a pension
16:38
system and i understand that
16:40
if if you are saying as i think you are
16:43
which is something
16:44
new that um if people have paid into the
16:48
national insurance system
16:50
then they would in a sense inherit a
16:52
payment from that national insurance
16:54
system
16:55
that would actually presumably mean that
16:57
the liabilities and assets would stay
17:00
with the
17:00
united kingdom government rather than be
17:03
divided i mean that would clearly have
17:04
to be a matter of negotiation because of
17:06
course
17:06
um for to give a simple example
17:09
someone's worked all their life in
17:11
england
17:12
retires into scotland can you just
17:14
assume that the
17:15
continuing uk government will pay the
17:17
whole cost of that pension so there is a
17:19
liability
17:20
to pay a pension or they have built up
17:22
an entitlement
17:24
but the split of funding of that is for
17:26
negotiation
17:27
so the split sorry the split of funding
17:30
is only unclear in as much as who
17:32
actually
17:33
pays it it's not unclear as to what
17:36
people would get
17:38
up to the period of separation because i
17:40
say because you could you could retire
17:41
to france
17:43
and we'd just pay you a pension so where
17:45
you end up
17:46
isn't material because you've built
17:48
you've paid into the system
17:50
fine because i think it isn't i mean
17:52
people in scotland will be anxious
17:53
about whether or not um their pensions
17:57
are secure
17:58
in the event of separation i think that
18:00
you are saying to us
18:02
um that their pensions will be secure
18:05
because
18:06
they if they have paid in then they will
18:08
get out the question of whether or not
18:10
that comes from a separate scotland
18:12
or the remaining the uk will have to be
18:14
yet divided devised by a scheme
18:16
as yet undetermined but the individual
18:20
can be secure in the knowledge that they
18:22
will get their money so that that's
18:24
so just to stress i know i know you know
18:26
this but we're talking about state
18:27
pensions only i think the position of
18:29
private pensions
18:30
and public service pensions yes that's
18:31
right we're just stacking just
18:33
just on the state people have built up a
18:35
right wherever they retire to
18:37
in respect of service for as long as
18:39
they are paying into the uk national
18:41
insurance system
18:42
right jim and then well i just want to
18:46
i was going to pick up this point about
18:49
where people retired too
18:50
but i think minister answered that with
18:52
his reference to he retired
18:54
to france or spain can we just
18:57
clarify that when we're talking about
18:59
the entitlement
19:01
that is to a state pension the level
19:03
that the state pension though
19:05
is not predetermined and that therefore
19:09
somebody
19:10
who is uh in if they retire from england
19:13
to scotland they would obviously get the
19:16
the the pens the state pension as
19:17
decided by the
19:19
government here in westminster but if
19:21
they were
19:24
the chairman's scottish uh uh
19:28
pensioners who've earned their pension
19:29
in scotland we must be
19:32
clear should we not that the actual
19:34
although they might be entitled to a
19:36
state pension the level of that state
19:38
pension would then be set by the
19:39
scottish government
19:42
so um my argument is that
19:46
just as for example take a scottish
19:50
person who's paid in all their life and
19:52
then retired
19:53
to france or something like that they
19:55
they still have
19:56
an accumulated pension right in respect
19:58
to the national ships they have paid in
20:00
when they were part of the united
20:01
kingdom
20:02
that's that's the key point but if
20:04
they've stayed in scotland
20:07
are they then entitled to the uk level
20:10
of state pension
20:11
or the state pension whatever it would
20:13
be as set by the new scott independent
20:16
scottish government so
20:18
inevitably with all these things there's
20:20
a bit of who knows exactly what would
20:22
happen but my presumption would be
20:25
that because they paid into the uk
20:27
national insurance system prior to
20:28
separation
20:29
built up a set of my lawyers always told
20:32
me not to call them rights
20:33
but a set a set of service which under
20:36
our rules converts into a pension
20:38
under the rules prevailing at the point
20:39
they draw it that that
20:42
that that bit is is they've
20:45
banked that because of their national
20:47
insurance contributions to the uk system
20:51
yeah but future
20:54
scottish uh workers still working not
20:57
yet entitled
20:59
any the remaining entitlement they built
21:01
up after independence would be
21:04
behest entirely absolutely yes so that's
21:06
all i wanted
21:07
yes and i think mr it's also
21:10
important to understand in this
21:13
a context that the scottish government
21:17
have announced that they wouldn't
21:18
uh go ahead with the delay uh with
21:21
putting back the
21:22
the pension age so that they would be in
21:25
themselves entirely responsible
21:27
for funding a uh a different
21:31
a uh age for the start of the of the
21:35
state
21:35
a pension and that's been
21:39
a estimated to be around six billion
21:42
pounds
21:43
to fund having a different and earlier
21:46
age at which you become entitled to the
21:49
state pension
21:50
right yes i think in in this discussion
21:52
particularly about pensions
21:54
i'm trying to distinguish um between on
21:56
the one hand um
21:58
these big figures about governments
22:00
paying things
22:01
and somebody somewhere will at some
22:03
stage add these up and work out what's
22:05
affordable what's not
22:06
but on the other hand and how they
22:08
actually impact upon individuals
22:11
and i think i think you're saying yes
22:14
the the state pension of any individual
22:18
in scotland after in the event of
22:20
separation
22:21
would not be adversely affected that
22:25
they would continue
22:26
to get the level of state pension the
22:28
same as everyone else
22:30
in the uk the question of how that cost
22:32
is allocated
22:33
between scotland than the in this in the
22:35
uk is a matter of haggling and
22:38
processing all the rest of it but people
22:40
themselves can be assured
22:42
that their pensions are secure and i
22:44
like taking your point david if the
22:45
scottish government then decides
22:47
to increase the pension at all they will
22:50
have to meet the entirety
22:52
of the cost since it would be patently
22:54
unreasonable for them to be able to pay
22:56
decide to pay out more but decide to
22:58
have somebody else
22:59
paying for it is that that accurate
23:02
reflection of the position
23:04
yeah so they have accumulated rights up
23:06
into the uk system
23:08
under the uk system's rules so as as
23:10
david says
23:11
to a pension at our age at the age we
23:13
would have paid it to them not at the
23:14
age of the scottish government the heart
23:16
right fine thanks now if you passed
23:19
notes oh sorry i was going to take allen
23:20
you pass notes correcting that possibly
23:22
but
23:23
in the meantime we'll ask alan to ask
23:25
you a question
23:27
under the current rules how many years
23:29
does somebody
23:30
in the uk system have to work for in
23:33
order to
23:34
be entitled to a full state pension yeah
23:36
so
23:38
we are introducing a new state pension
23:39
regime in 2016 which i suspect is the
23:41
relevant one for the purpose of this
23:43
conversation and that's 35 years for a
23:45
full pension
23:47
right so let's take a hypothetical case
23:49
of somebody who
23:50
left school at 16 worked all their
23:53
working life
23:54
so by the age of 51 they would be
23:56
entitled to
23:57
a full pension and let's just suppose
24:00
they reach
24:01
51 at the separation date so they are
24:04
they are now entitled to a full
24:06
united kingdom pension but they're
24:08
living in scotland have always lived in
24:09
scotland they're a scottish citizen
24:13
will they get that pension from the uk
24:16
government or
24:17
will it be the scottish government that
24:19
would become responsible
24:20
for paying that pension so citizenship
24:24
is irrelevant
24:25
right it's what have you put into the uk
24:28
national insurance system
24:29
separation answer 35 years that builds
24:32
you up a right to a full
24:34
uk pensions of the uk cis uh continuing
24:36
uk rules
24:38
um so and then the question so they're
24:40
entitled to that money big question is
24:42
who's paying for it and how is that
24:43
split but they are entitled to that
24:45
money
24:46
but not at 51. no no no
24:49
but indeed right but if they're in
24:51
scotland
24:52
then obviously if if
24:55
during the next um 15 16 years between
24:58
being 51 and retirement
25:00
if the scottish pension rules diverge
25:03
significantly
25:04
from the uk pension rules i mean what
25:07
happens when does that
25:08
person then get their pension
25:11
at the time that the scottish government
25:14
the age of scottish government
25:15
determined so the age of the uk
25:16
government determines
25:18
and what about annual increases who
25:20
determines the annual increase well
25:22
that is a good question and that is a
25:24
different question but an important one
25:25
so
25:26
just dwell on that for a moment annual
25:28
increases are a matter of annual
25:30
discretion
25:32
beyond the legal minimum yeah so
25:36
you do your service in the uk scheme you
25:37
build up a set of rights in the uk
25:39
scheme
25:39
but the indexation of it post-retirement
25:42
would be a decision
25:43
for the continuing uk if they were if if
25:46
that's the scheme you built up your
25:47
right so your pre-separation service
25:50
is indexed according to whatever in
25:52
principle the uk
25:53
continuing uk is doing for people who
25:56
paid into the scheme
25:57
so if the scottish government wants to
25:58
do something same or generous they would
26:00
have to find the difference
26:01
right or if there is something less
26:02
generous they wouldn't be saving
26:08
well would they be able to do something
26:09
less generous or with that
26:11
in respect of post separation service
26:13
yet they do have a lot
26:14
of separation right just to give a
26:17
obviously this is going to be a very big
26:18
item in the negotiations i mean just to
26:21
get
26:21
a handle on how big this will be
26:24
compared to other items do you have a
26:26
figure for
26:27
the total liabilities
26:30
so far as state pension is concerned um
26:34
we tend not to add up the whole sort of
26:38
future ever
26:39
liabilities for scottish what for state
26:42
pension don't tend to do it in the uk
26:43
basis very often it can help it because
26:45
the numbers
26:46
even i think they're truly trillions are
26:48
a bit scary there is another
26:49
coming my way no no but but just to give
26:51
you a feel for for scale
26:54
um you know we think that um there's
26:57
probably a hundred billion of unfunded
26:58
scottish
26:59
uh public sector pension liabilities
27:02
unfunded
27:03
that would have to be paid by someone so
27:05
you know we're just talking literally
27:06
hundreds of billions of pounds between
27:08
vast numbers of promises that
27:10
essentially are always paid in year i
27:11
mean that's that's
27:12
the point really yeah so how does this
27:16
in comparison say to the accumulated
27:18
national debt i mean how
27:20
big is this figure in comparison with
27:22
that for example
27:24
so the would say this figure which
27:27
figures
27:27
well well we're talking about still
27:29
talking about state tensions i mean
27:31
i don't know if that piece of paper
27:32
gives you that number
27:35
but um of the so
27:38
liabilities for state in very round
27:41
numbers at the moment at the uk level
27:43
we're spending
27:44
of the order of i'm saying very round
27:46
numbers 100 ish on
27:48
100 million a year 100 million state
27:50
pensions give or take 100 billion yeah
27:52
it's slightly less than that but you
27:53
know if you
27:54
that's the national debt well over a
27:56
trillion so it's
27:57
you know but these are still very large
27:59
numbers relative to the national
28:01
yes right okay thank you okay
28:04
thank you to you um
28:08
can can i just ask uh first of all
28:11
what is the estimate that the government
28:14
has made
28:14
of the cost of the promises that the
28:17
current scottish government has made in
28:19
the white paper
28:20
sure of pensions yes thank you um
28:23
so what we're trying to do to again to
28:24
take the chairs in junction to sort of
28:27
earth facing things that means something
28:28
to people not this sort of trillions of
28:30
billion stuff
28:30
is we've said what would be the cost per
28:32
working age person
28:34
so if for example it was all funded
28:35
through taxation what were the extra tax
28:37
bill and we estimate just over 200
28:40
pounds a year
28:41
relieving the demographics so if you
28:43
ignore the fact of the aging population
28:44
or the rest of it if you just took the
28:46
promises
28:47
like holding off on 67 like keeping the
28:50
savings credits
28:51
like having transitional protection in
28:53
the single tier all that kind of stuff
28:55
which is big ticket items that the tax
28:57
hit is of the order of 200 210 pounds a
28:59
year
29:00
on the average scottish worker
29:03
okay and do you think um
29:07
the policies that have been announced in
29:08
the white paper and otherwise by
29:11
the scottish government do you think
29:14
that this will impact
29:15
how individual scottish people save
29:18
privately for the future
29:23
certainly in terms of private pension
29:25
saving
29:26
i have some serious misgivings about
29:28
what what separation
29:30
would mean and if i just run through one
29:31
or two of those i think something that
29:33
the uk government has done
29:34
very successfully is automatic
29:35
enrollment into workplace pensions
29:38
and we started with the biggest firms
29:39
we're working our way down to the
29:41
smallest firms by
29:42
2017 2018. one of the key elements of
29:45
that
29:46
is that every employer has the nest
29:49
corporation to go to
29:50
so we've given the legal duty on the
29:52
employer to put their workers into a
29:54
scheme
29:54
we have to make sure that there's a
29:55
scheme that's willing to take them and
29:57
as you get to the smaller employers the
29:58
big firms are not interested the big
30:00
providers are not interested
30:02
so we've given creativeness to the
30:04
public service duties to take the
30:05
business
30:06
roll forward separation happens
30:10
if the scottish government thinks that
30:11
auto enrolment is still a good thing
30:13
which
30:13
it seems to be an extraordinarily good
30:15
thing they would have to make sure that
30:16
small scottish firms
30:18
had somewhere to enroll their workforce
30:20
into well nest
30:22
is a uk body has no would have no
30:25
legal duty to take scottish employers so
30:27
the suggestion is you create a scottish
30:29
nest
30:29
well a if you think about the lead times
30:32
on all of this
30:33
nest you know we had the turner
30:34
commission over a decade ago nest was
30:36
only set up in 2012.
30:38
we the government had to lend nest
30:39
hundreds of millions of pounds to get
30:40
started
30:41
we had to negotiate it with the eu
30:43
because of state aid issues
30:44
setting up a scottish nest would require
30:46
a lot of money up front
30:47
uh b negotiation if they were in the eu
30:50
with the eu
30:51
i think auto enrollment would come to a
30:53
grinding halt
30:54
if separation happens soon i think auto
30:57
enrolment would screech to a halt
30:58
and there'd be a set of scottish workers
31:00
to answer your question who worked for
31:01
small firms
31:02
for whom ultimate enrollment just
31:04
couldn't happen because there's nowhere
31:05
to alternate them into
31:06
and i think that would be very damaging
31:07
you're a worker in a small scottish firm
31:09
you haven't got a pension
31:10
carry on with the uk auto enrollment
31:12
carries on you get a pension for the
31:13
first time
31:14
if we have separation who knows what it
31:17
could be
31:18
years before a scottish nest is set up
31:20
it couldn't
31:21
it would struggle to be as good a value
31:22
for money as a uk wide one because it'd
31:24
be a tenth the size
31:25
so i think on the private pension side
31:27
it could be seriously damaging
31:28
can i just a as a lay person on this and
31:31
and
31:32
uh i appreciate this is an issue that we
31:34
could probably have a full session on
31:35
but
31:36
um as briefly as you could why exactly
31:39
was nest
31:40
absolutely necessary for auto enrollment
31:42
to be set up and
31:43
could there's a scottish government come
31:45
up with an alternative a quicker
31:46
alternative
31:47
to create that system yeah sure so um
31:50
the short answer is profit
31:52
so uh i am a scottish employer with one
31:55
relatively low paid employee
31:57
the amount of pension contributions
31:58
going in each year could be a few pounds
32:00
could be tens of pounds if you you know
32:02
tiny amounts of money
32:03
by the time the provider has taken their
32:05
0.75
32:07
which is going to be our new cap it
32:08
would be a tiny tiny amount of money
32:10
most providers would run a mile which
32:12
can't make any money out of it
32:14
so because we've given firms a legal
32:16
duty to choose a scheme for their
32:17
workers we have to make sure that
32:19
there's one there it's a bit like
32:20
posting a letter to the authorities it's
32:22
a public service duty you have to take
32:24
it
32:24
so nest is legally obliged to take so
32:26
the scottish government has talked about
32:28
a snes to scottish nest
32:30
it took us years to get the thing going
32:32
we had to lend large amounts of money we
32:34
had to negotiate and all the rest of it
32:36
and it's you know it's a uk wide scheme
32:38
it will have three or four million
32:39
members by the time it's up and running
32:41
do that at a tenth of the size with the
32:43
same fixed costs
32:44
can you even deliver it at the pension
32:46
charges we're talking about you know
32:48
i would be a concerned employee of a
32:50
small scottish firm
32:51
i think my chances of getting into a
32:53
decent quality workplace pension would
32:55
be substantially harmed
32:56
by separation okay and i think we might
32:59
become onto that a bit late and i hadn't
33:01
intended to go down the autumn
33:02
road but thank you for that information
33:04
and as i was thinking more in terms of
33:06
individuals
33:07
so so you said that the extra cost to
33:09
the government be 200 pounds per year
33:11
per head
33:12
can i just just to be clear per working
33:14
person
33:16
perhaps okay so to me that doesn't sound
33:19
very
33:20
sustainable would you agree
33:23
i would i mean in a sense it's easy to
33:24
say oh well maybe we wouldn't put state
33:26
pensions ages up maybe we'd keep the
33:28
savings credit maybe we'd do this maybe
33:30
we'd do that
33:31
maybe you know maybe we'd start the new
33:32
single tier pension a few pounds a week
33:34
higher
33:35
these are all kind of nice things but
33:37
they as we're discovering with pensions
33:39
everything has a lot of zeros attached
33:40
to it
33:41
so these are very attractive sounding
33:43
promises but essentially what we're
33:44
doing is promising
33:47
good things to the retired population at
33:48
the expense of the working population
33:50
which within a couple of decades
33:52
are costing the working age population
33:53
hundreds of pounds okay
33:55
um so i mean my view would be if these
33:58
promises
33:59
uh are made and then can't be kept then
34:02
individuals might not
34:03
save as much for their retirement than
34:05
things that
34:07
later on that that's a mistake is that
34:10
i i see i see your logic yes so so you
34:12
you think you're going to get
34:14
you know a pension earlier than you
34:16
eventually do you think it's going to be
34:17
higher than it eventually is
34:19
and you plan on that basis so i take the
34:21
point you you
34:22
you might under save privately in
34:24
anticipation of a more generous state
34:26
pension that never materializes
34:28
yeah okay thank you and just before i
34:31
hang back here i just wanted to touch on
34:33
on migration
34:35
um clearly migration for scotland is
34:38
essential when we're looking at
34:39
the future of scotland and the future of
34:41
pensions
34:42
and can i just ask is it a figure that
34:45
the uk government has been using as an
34:47
assumption
34:48
and to calculate this yes so
34:51
um the figures have been uh
34:54
calculated on the base of a set of core
34:57
migration assumptions but we've also
34:58
tested the sensitivity
35:00
so let me give you a just just some for
35:03
instance
35:04
you asked what the the cost of the
35:07
pension promises was and i said 210
35:09
pound for working age person
35:10
if you add in the demographic pressures
35:13
uh aging population and all of that
35:15
relative to the working that's another
35:16
200.
35:17
so you end up at 410 pounds just on the
35:19
pension side
35:20
we think about another 40 on the working
35:22
age side so our kind of headline number
35:24
i'll come back to migration in a second
35:26
a headline number is 450 pounds
35:29
per working age person to pay for
35:32
demographics and the scottish
35:33
government's promises
35:34
that 450 if you took a more
35:37
if you thought migration would be bigger
35:39
you know if you took a a
35:41
higher migration that 450 might be 420
35:44
say so obviously more working age people
35:46
coming from outside the country
35:47
helps a bit at the margins but it
35:50
doesn't change the fundamental story
35:52
okay so just be clear so 210 was just
35:54
the cost of the promises yes from sports
35:57
450 was including demographic
35:59
demographics and a bit of working age as
36:01
well
36:01
yeah and working age okay so you think
36:04
it would only bring it down about about
36:05
30 times
36:07
okay and what level of migration would
36:09
that so that's that's a move
36:10
that's uh the the the migration estimate
36:14
that
36:14
as i recall has been used it's about 15
36:16
000 a year so over
36:18
over a decade it's like migration of the
36:20
size of the population of dundee
36:21
something like that
36:22
over a 10-year period okay so
36:26
how much additional migration then would
36:29
be needed
36:30
to make activity well
36:34
i suppose you could argue that if i'm
36:35
sure i could work it out by then
36:38
these figures
36:41
i mean i think the short answer is
36:43
implausible levels i mean
36:44
at any sort of plausible level of
36:46
migration there is still a significant
36:48
hit on the working age population
36:50
okay so we need to more than fill the
36:52
highlands then
36:53
well the figure that was used by i mean
36:56
by
36:56
one of our colleagues was that it by
36:58
2050 it would be just under a million
37:01
now does that seem to be a reasonable
37:03
sort of figure
37:05
to you so so um
37:08
the the inward migration would require
37:10
to be
37:11
about just well just under a million i
37:14
think it was nine hundred and thirty
37:15
thousand if i remember
37:17
twenty fifty achieve what to to keep
37:20
down to well to have the the number of
37:22
people paying in
37:23
to pensions to be able to to fund them
37:26
at the existing levels
37:29
um well certainly the the main
37:32
comparisons that we've used assume net
37:34
inward migration of just over eleven
37:36
eleven and a half thousand a year
37:37
in scotland that's the sort of scale
37:38
that we've been assuming um
37:41
so as i say that the kind of scale that
37:43
you'd need to dwarf
37:44
these underlying pressures is just huge
37:46
i couldn't tell if it's exactly a
37:47
million but it would be huge relative to
37:48
the numbers we've actually used
37:50
right and can i just clarify again i
37:52
mean this question
37:53
of um 450 pounds per person
37:57
yeah per year yes i mean it has been
38:00
suggested that there's lots of people in
38:02
scotland that
38:03
that would sell their granny for 500
38:04
pounds a year
38:07
but this is this is 450 pounds of it
38:10
in in pension payments or relating to
38:13
pension
38:14
obligations alone is that correct so
38:16
this
38:17
is this is principally about pensions
38:20
bit about working age but overwhelmingly
38:21
about pensions
38:22
and it's two things it's the demographic
38:24
pressure and it's the promises the
38:25
unfunded promises
38:27
right and that's every year now once we
38:28
get to this point that's the bill every
38:30
year
38:30
okay right i wonder if we could move on
38:32
because we've that was pensions in
38:34
general
38:35
if we move on just to look a bit more at
38:38
public sector
38:39
um pensions now alan you wanted to pick
38:42
up some points some of which we touched
38:44
on earlier
38:44
right we'll look at public sector
38:46
pensions so we take what's probably the
38:47
easiest
38:48
one first the funded schemes which is i
38:51
think largely the mainly the local
38:52
government scheme
38:53
yeah would someday in a funded scheme
38:57
see any change if separation happened
39:00
um well again that that would be a very
39:04
messy thing to disentangle because for
39:07
example suppose you live
39:08
post-separation in the continuing uk but
39:11
you worked at some point for scottish
39:13
local authority
39:14
you presumably have a property rights on
39:17
that scottish scheme
39:19
um under the now funded pensions in
39:22
general
39:23
are a lot easier because there is a
39:25
sense of property right there's an asset
39:26
and all the rest of it
39:27
um but i mean you know
39:31
this what i want to try and convey is
39:32
the complexity of disentangling this
39:34
stuff because let me give you a simple
39:35
example people get divorced
39:37
and one of the ways they deal with
39:38
pensions after divorce is that one of
39:40
the partners
39:41
gets a claim on the other person's
39:43
divorce pension
39:44
they don't take money out at the time
39:46
they just say when they retire this week
39:47
so they live both sides of the border so
39:50
this scheme is paying this person
39:52
because they got divorced and then you
39:54
get i you know i just want to sort of
39:56
convey that i don't know the answer to
39:58
mostly or
39:58
i try not to come to a select community
39:59
saying this i think many of these things
40:02
are unknowable until you have that
40:04
discussion that negotiation you know
40:05
what what would be the lead position
40:07
what would the result of a negotiation
40:09
and how would it one of the things
40:10
working to stress on public service
40:12
pensions is
40:13
it's part of the whole you know it's not
40:15
just nhs pensions it's the nhs
40:17
and nhs pensions seen as a whole who
40:20
employs everybody and that will have an
40:21
effect on the pension side so we can't
40:24
segment off just the pension bit of this
40:26
it would have to be part of the whole
40:27
story
40:29
right that was meant to be the easy bit
40:31
yes return to the
40:33
more complicated area of the one before
40:36
we move
40:42
sector pension is presently fully funded
40:45
there should be no difficulty because
40:47
the liabilities and the funding
40:49
just simply move together just separate
40:51
scotland
40:52
where there's a deficit then that would
40:54
become the the responsibility
40:57
of a separate scottish government and
41:00
that that mean that seems all remarkably
41:01
straightforward to me that i understand
41:03
there's difficulty about partial
41:05
payments and so on
41:06
but um i guess i mean a
41:09
in reality local government pension
41:11
schemes in general are chronically
41:12
underfunded
41:14
so there is just you know it ain't going
41:16
to be the case that we're talking about
41:18
fully funded pension schemes
41:19
so then there'll be an issue no i
41:20
understand that so if they're not fully
41:22
funded though
41:23
the liabilities um transfer i mean if
41:26
it's
41:27
the strathclyde or the loading or some
41:29
similar pension scheme
41:31
in scotland that then just simply
41:32
transfers to the
41:34
the scottish government well no and they
41:36
inherit the liabilities
41:38
so just to be careful so if it is a
41:40
genuine pension fund
41:43
then the fund has to pay the pension and
41:46
they have to get the money from
41:47
somewhere
41:48
so the fund has has taken contributions
41:51
in has to pay a pension to the member of
41:53
the scheme wherever they live
41:55
and then the question is if they don't
41:56
have enough money
41:59
i mean they'll have enough money in year
42:00
to pay this year's pensions because
42:02
they've got
42:02
billions of pounds but if their whole
42:04
pension fund hold is getting
42:06
worse because people are living longer
42:08
and stock markets falling how on earth
42:09
do you carve up
42:11
that deficit there's a thousand
42:13
different ways of measuring it and a
42:14
thousand different
42:15
outcomes i suspect so well there are a
42:17
number of of finite
42:19
identifiable scottish um public sector
42:22
pension schemes
42:24
that and these are distinct from the
42:25
ones that are cross-border it was those
42:27
ones that i was
42:28
identifying there but yeah back home
42:31
would the money not come from the local
42:33
authority
42:35
so um at the moment
42:39
scheme members pay in if they are still
42:41
employed
42:42
the local authority potentially pays in
42:45
if it's still actively employing people
42:47
but
42:47
for example let me give you an example
42:48
of what they call in the jargon a
42:49
deferred member
42:50
you used to work for scottish local
42:52
authority there's no money going in at
42:54
the moment from you there's no money
42:55
going in from the employer
42:56
you have a pension promise which you
42:58
expect to be kept and there isn't enough
42:59
money
43:00
in the scheme to pay those liabilities
43:02
who's going to pay that shortfall
43:05
well we're asking we're asking questions
43:09
and the answer is i don't know because
43:11
you could argue well
43:12
they did they they now live in england
43:15
so is that a uk
43:16
problem or they've retired to scotland
43:18
so that becomes a scottish problem or
43:20
they you know there was there wasn't a
43:21
deficit when they retired and the
43:23
deficits happened since
43:24
what if what if it's fully funded at the
43:26
point suppose it's fully funded at the
43:27
point of separation
43:28
and then it deteriorates so a deficit
43:31
arises which they do because obviously
43:32
pension funds go up and down
43:34
a new deficit arises who's responsible
43:36
for the new deficit it's there is no
43:38
obvious right answer to any of these
43:40
questions there is no
43:41
simple principle that sorts all this
43:44
stuff out it will be hugely uncertain
43:46
hugely complicated
43:47
and will take ages to sort out and if we
43:50
stay in the uk
43:51
who is responsible for making the
43:53
payments
43:55
so the scheme is responsible for making
43:57
the payments and
44:01
employers each year and employees are
44:03
putting money in and then
44:05
in general the uk government has
44:07
overseen the process of making sure that
44:09
pension funds are properly
44:10
properly funded where there is a fund
44:12
but as you know in most
44:13
most public service schemes there isn't
44:15
even a fund
44:17
right if we turn to the um
44:20
well i think will be a more complicated
44:23
area
44:24
of the unfunded schemes
44:27
um i mean we touched it we touched on
44:28
this earlier uh
44:31
i mean i think i'm right in saying
44:34
other than armed forces and civil
44:37
service
44:38
the other schemes are all clearly
44:41
identifiable
44:42
as being separate scottish schemes such
44:44
as for teachers and national health
44:46
services
44:47
is that correct so that so the the
44:50
uh that's right so particularly the nhs
44:52
and the teachers the separate
44:54
it's an identifiable set of scottish
44:57
members and so on
44:58
so is it would it then be a case if
45:01
separation happened that
45:03
the scottish government would be
45:05
responsible for
45:06
the scottish schemes and the uk
45:08
government would be responsible for
45:10
the english welsh and northern ireland
45:12
schemes is that a fair
45:13
comment um
45:17
again i'm keen to stress that we don't
45:19
see the public service pension schemes
45:21
as being this kind of free-floating
45:22
thing over here and there's an answer to
45:24
that
45:25
and then what happens to the continuing
45:27
nhs and the schools
45:28
well nhs in particular as being somehow
45:31
over here
45:31
this is a whole set of costs
45:34
assets liabilities which we think would
45:37
be negotiated as a whole you wouldn't
45:38
kind of carve up the nhs pensions and
45:40
say well that's over there that's done
45:41
dusted
45:42
because you know if you take for example
45:45
i know more about
45:46
the english nhs the english nhs for
45:48
example is employing
45:50
charities voluntary groups that sector
45:52
groups that so so whose pension rights
45:55
are are different so you have to look at
45:57
the whole thing you can't just
45:59
section off the pension rights yes the
46:02
things like
46:02
nhs as distinct say from defense
46:05
are very much geographically based and
46:08
therefore it's much easier to make
46:10
allocations there
46:11
than it is for something like defence
46:13
which by its very nature
46:14
it covers the country as a whole
46:18
but again i i i would caution against
46:20
thinking any of this is straightforward
46:22
i don't think any of any of it is and so
46:25
for example
46:27
alan has said uh scottish citizen
46:30
scottish resident scottish employee and
46:33
you could
46:34
you know you could make different
46:35
arguments on all of these bases that
46:37
would come up with different answers
46:38
what
46:38
what if uh you know when you were
46:42
when you were in the scheme the rules of
46:43
this and subsequently they were changed
46:45
you know carving all of this up just
46:47
will not be straightforward i'm sure of
46:48
that right
46:52
you implied by your answer just now
46:54
referring to the nhs scheme as part of
46:56
the nhs widely
46:57
you implied that therefore in the event
47:00
of independence
47:02
the arrangements for different public
47:04
sector schemes could be different yes
47:07
so there's the arrangements for the nhs
47:09
pension scheme could be different to
47:11
that for the teachers
47:12
or one of the others yes okay just
47:14
wanted that right
47:16
do we have um do you have figures for
47:19
the liabilities for the purely scottish
47:23
public service schemes
47:25
as opposed to the equivalent of england
47:27
and wales yes so so this is this was the
47:29
hun
47:31
the 100 billion figure that i was
47:33
quoting so
47:34
we don't we don't have a very precise
47:36
number but of the the uk wide liability
47:38
which i think from memory is a trillion
47:40
or so i mean
47:41
that's a trillion amongst friends you
47:44
know
47:44
the the scottish air is thought of
47:46
unfunded public service pension
47:48
liabilities is thought to be of the
47:49
order of 100 billion pounds
47:51
now obviously that's spread over decades
47:53
and decades it wouldn't fall to you
47:55
in one go but you know and that will
47:57
clearly as as
47:58
the chair said that will have to be met
47:59
in any case somebody's got to pay for
48:01
those pensions but they are
48:02
sure right so around figures the
48:05
scottish uh
48:06
share of the liabilities is ten percent
48:08
of the uk
48:09
which is obviously significantly more
48:11
than the either the population or the
48:13
gdp
48:17
um sorry yes yes
48:22
why is this um
48:27
clearly one of the issues is the um
48:30
relative size of
48:31
the public sector in the continuum uk
48:33
and in scotland
48:34
uh relative wage levels so there's a
48:36
whole raft of different factors but
48:38
clearly
48:39
um if we come back to this issue about
48:42
increasing life expectancies and so on
48:43
clearly if life expectancy is going to
48:45
rise rapidly
48:46
at proportionately different rates then
48:49
that has a bearing as well
48:52
um right when we talked earlier
48:56
so dude i mean do the figures for
48:58
increasing life expectancy that apply to
49:00
the population as a whole
49:02
do the same figures apply
49:05
to um teachers nurses yes i didn't i
49:08
didn't so much mean public service
49:10
i mean obviously that would be the right
49:11
number to use and we don't have those
49:12
but
49:13
what i meant is i gave some figures
49:15
earlier that said the
49:16
the average man at 65 will see an
49:19
improvement in the life expectancy in
49:20
england scotland of about the same
49:21
amount but
49:22
percentage-wise that's a bigger increase
49:24
in scotland
49:25
for example because they start from a
49:28
lower basis
49:29
i mean these um you know you mentioned
49:31
there were the
49:33
um increased the liabilities per header
49:36
population are higher in scotland
49:38
is it any higher than
49:42
obviously public we also said you know
49:44
public spending in scotland
49:46
is higher than the rest of the uk is the
49:51
is the share of the the liabilities uh
49:54
is it
49:54
that broadly similar to the share of
49:56
public spending
49:58
i i don't know we we could have a look
50:01
at that for you and
50:02
probably come back to you right okay i
50:05
think that's
50:06
all thank you see this whole area seems
50:08
to be about the minefield
50:10
um how would public center pension
50:13
schemes apply across the uk be
50:15
disaggregated
50:16
and can you give us an estimate as to
50:18
how long it would take
50:20
you know like the civil service yes um
50:24
disaggregation is is in one sense
50:28
simpler if there isn't a fund possibly
50:31
with a deficit because that raises whole
50:33
different sets of issues
50:35
um but you know i would anticipate these
50:39
things will take years to disentangle
50:41
um i always say whenever i have a
50:44
meeting in the department about pensions
50:45
if there's two lawyers in a room that's
50:47
bad news
50:48
and there will just be you know buy
50:51
shares in pensions lawyers
50:52
because it would just it would just take
50:54
forever to sort all of this stuff out
50:56
because
50:57
um clearly um there's issues about
51:02
the rights you've built up under the
51:03
scheme but the crucial uncertainty is
51:05
who's actually going to pay the bill so
51:07
these pension promises have been made
51:08
they should be honored
51:10
but arguing about who's who's actually
51:11
going to pay for them
51:13
do we even have the data because as i
51:15
said a moment ago
51:16
very often you don't record data that
51:18
you don't need
51:19
so in a sense if i'm a member of the
51:20
civil service whether i work for a
51:22
pension service in dundee or in burnley
51:24
it doesn't matter i'm building up the
51:26
same right so we may not even know for
51:28
example
51:29
where somebody was when that when they
51:30
did the work if they're in a uk
51:32
new systems which have to come into
51:34
place well or would it even be possible
51:36
to do on you know in other words
51:38
if if you felt the right way to carve
51:40
things up was to look at where people
51:41
were working when they contributed
51:44
you might not even have gathered the
51:45
data so potentially you might be trying
51:47
to gather data for millions of people
51:49
for their working history of debt right
51:50
but
51:51
can i just be clear though i mean while
51:52
i appreciate that this is enormously
51:54
complicated
51:55
and could potentially generate
51:56
employment for you know
51:58
for the undeserving nonetheless it
52:01
wouldn't necessarily
52:02
impact upon people who were the
52:04
recipients of pensions
52:06
so nausea nodding doesn't get recorded
52:09
so i think i mean
52:10
a statement so so um
52:14
the difficult thing to disentangle
52:17
wouldn't principally
52:18
be the level of the pension right you'd
52:20
already built up we have a figure for
52:21
that
52:22
it would be who pays the bill that that
52:24
would be the source of endless
52:26
negotiation take years to disentangle
52:28
that's the day that we'll take it but
52:30
it could be as long as try them
52:31
basically
52:35
yes but sorry i think there are an
52:38
interest here and
52:38
i'm proud of the teachers
52:43
would there be a guarantee that those
52:44
who have already retired from my college
52:46
are about to retire who get the
52:48
balance that's due to them
52:52
in terms of their you know the figure
52:54
they've been promised
52:56
in terms of return or actually getting
52:57
now in terms of the time
53:00
that would clearly be the right outcome
53:03
you know i think it would be entirely
53:04
wrong if someone so you're a scottish
53:06
teacher you've retired you're drawing a
53:07
pension under a set of scheme rules
53:09
clearly
53:10
we have to make sure that those ventures
53:12
go on being paid according to those
53:13
rules
53:14
i think the pressure wouldn't be so much
53:15
whether that pension got paid
53:17
would be so for example
53:21
suppose the scottish future scottish
53:23
government took on that
53:24
liability and was then short of cash
53:26
because as i've said there is a hole in
53:28
these schemes
53:29
what might they do then so although in
53:31
principle you'd want to see it carry on
53:33
they might say well we're so short of
53:35
cash maybe we won't pay the full
53:37
inflation increase this year or
53:38
something like that you could
53:40
that's conceivable and we the uk
53:41
government couldn't control that i don't
53:43
think
53:43
yeah we'd have to take on that liability
53:47
um well as i say
53:50
i don't think anything is clear i really
53:52
don't i don't think you can simply say
53:54
oh well it's obvious you're a scottish
53:55
teacher you worked in scotland all your
53:57
life the scottish government will pay
53:58
your pension in future i don't think
53:59
even that
54:00
is absolutely clear because as i say
54:04
you can't section off the pension stuff
54:06
from the rest of the public service the
54:08
whole thing would have to be considered
54:09
in the round
54:10
now you're not scared and wondering
54:11
because in my book
54:14
translation would be asking a question
54:16
to which people can't give you the
54:17
answer
54:19
um in a way you know i want to do right
54:22
by the citizens of the united kingdom i
54:24
would love to give very clear answers to
54:26
the questions you're asking and so do we
54:27
all yeah
54:28
and i don't feel able to do that okay
54:30
thank you very much
54:33
as we previously discussed we are
54:34
talking about very large amounts of
54:36
money and clearly in the negotiations
54:38
both sides are going to be extremely
54:40
anxious to come out of the negotiations
54:41
being out as little as possible yes so
54:44
negotiations are going to be
54:45
difficult now say they haven't concluded
54:48
by
54:49
the time by the 24th of march 2016 when
54:52
the scottish government plans
54:54
got into an independent state i mean is
54:56
it possible
54:57
for scotland to become an independent
54:59
state without these negotiations having
55:02
been concluded
55:03
i think i think it's important to
55:06
remember in this context
55:08
that the date given in in march 2016 is
55:11
an assertion
55:12
it's not based on any a factual
55:16
uh analysis a it's a chosen
55:20
uh date it would a the the date of which
55:24
scotland
55:25
uh became independent would would depend
55:27
on the nature
55:28
of the negotiations obviously the
55:30
scottish government choose a position
55:32
whereby they're going to say regardless
55:34
of where we've reached our negotiations
55:37
uh we're going to just accept that
55:39
position so that we can be
55:41
independent in march 2016. uh
55:44
that's that's an option for them but you
55:47
know
55:48
our position is that that seems
55:50
extremely
55:51
unlikely that these very complicated
55:54
negotiations not just in relation
55:56
to pensions but all the other uh areas
56:00
which this committee has looked at could
56:02
be concluded in an 18-month
56:03
period a uh so that you had detailed
56:07
uh resolution so if the scottish
56:10
government
56:11
went through with that independence of
56:14
that date
56:16
and declared scotland to be independent
56:18
and these negotiations hadn't been
56:20
concluded
56:20
and what impact would that have on
56:23
people who were
56:24
in receipt of pensions well as
56:27
in relation to whole a range
56:31
of issues clearly if independence was
56:34
concluded
56:35
it was without a the resolution of a
56:38
number
56:39
of issues it would just a
56:43
manifest and and increase the
56:46
uncertainty for an independent scotland
56:48
uh that uh mr webbs referred to
56:52
so i mean so somebody in
56:55
scotland who was um expected to be in
56:58
receipt of a pension and we were in this
57:01
very
57:01
unclear situation do you have any idea
57:06
what would that would be could they
57:08
guarantee getting that pension
57:10
or could we be in a completely
57:14
chaotic situation well i i think it's
57:18
quite clear that we could be
57:19
in a completely chaotic situation i
57:22
certainly don't want us to be
57:24
in a chaotic situation you as you know
57:27
the uk government in the
57:29
edinburgh agreement have committed a to
57:32
work with the scottish government in the
57:34
event of a yes vote to ensure
57:36
a a smooth a transition
57:40
that of course doesn't mean as the
57:42
scottish government sometimes
57:43
seek to interpret it as doing exactly
57:46
what they would wish because obviously
57:48
the government for the rest of the uk
57:50
will have to act
57:52
in the interests of the citizens of the
57:54
rest of the uk which will include
57:56
pension uh pension issues
57:59
but clearly if there isn't a
58:03
you know if there isn't sufficient time
58:04
for negotiations
58:06
and there isn't a clarity of where
58:09
the scottish government is seeking to to
58:11
take those negotiations in terms of
58:14
of what a resolution they're looking for
58:17
then then you do risk a chaotic
58:20
outcome and i think you know one of the
58:22
things that even at this stage
58:25
is as you as you know having looked at
58:27
the white paper
58:28
there is actually very little detail as
58:31
to actually what
58:32
the the direction of travel or objective
58:35
would be
58:36
in relation to a range of these matters
58:38
and on a number of the other
58:40
issues both in relation to pensions or
58:42
welfare there's just a number of
58:44
statements
58:44
that the scottish government wouldn't be
58:46
doing what the uk government's doing
58:49
but no assertion no even by this time
58:52
there's no assertion of actually what
58:53
they would be doing
58:54
and therefore i mean i think that makes
58:57
it even more complicated to come to a
58:59
successful
59:00
resolution within a very short period of
59:02
time
59:04
okay i wonder if we could turn now to
59:05
occupational private pensions
59:07
so jim thank you mr chairman and i'd
59:10
probably ought to
59:11
remind the committee of my red entry in
59:14
the register on
59:15
i'm going to talk about these things
59:19
your own minister your own analysis
59:21
paper
59:22
refers to all the things that uh will
59:25
that
59:26
apply to the private and occupational
59:28
pensions
59:29
regulatory things and compensatory
59:32
schemes and things like that
59:33
so can you tell us
59:36
how would you say in the event of
59:39
independence in scotland how would
59:41
what would the effect on occupational
59:43
and private pensions
59:44
be
59:49
the infrastructure for private pensions
59:50
is one of those things that you don't
59:52
notice until it goes wrong
59:54
so the fact that we have a pensions
59:56
regulator based in brighton
59:57
whose job every day is to make sure that
59:59
company pension schemes are
60:01
properly funded or will be we have a
60:04
pension protection fund dimension so
60:05
that if your company goes to the wall
60:07
and the money the fund is short of money
60:09
then you get a pension
60:10
paid we have nests that i talked about
60:12
to make enrollment work
60:14
if the pensions trace and service and so
60:16
we have a whole infrastructure
60:18
and the challenge really would be does
60:22
an independent scotland reinvent all of
60:25
this stuff
60:26
now this has taken years and years to
60:29
evolve
60:30
uh it's obviously been designed with the
60:31
uk context in mind
60:33
um it would take a very long time to
60:34
recreate all of these things
60:36
but for example take the pension
60:37
protection fund it's very hard to see
60:40
how unless scottish firms
60:43
or scottish pension funds were paying
60:44
the pension protection fund levy
60:46
they'd have any rights under the pension
60:47
protection fund they wouldn't be members
60:49
of it anymore
60:50
so i'm a scottish worker you have
60:51
independence my firm goes to the wall
60:55
what happens and the answer i don't know
60:58
what happens and you know unless a new
60:59
regime has been put in place well it
61:00
took us
61:01
years to legislate for these things um
61:04
and if i might if i may just very
61:06
briefly make a more general point which
61:07
is just the lead time on all of these
61:09
things
61:10
even if the negotiations we were just
61:11
talking about a moment ago happened
61:13
you then have to write the laws we
61:15
generally take a long time to write
61:16
pensions laws we consult on all the rest
61:18
of it so even if you've had
61:19
negotiations taking a while there's been
61:21
a lead time to write legislation consult
61:23
and put it in
61:24
so how you'd have independence and have
61:27
pension protection the day after i can't
61:29
see how it could possibly work
61:31
can i pursue you on the point you
61:34
touched on just now
61:35
you talked i think about the company
61:37
paying your pension
61:38
yeah do you mean the company that used
61:41
to employ you has a pension fund
61:44
um where that company is located or what
61:47
about if
61:48
it is being run by one of the big
61:50
providers
61:51
scottish ones like standard life or
61:53
scottish widows i mean yeah
61:55
is there is there a location issue here
61:57
so we've got two different sorts of
61:58
pensions that we're talking about so
62:00
first is the the defined benefit company
62:02
pension
62:03
where the employer the sponsoring
62:06
employer whose job it is to make sure
62:08
the fund is eventually has enough money
62:09
in it for instance they go to the wall
62:13
and there is no pension protection fund
62:15
in place post-independence to pay
62:16
your pension from from the fund so all
62:19
you get is the
62:20
you know if the fund's 70 funded you get
62:22
70 of your pension or whatever whatever
62:24
um so that's one set of issues
62:28
the other sort of pensions you describe
62:30
the defined contribution the pension pot
62:33
the concept of a shortfall doesn't
62:34
really arise it's just a pot of money
62:36
it's a set of assets they are your that
62:38
is your money
62:39
so where you choose to draw that on the
62:41
whole won't make a great deal of
62:42
difference
62:43
although there will need to be a
62:44
regulatory relationship she's going to
62:45
say it's only that's only on protection
62:46
of rest
62:48
yeah so so if you're a member if you've
62:50
got a standard life pension or something
62:51
like that
62:52
you can draw your standard life pension
62:53
wherever you happen to live
62:55
um there'd be an issue about currency
62:58
you know
62:58
in what currency did you accrue your
63:00
rights and what currency do you want to
63:01
draw them that would be that
63:04
but standard life would assuming it
63:07
remains
63:08
in its current location would then need
63:10
to be regulated by
63:12
in under whatever regime the new
63:13
scottish government developed
63:16
so yes so an english person in the rest
63:19
of the uk
63:20
currently saving with or a pensioner
63:22
with standard life for example
63:25
would no longer be protected by the
63:27
regulatory
63:28
systems that they currently are broadly
63:31
yes so they would they would have
63:32
effectively chosen to have saved with a
63:35
a pension provider in another country
63:37
and they would have to hope that the
63:39
government of that country had got a
63:40
good regulatory regime in place
63:43
except they didn't choose well by
63:46
remaining in the scheme they are
63:47
choosing
63:49
yeah okay it's been suggested
63:52
by the institute of chartered
63:53
accountants for scotland that the eu
63:55
could uh
63:56
have a locus on all of this yeah and
63:58
that the rules would require
63:59
cross-border pension schemes to be fully
64:01
funded
64:03
separation do you have a view on that
64:05
yes i had a very good meeting with uh
64:07
the icas
64:09
in edinburgh a little while ago and i
64:11
think they've made a really valuable
64:12
contribution to this debate
64:14
and the issue here is that the eu has
64:17
rules the the what's called the iop
64:19
directive the iorp
64:21
the ielts directive which says that
64:23
where
64:24
you have a cross-border pension scheme
64:26
then you have to make sure
64:27
within a two-year time frame that it's
64:30
funded up
64:31
to the requisite level there was some
64:33
suggestion they might roll back on that
64:35
the eu in revising this directive and in
64:37
fact they didn't
64:39
so so there had been some hope i think
64:40
amongst the nationalists that the eu
64:42
would relax these rules
64:44
and they have not done so they might at
64:46
some point in the future but at the
64:48
moment they are in place
64:49
so if independence separation happened
64:51
on a certain date
64:53
as far as one can tell these rules would
64:55
bite so if you work
64:56
for say you work for a big supermarket
64:58
headquarters in england
65:00
you work in scotland for the supermarket
65:02
you would potentially become a member
65:04
immediately of a cross-border scheme
65:06
if that supermarket scheme had a
65:08
shortfall in it
65:10
your employer would suddenly have to
65:11
fill within the next couple of years
65:13
fill that gap or do complicated
65:15
restructuring of the pension scheme
65:17
so that's bad news for your employer
65:20
there's going to be costs associated
65:22
with all of that so so
65:24
um the current rules would allow the
65:26
employer to fill the deficit over a
65:27
reasonable length of time
65:29
if firms suddenly have to find that
65:30
money in the short run that's
65:31
potentially bad news
65:32
bad news for the business so can we be
65:34
clear what what money would they need to
65:36
find to balance the scottish deficit
65:38
so they'd have to the whole scheme the
65:40
entire year
65:41
because it's a cross-border scheme by
65:43
virtue of coming across border schemes
65:45
yes they'd have to fill the whole
65:47
deficit
65:47
so this is going to be a major impost on
65:51
a vast number of businesses that trade
65:53
currently trade and employ in both
65:54
england that were uk
65:56
yes if they have these defined benefit
65:58
pension schemes so traditional seller
65:59
related pension schemes that
66:01
are capable of having a deficit that
66:03
deficit would have to be filled
66:05
over over two-year period in principle
66:07
um
66:08
we the uk government have been fighting
66:10
eu attempts to impose
66:12
strict funding requirements on uk
66:14
pension funds precisely because it
66:16
brings up front
66:17
these long-term liabilities and that's
66:18
exactly what would be at risk of
66:20
happening here
66:22
can i just see clarification on whether
66:24
or not it would be possible for
66:26
ethereum just simply to break
66:30
its unified scheme in half and just say
66:32
well yesterday
66:34
we had one scheme today we have two
66:37
schemes
66:38
um and each has the assets and the
66:40
liabilities of the of the
66:41
the staff who are in particular
66:43
locations
66:46
it's certainly possible that
66:47
restructurings of that sort might be one
66:49
thing again
66:49
our friends the lawyers would have a
66:51
look at um but then
66:53
then you have an issue about is it is it
66:55
genuinely
66:56
separate schemes so yeah do you
66:58
literally have to carve them up and make
66:59
them completely separate schemes
67:01
you probably would um and then of course
67:04
you've got the issue of scale because if
67:06
you've got
67:06
one one sub scheme that's now a fraction
67:09
of the size
67:10
against another you've got the
67:11
additional costs and so on so it's not a
67:13
free lunch as it were it might be a way
67:15
around that particular problem but it
67:17
would create new problems and
67:19
certainly new costs look and i
67:21
understand that i mean we cannot always
67:23
assume
67:24
excuse me in circumstances where there
67:26
are close cross-border
67:28
films that the proportions of employees
67:30
is the same proportion as the population
67:32
of the
67:32
the uk and scotland may very well be it
67:35
could be the scottish
67:36
end is the bigger is the bigger end yes
67:38
um
67:39
but in the in the event leaving aside
67:42
the question
67:43
of um the the running costs
67:46
i mean simply splitting them would leave
67:49
them no worse off than they were before
67:52
because presumably if there was a
67:53
deficit to the office it would be a
67:55
as with the assets and you would then
67:57
have that you know a dislocation
68:00
but that would be attainable position
68:01
would it not um
68:03
it might well be the way that some
68:04
schemes choose to respond to this
68:06
i think it's fair to say i wouldn't want
68:08
to dismiss when you say
68:10
running costs i mean just i just quote
68:12
from the national association of pension
68:13
funds
68:14
in march when this directive was was
68:16
published and they said just one
68:18
sentence
68:18
the knock-on effect of this i.e the
68:20
directive is that schemes with members
68:22
both north and south of the border will
68:23
become much more expensive to run
68:25
if scotland were to vote for
68:26
independence so i think i always say i
68:29
want every pound that goes into a
68:30
pension fund to turn into as much
68:32
pension as possible
68:33
and the risk of all of this is this is
68:35
all cost that's coming out of people's
68:36
pensions and that's the way
68:38
i wonder if i could just go back one
68:40
point to the the point that jim made
68:42
earlier on just previously
68:44
about the um occupational and private
68:46
pensions and the structures
68:48
about regulation and the protection fund
68:51
and all the rest of it
68:52
yeah i mean is there any reason why um
68:54
in the event of a decision for
68:56
separation
68:57
that the uk government should not just
68:59
simply say
69:00
well we will allow this to continue on a
69:03
cross-border basis
69:04
and that that would overcome the the
69:07
the short-term difficulty and say that
69:10
well either in the long term subject to
69:12
negotiations
69:13
we'll keep it as a joint function
69:16
or um in the longer term we will allow
69:19
the scottish government to do the hell
69:21
of its own
69:22
but that would overcome the short-term
69:24
difficulty would it not
69:25
would obviously be subject to
69:26
negotiation but
69:28
it's a possibility i suppose if you take
69:30
something like the pension protection
69:32
fund
69:32
for example um there will be a
69:35
differential hit on the pension
69:37
protection fund between scotland and
69:38
england
69:39
just because the risks are different i
69:40
don't know which way it would go
69:41
necessarily i'm not saying be worse from
69:43
one or the other but they will just be
69:44
different
69:45
so if you are the continuing uk
69:46
government and you've got your own
69:48
pension protection fund for your
69:49
continuing
69:50
uh employees in your country
69:53
do you want for example insolvency risk
69:56
from another country
69:58
potentially destabilizing your
70:00
protection fund
70:02
i don't know but it's not necessarily
70:04
because you can't control
70:05
in the same way that insolvency risk you
70:07
can't control these things all together
70:08
anyway but
70:10
it wouldn't necessarily be attractive i
70:12
wouldn't say it couldn't happen
70:13
but but there might be reasons why it
70:15
would be unattractive likewise nest
70:18
if say the continuing the the
70:20
independent scotland
70:22
i don't know had more low paid employees
70:24
than than the remaining uk
70:26
you'd be getting more poor value into
70:29
economic terms
70:30
uh members who you're essentially
70:32
subsidizing so
70:34
i'm not saying any of this is impossible
70:36
but it might be quite unattractive
70:38
no i understand that but the the
70:40
question of the um
70:42
the basis of the division of assets and
70:44
liabilities
70:45
again as so many things potentially
70:47
involve big sums
70:48
and are complicated to work through yeah
70:51
but the
70:51
decision to do it would essentially be a
70:54
political one
70:56
and therefore entirely entirely possible
70:59
and you know all the all the arithmetic
71:01
would be consequential
71:02
upon a whole set of complex negotiations
71:07
which would be balancing the health
71:08
service against you know pension
71:10
responsibilities against defense again
71:13
you know and on the basis that nothing
71:15
is agreed until everything's agreed
71:17
it would not in fact be impossible for
71:19
this to be
71:21
a solution to be found that was
71:22
agreeable and that involved scotland
71:25
keeping um the uk pensions regulated in
71:28
the uk protection fund
71:31
it wouldn't be impossible but bear in
71:33
mind on this one i'm talking about the
71:34
future as well as the past so it's not
71:36
just an argument about how you carve up
71:38
the past
71:39
you know if i if i was a member of the
71:41
continuing uk government
71:43
i really wouldn't want my pension
71:45
protection fund to be exposed to risks
71:47
and revenues but risks
71:49
from another country i mean why don't we
71:50
allow another country
71:52
into our pension protection fund well
71:54
because we you know we know our domestic
71:57
situation we know our risks we can
71:58
control them to some extent
72:00
why would you want to exposure it would
72:01
be unattractive i think it's not
72:03
impossible but i think it would be
72:04
unattractive are you ruling it out
72:05
i'm not running it out now so it's
72:08
something that is subject to negotiation
72:10
it is entirely possible but but i think
72:12
unlikely
72:14
i mean but that's what negotiation is
72:16
all about though isn't it yeah
72:17
right thanks jim i just uh
72:21
as a purely a point of order mr chairman
72:23
just to clarify my comment about
72:26
uh my interest it is register the entry
72:28
that says i'm chairman of first milk
72:30
which is you know
72:31
he's a scottish company and has
72:33
employees in
72:34
england wales and scotland anything to
72:37
do with occupational pensions
72:39
right
72:43
i just wanted to say something in
72:45
relation to a point that
72:47
sir jim touched on in passing and i know
72:49
that you're conducting
72:51
a separate inquiry which you'll have the
72:53
chief secretary of treasury here
72:54
in relation to the currency union but i
72:56
do think it is worth recording
72:58
that complex as these issues are they
73:01
will be even more complex
73:03
if scotland was not operating uh with
73:06
the pound sterling
73:08
in relation to the these cross-border
73:12
a pension payments and i think
73:16
a currency separate currency
73:19
or other currency arrangement would have
73:21
a very very significant impact
73:23
on on the issues that we're discussing
73:25
today can i
73:27
why because um presumably
73:30
if the uk government was paying pensions
73:33
to somebody in scotland
73:34
in sterling then it's just changed into
73:37
the
73:38
the merk or whatever the scottish
73:39
currency is at the prevailing rate of
73:41
exchange
73:42
i mean surely that's fairly
73:44
straightforward i i
73:46
i don't think uh i i don't think it is
73:49
because you you run into
73:51
exchange rates in being required uh
73:54
to determine payments payment levels uh
73:57
being determining uh the point at which
74:01
a the the future assessment of the
74:04
payment
74:05
is being uh made it also makes it much
74:08
more difficult because i think you're
74:09
going to come on to discuss
74:10
the administr the operation of systems
74:13
uh
74:14
it makes it much more difficult for
74:16
those systems uh
74:18
at all to operate in on a dual or
74:22
a currency basis when the uk government
74:26
pays pensions to pensioners in australia
74:29
or spain or anywhere else presumably we
74:32
pay the money in sterling
74:34
and they then translate it do they
74:37
we we sometimes do um bulk currency um
74:42
um conversion for people so if we pay
74:45
british people in us
74:46
in australia uh we we can pay into
74:49
australian denominated accounts but at
74:53
whatever
74:53
deal we've been able to strike on on
74:55
currency and so on
74:57
so so all of that is doable yes right
75:00
let's do
75:00
i mean again i think as david he says
75:02
though a lot of these none of these
75:04
things are impossible a lot of them add
75:06
costs and complexity
75:07
yes it adds costs i understand that but
75:10
it is doable sorry right
75:11
so jim all right thanks mike right okay
75:14
um graeme thank you i wanted to
75:18
touch on the the issue of um the labor
75:20
market and
75:21
in the the scotland analysis paper that
75:25
that's obviously discussing today
75:28
uh the dwp goes on about the the
75:31
advantages
75:32
to all with regards to the current uk
75:36
labor markets can i maybe just ask you
75:39
to maybe kind of um confirm um
75:43
that is correct to say that we do have a
75:45
single uh
75:46
uk labor market in the country and
75:49
can you maybe just explain what that is
75:51
and what the advantages are
75:53
yeah particularly to scotland sure i
75:55
mean i think
75:56
wherever you're working in the uk there
75:58
is a common set
75:59
of uh legal employment rights for
76:02
example
76:02
uh a common uh minimum wage obviously
76:05
sometimes there are different rules for
76:07
london
76:07
that's that's separate issue common set
76:09
of employment rights
76:10
uh so for example if you work for a big
76:12
firm and you move from their office one
76:14
side the border to the other
76:15
that's not changing your terms and
76:17
conditions of employment
76:18
so i think it gives a flexibility to
76:20
individuals and to employers
76:22
both sides of that of that mix um
76:25
you know from the from the social
76:26
security side you're building up a set
76:28
a common set of you're paying national
76:30
insurance into one system
76:31
so if then your job in that common
76:33
labour market fails you've got a set of
76:35
rights
76:36
wherever you paid in there's no sort of
76:38
disentangling different periods of
76:39
service and slicing it together so i
76:41
think for the individual
76:42
it's seamless uh for the for the
76:45
employer
76:46
that's able to treat everyone the same
76:49
you know when you're deciding where to
76:50
work you're not thinking oh well
76:52
you know i'm in a different benefit
76:53
system or a different set of legal
76:54
rights all of that is standardized so i
76:56
think it just adds
76:57
to the individual and the employer's
76:58
flexibility
77:01
okay so maybe in particular um to answer
77:04
the second part of my question
77:06
how is this advantage
77:09
advantageous to to scotland so i suppose
77:13
if you are um working for
77:16
a uk-wide company then
77:20
uh working you know if your company
77:22
wants to work in scotland then there's
77:24
no issue about well
77:25
i might be paid in a different currency
77:27
or on my my my future state pension
77:29
rights are built up on a different basis
77:31
or my benefit position if i lose my job
77:33
is different you know
77:34
as an employee you are happy to work i
77:37
mean other things being equally happy to
77:38
work wherever in the uk you need to
77:40
uh so i think that means from from
77:42
scottish point of view
77:43
there's no issue no question if your
77:45
firm wants you to work in scotland
77:46
there's no
77:47
there's nothing in your back your mind
77:48
saying ah but there's all these things i
77:49
need to think about you just don't need
77:51
to think about them
77:53
okay and what risks do you perceive as
77:57
scotland was indeed to
77:58
become independent
78:01
um i think in terms of the labor market
78:06
i mean
78:06
if i just give you one sort of anecdotal
78:08
example but you know i have a
78:10
constituent who worked in scotland and
78:11
worked in england
78:13
in the public sector as it happened and
78:14
she built up pension rights in both
78:16
and she said i want all my pension in
78:18
one
78:19
in in in this case in the british in the
78:22
english scheme
78:23
because i want all of my money in one
78:24
currency and she was worried about
78:26
currency fluctuations
78:27
so if you imagine a world where you've
78:28
got two separate countries you you work
78:30
in both of them
78:31
you're going to build up pension rights
78:33
going forward in
78:35
different state pension schemes you're
78:36
going to get pensions presumably
78:38
potentially paid in different currencies
78:40
you're gonna you know if you lose your
78:42
job
78:43
it might depend which benefit system
78:45
you're going to be under so i think
78:46
there's all
78:47
that kind of uncertainty um
78:50
complexity that you just don't have and
78:52
for no obvious benefit
78:54
in terms of your job
78:57
you obviously talk about the the healthy
79:00
states
79:01
of the single uk labor market
79:04
as it is and despite
79:08
scotland perhaps becoming independent
79:10
would there still not be
79:11
advantages in terms of people crossing
79:14
the board
79:15
either way in terms of seeking jobs and
79:18
businesses moving to and fro
79:20
i mean we do obviously have a single
79:22
market when it comes to the eu
79:24
yes um so why in particular scotland
79:28
may be disadvantaged in relation to this
79:31
if scotland did indeed become
79:33
independent
79:34
i think if you are an employee of a
79:36
uk-wide company
79:38
and they and the company says you know
79:39
we'd like to work
79:41
uh in scotland then at the moment then
79:44
then that's you know subject you wanted
79:46
to work in scotland absolutely fine
79:48
whereas i think in this new situation
79:50
just as if they said we want to work you
79:51
and
79:51
want you to work in front say you'd be
79:53
thinking well hang on
79:54
if i'm working in france what tax am i
79:58
paying
79:58
what you know what pension rights am i
80:00
building up what what if i fall
80:01
sick you know and there's a whole set of
80:03
things that are just common now that you
80:05
don't even think about that you suddenly
80:06
have to think about
80:07
um so so i think it's as much about you
80:11
you know scotland it seems to me the
80:12
scottish economy wants to have the
80:14
biggest pool of label available to it
80:16
that it can it wants to have the
80:17
brightest and best from around the
80:18
united kingdom willing and happy to work
80:20
there
80:20
without having a second thought about
80:21
all those things
80:23
well i think if you say
80:27
just referring back to our borders paper
80:29
which obviously committee looked
80:31
at before and looking at just as part of
80:33
that general evidence
80:34
that although there is interaction
80:36
across
80:37
between the north and a republic of
80:41
ireland
80:41
between canada and united states and
80:44
between austria and germany three
80:46
examples
80:46
it is actually less than people would
80:49
anticipate for
80:50
very simple you know very similar
80:53
co-terminus every
80:54
equatement countries and i i think
80:58
you know the the evidence presented
81:00
there was that if you do create a border
81:02
then that border does have an effect in
81:05
terms not just in terms of goods of
81:06
movement but people as well
81:09
yeah and i suppose uh your points
81:11
earlier mr mundell in relation to
81:13
they're not being the currency union or
81:15
the likelihood of there not been
81:16
a currency union in scotland was become
81:18
independent would probably put up a very
81:21
sizable barrier to the you know the free
81:24
flowing of of labor and business and
81:26
trade between
81:27
scotland and the rest of the united
81:29
kingdom i think you're correct and i
81:31
mean that's why i find
81:32
that you know i have many constituents
81:34
in my border constituency
81:35
who operate small businesses uh
81:38
and who who are very concerned that
81:40
people on the other side of the border
81:42
simply wouldn't employ them because they
81:44
would just be put off
81:45
by the thought that factual or otherwise
81:48
that there would just be a great deal of
81:49
complexity
81:50
of using trades people are using a
81:52
business uh
81:54
on the different side of a border i mean
81:56
that's an interesting point because of
81:58
the geopolitical publication of your own
82:00
constituency
82:02
which does border onto england
82:06
these concerns been expressed to you
82:08
personally by by
82:09
individual constitutions they've been
82:12
expressed by a large number of
82:14
constituents
82:15
and that's why i was quite surprised
82:17
when mr alex salmond first minister
82:19
scotland
82:19
visited carlisle to tell people that all
82:22
these things would be all right
82:24
but didn't feel that he needed to come
82:26
to the scottish side of the border
82:28
to reassure people there i i think my
82:31
constituents were quite surprised
82:33
uh that he chose to go to carlisle to
82:36
announce
82:36
that actually their concerns were
82:38
unfounded rather than
82:40
to come a a and meet them
82:43
well don't worry minister we're going to
82:45
dump freeze and gamma shield shortly
82:50
indeed
83:04
you're very much uh enjoy the visit to
83:06
people's people's high street
83:08
has the largest number of independent
83:10
shops of any high street in scotland so
83:13
it's a thriving small business so that
83:15
doesn't surprise me having been shopping
83:16
there myself
83:27
scotland but um in terms of uh
83:30
just looking at welfare and look at
83:32
benefits
83:33
um can i just clarify scotland does
83:37
have a higher expenditure
83:40
on benefits compared to the rest of the
83:43
uk
83:43
um and if you just look at
83:47
why what is the uk government's analysis
83:49
of
83:50
why that's the key yeah and particular
83:52
disability benefit but they're
83:54
interested to hear your views on
83:55
sure on other benefits you're right it
83:58
does have a
83:59
scotland currently has a slightly higher
84:02
expenditure of their head on
84:03
social security and one of the points i
84:05
would make is that number has fluctuated
84:07
a lot
84:07
so there have been times when it's been
84:08
a lot higher it's now slightly higher
84:11
one of the reasons the differentials
84:12
come down has been that within the
84:14
united kingdom the scottish economy is
84:16
doing relative
84:17
has been doing relatively well so
84:19
employment growth has been relatively
84:20
rapid
84:21
so which has changed the differential um
84:24
obviously there are slightly higher
84:26
proportion of pensioners in the
84:27
population in scotland
84:28
relative to working age and children
84:30
which puts an upward
84:32
pressure on spending there are slightly
84:34
fewer children
84:35
relative to the rest of population which
84:36
puts it downward pressure so there's a
84:38
range of different factors
84:40
rent levels tend to be slightly lower in
84:42
scotland the rest of the uk particularly
84:44
london so you know so there are lots of
84:46
different factors going on
84:48
but taking all of that overall
84:49
particularly because of pensioners it's
84:51
it's slightly above
84:51
and as you say uh incapacity benefits
84:54
are slightly above
84:55
i i am i have to say i'm guessing but
84:58
i'm reasonably confident that a lot of
84:59
people are in capacity tight benefits
85:01
now
85:02
previously worked in the sort of heavy
85:04
industry manufacturing and so on
85:06
uh and that's part of the reason why
85:08
they have the the bad backs and all the
85:09
rest of it now
85:10
and that i think tends to it's tend to
85:12
be a sort of hidden form of long-term
85:13
unemployment to be honest
85:14
in those sectors of the economy uh which
85:17
i would speculate have been historically
85:18
quite well
85:19
represented in scotland but i wouldn't
85:20
swear to that can i just ask me that's
85:22
not the first time i've heard this
85:23
either
85:24
in this committee are beyond that that
85:25
is the reason why we have higher
85:28
levels of disability benefits in
85:30
scotland
85:31
and are you aware of any analysis that's
85:33
been done with this um
85:35
we could certainly give you the the the
85:37
figures for scotland and the rest of the
85:39
uk
85:39
and and some historical trends in that
85:41
very happy to supply you with that
85:43
in terms of what the health problem
85:44
would be we would have that information
85:46
yes
85:47
yeah okay um and
85:51
so in that case if scotland was to
85:54
to leave the uk and is the
85:58
the gap significant enough between um
86:02
the the current the uk level of
86:05
disability benefit and other benefits
86:07
the scottish benefits that a scottish
86:10
government would need to
86:11
increase taxes in order to fill that gap
86:15
um so at the moment the difference is
86:19
relatively slight taking if i can take
86:21
the whole of social security together
86:23
first of all
86:24
um it's a couple of percent higher so we
86:28
we
86:28
converting this into my parents per
86:30
working age person
86:32
it's perhaps an extra 10 pounds now
86:34
which doesn't sound like very much
86:36
but when you then roll forward uh the
86:39
the demographics and so on that 10
86:41
pounds turns into
86:42
120 pounds the
86:46
additional cost for social security in
86:48
scotland is 10 pounds per head yeah
86:50
per yeah per head per working age
86:53
population so
86:54
if you simply required um
86:57
the current working age scottish
86:59
population to pay for
87:01
what the scottish benefit receiving
87:03
population got
87:04
there would be a slight increase in
87:05
taxation or borrowing or whatever
87:08
really as i say about 10 pounds ahead of
87:10
working age population
87:12
but because of long-term trends so for
87:15
example
87:16
because the scottish working age
87:17
population is older
87:19
more 50 to 65 year olds and the incident
87:22
of disability and capacity benefits is
87:23
higher
87:24
in that age group that's that's one of
87:26
the reasons why
87:27
the scottish figures are higher so so we
87:30
know although there's been a growth in
87:31
young people getting these sickness
87:32
related benefits it's still quite
87:33
heavily concentrated amongst older
87:35
working age people um and so those
87:38
trends would
87:39
get worse over time okay
87:43
um thank you can i just the 10 pounds is
87:47
can i just ask what benefits that you're
87:49
including so that's
87:50
so that's that's everything so uh it's
87:53
made up at the moment
87:54
that's not not pensions it does include
87:56
pensions so it's
87:57
it's it's a plus 80 on pensions and a
88:00
minus 70 on working age
88:02
so so we spend if if the scottish
88:05
working age population had to fund the
88:07
bill of the scottish benefit receiving
88:08
population
88:09
it would be paying 80 pound extra per
88:11
working age person on pensions
88:13
70 pounds less on working age and the
88:15
reason it's less on working age is
88:17
primarily because there are fewer
88:18
children
88:18
and obviously if you think about the
88:20
working age population families with
88:21
children
88:22
tax credits and all the rest of it
88:23
that's where we pay a lot of money out
88:26
owns is in addition to the 400 odd that
88:28
we discussed earlier on
88:30
which gets us ever closer to the magic
88:32
500
88:33
at which people will sell their souls of
88:35
their grandmothers
88:36
so so that's the base that's the
88:38
baseline now and then these other
88:39
figures
88:39
are additional just to be clear though
88:42
the 450 was referring to scottish
88:44
government policies whereas
88:46
this figure is referring to current uk
88:47
government policies is that correct
88:49
yes so the so the the 450 number is a
88:52
split of unfunded scottish government
88:54
promises
88:55
and demographics so half half of it
88:58
is that is the 10 that will become worse
89:03
but just sorry you did see there's only
89:06
slight difference in terms of benefits
89:08
and
89:08
we discussed the the disability benefits
89:12
what is the difference of disability um
89:14
i i haven't got the sub
89:15
breakdown but i'm very happy to give you
89:17
that thank you okay thank you thank you
89:20
turning now to universal credit as you
89:23
know the scottish
89:24
government in the event of separation
89:25
proposes to stop the implementation of
89:27
universal credit in scotland
89:29
yeah is that a practical thing to do i
89:32
think it gets to the
89:33
nub of the inconsistency here of the
89:36
scottish government's position
89:37
because on the one hand they they even
89:39
they recognize
89:41
that you can't invent a new social
89:43
security infrastructure overnight it
89:44
takes
89:45
years to do all the computers and all
89:46
the rest of it so they anticipate
89:48
paying the uk government presumably to
89:51
go on administering these things
89:53
post-independence
89:54
but the uk government will only be
89:56
administering uk social security
89:57
benefits according to uk rules
90:00
so there will be a computer system
90:01
delivering universal credit and personal
90:03
independence payment and all of these
90:04
things
90:05
the uk government is not going to want
90:07
to uh
90:08
jeopardize what it delivers to its own
90:10
citizens by changing its computer
90:12
systems
90:13
to do versions of its own benefit system
90:15
that work for the
90:16
for a different country so either the
90:19
scottish government sets up its own
90:20
systems
90:21
or it pays the uk government continuing
90:23
uk government to run uk benefits
90:25
but what it can't do is immediately
90:27
deliver
90:28
its own version of those systems those
90:30
benefits
90:31
so does that does that
90:35
but there's a computer system there that
90:37
operates the
90:39
present pre-universal credit system why
90:41
could the scottish government not
90:43
simply continue to operate that
90:46
existing computer system so so those
90:49
systems are being progressively
90:51
uh dismantled essentially those are
90:54
being run down and
90:55
the software the software exists they
90:57
exist yeah um
90:58
why can't it just running that software
91:01
um but the
91:02
the uk government won't want to be
91:04
running i mean you know
91:05
i i think it's very unlikely the uk
91:07
government will want to
91:09
be running what we i mean a lot of these
91:12
are what we call the jargon legacy
91:14
systems
91:15
i.e they're very not all of them a lot
91:16
of them are very old
91:18
basically some of them we are eeking out
91:21
to the day when we switch them off
91:23
so i think you know to keep them going
91:25
into the medium term would probably cost
91:26
a lot of money i can't see the uk
91:28
government wanted to spend that money or
91:30
actually wanting to be diverted from
91:32
doing the day job and i think that's the
91:33
important point the uk government will
91:35
still be trying to pay
91:36
hundreds of billions of pounds in
91:38
benefits of pensions to its own citizens
91:40
it won't want to be diverted to running
91:41
legacy systems to a small number of
91:43
people
91:44
have your any um estimates of how long
91:47
it would take
91:47
for the scottish government to design
91:50
and implement
91:51
a computer system of its own for the
91:54
benefit system that it wanted
91:56
well it's clearly multiple systems so
91:58
for example
91:59
it says it wouldn't have universal
92:01
credit now bear in mind universal credit
92:03
replaces
92:04
three separate streams of benefits so
92:06
it's replacing
92:07
uh local authority housing benefit rent
92:09
rebates it's replacing dwp
92:11
job seekers and esa um and it's
92:14
replacing tax credits
92:15
so the scottish government would have to
92:16
keep presumably
92:18
three separate computer systems going
92:20
for those three things
92:21
it wouldn't have the personal
92:23
independence payment it'd have
92:24
disability living allowance so it would
92:25
need a system for that
92:26
uh it would keep the savings credit bit
92:29
of the pension credit which we're
92:30
getting rid of for new cases so we'd
92:32
have to add a bit
92:32
you start see this is multiple systems
92:34
over many years i mean you think
92:36
trying to merge all of those into one
92:38
has proven um demanding for the dwp
92:41
over a period of many years as it will
92:44
you know these things take several years
92:45
to do
92:46
even when you've had plenty of time to
92:47
think them through to plan to get the
92:49
legislation through
92:50
because you know before you do the
92:51
system do you write the laws
92:53
so the lead times on these things are
92:55
just huge in terms of unity
92:57
just to take an example in terms of
92:58
universal credit i mean how long will it
93:00
take
93:01
from um thinking about it to it actually
93:04
being
93:05
fully implemented was a scottish version
93:08
well i was just really asking for
93:10
how long did universal credit take from
93:13
the initial concept yeah to
93:15
implementation just to get together
93:18
the welfare the welfare reform act that
93:20
provided for universal credit to come in
93:22
was if i remember 2011 but it was early
93:24
2012 that sort of thing 2011 2012
93:27
um the lead time therefore is six
93:30
seven years something like that from
93:32
from getting the law through
93:33
to actually having the payments on the
93:35
ground to everybody i mean it's
93:37
certainly where you're bringing complex
93:38
systems together
93:40
and do you have a figure for how long it
93:42
for the cost of
93:43
of implementing university we think a
93:45
significant it
93:47
program for a major benefit is of the
93:48
order of 300 to 400 million pounds
93:51
and a lot of that cost is fixed whether
93:53
you're doing it for 5 million or 50
93:55
million a lot of that is just fixed cost
93:57
right and i think the point which i made
94:00
earlier is
94:00
it it's not clear what um
94:04
benefit system welfare proposals
94:07
scottish government intend to bring
94:08
forward
94:09
they had established a commission which
94:11
you may be aware of
94:12
but as far as i'm aware it hasn't
94:15
reported within the time scale that was
94:17
initially uh
94:18
set out i so it it
94:21
it's not clear the framework on which
94:24
they would wish to legislate to create
94:26
their new
94:27
uh system if they were if they were to
94:28
do so i'm
94:30
sure you're aware of the nao report
94:32
which found that the dwp
94:35
had no detailed view of how universal
94:37
credit is meant to work
94:39
and has not achieved value for money
94:41
with the program
94:43
so given that what's your response first
94:47
of all
94:47
to that the neo report
94:51
and buddhist independent scotland
94:53
therefore
94:55
in designing a different system i think
94:57
it's
94:58
worth just reminding ourselves what
94:59
universal credit is trying to achieve i
95:01
think all of us will have had
95:02
constituents who've had tax credits
95:04
nightmares so you've got a tax credit
95:06
system based on annual assessment end
95:08
year reconciliations flaw backs over
95:10
payments under payments
95:11
you've got a local authority based rent
95:13
rebate system and then a dwp based
95:16
jsa esa system and for the for the
95:19
for the constituent what universal
95:20
credit is doing is saying let's have all
95:22
of this in one place
95:23
let's make sure we don't have
95:24
overlapping rules that are to the
95:26
detriment to the individual
95:27
so the idea that scottish citizens would
95:30
be deprived of having
95:32
so scottish systems presumably have to
95:34
carry on with some
95:35
continuing tax credits thing going to
95:37
the council of the housing benefit going
95:38
to
95:38
whatever the dwp successor is for jsa
95:41
esa or whatever
95:42
that is you know having overlapping
95:45
tapers and all of those things you know
95:47
if i were a scottish citizen i
95:49
absolutely would want to be part of
95:50
universal credit i mean i think there's
95:52
a
95:52
you know a compelling case that that
95:54
will be better experience for the
95:56
consumer it takes a while to get in but
95:58
once it's in it'll be very good
96:00
in the scotland analysis paper you
96:01
suggest that stopping universal credit
96:04
would create
96:05
poorer incentives to work and so make
96:08
unemployment higher in independent
96:10
scotland
96:11
yeah i mean what evidence do you have
96:13
that incentives
96:14
such as universal credit system do raise
96:17
the employment rate yeah
96:18
let me give you two examples one is um
96:21
smaller jobs
96:23
at the moment the benefit system is very
96:24
much you're in work you're out of work
96:26
it's either or it's black or white
96:28
there's nothing much
96:28
16-hour rules all sorts of artificial
96:30
rules what universal credit enables
96:32
people to do perhaps
96:33
people with disabilities for example who
96:35
might not be able to
96:37
do a full hour four weeks work uh he
96:39
enables people to do
96:40
smaller jobs part-time jobs jobs where
96:43
hours might vary from week to week
96:45
and it's much more accommodating rather
96:47
than saying well are you in work were
96:49
you out of work that week
96:50
and so many of the newer jobs being
96:52
created i mean a lot of them are
96:53
full-time jobs but
96:54
also jobs have been created perhaps
96:56
part-time or very variable hours
96:58
and the new labor market is a much more
97:00
flexible labor market
97:01
and you need a benefit system that
97:03
meshes with that so actually the sorts
97:05
of jobs employers want to create
97:07
uh to some extent and you have to say
97:08
many of them are just traditional
97:10
full-time jobs
97:11
but at the margins a benefit system that
97:13
fits that is going to help
97:15
the second thing is the whole issue of
97:17
of tapers you know you earn another
97:18
pound
97:19
is it worth it because things are clawed
97:21
back at the moment if you have your tax
97:22
credits here your housing benefit there
97:24
your esa jsa here
97:26
all of that together can mean you're
97:27
only a few pennies better off in
97:29
extremis
97:30
and what universal credit does is
97:31
because it's all in one system
97:33
it can align all of those withdrawal
97:34
rates so many people don't face these
97:36
very extreme withdrawal rates that put
97:38
them off working altogether
97:39
so there is good reason obviously
97:41
surveys and all the rest of it have been
97:42
done but there's good structural reasons
97:44
to think that universal credit
97:45
will be good for the labour market good
97:47
both for employers and employees
97:48
and a country that misses out on uc will
97:51
miss out on employment opportunities
97:53
so do you have evidence to suggest that
97:56
under the old system people are
97:58
being deterred from taking a job because
98:00
the financial
98:02
incentives is is a very small amount of
98:04
money um
98:05
yes and i mean the classic one is the 16
98:07
hours rule you know i've talked to
98:08
employers who say you know
98:10
you know they've got people who will
98:12
work for them for 15 hours but not 16
98:14
hours
98:14
because a whole different set of benefit
98:16
rules applies and i mean also that you
98:18
know
98:18
universal credit when it comes in is
98:21
typically more generous
98:23
those who would get less get
98:24
transitional protection so we estimate
98:26
around 300 000 people in scotland
98:28
will be an average of 166 pounds a month
98:31
better off under universal credit which
98:33
potentially they miss out on
98:34
if they're not part right okay thank you
98:36
sorry can i just clarify when you say
98:38
there's a certain number of people going
98:39
to be better off
98:41
um is there a net increase in
98:43
expenditure
98:44
as a result of the introduction of
98:46
universal credit because if not
98:48
yes and presumably the number would be
98:50
balanced by a number who would lose
98:52
no so so universal credit uh does
98:54
involve
98:55
an injection of money into the system
98:57
right graham you had some questions on
99:01
that so i just just a brief aside
99:04
following up from
99:05
from mr reese's questions uh it might be
99:07
a little bit of the name of the session
99:09
but
99:09
we were talking about any issues with
99:12
not going ahead with universal credit in
99:14
scotland
99:15
if um scotland votes no there is
99:18
a talk certainly in the labour party but
99:21
beyond as well about devolving
99:23
at least some elements of housing
99:24
benefit to scotland
99:26
could you see how that could work within
99:28
the universal credit system
99:30
um part of the point of universal credit
99:33
really is
99:33
is integrating the difference of the
99:36
benefit system
99:37
both so that the individual doesn't have
99:39
to go to different places
99:41
and so that all of the rules are aligned
99:43
so for example
99:44
there's a set of rules on on how savings
99:47
are treated there are different for
99:48
housing benefits for other benefits so
99:50
so instinctively part of the point of
99:53
view universal credit is it's a single
99:55
payment a single system integrated
99:57
so fracturing a bit off would undermine
100:00
i think potentially some of those
100:01
advantages
100:02
okay thank you thank you
100:07
obviously if we had a separate scotland
100:09
it would be a separate
100:10
benefit scheme presumably uh and also a
100:13
separate benefit administration system
100:16
have you done a network of the cost of
100:19
that including any
100:20
transitional costs or are you aware that
100:23
the scottish government
100:24
has has estimated the cost of this as
100:28
well
100:30
yes i mean we think it's costing around
100:33
720 million pounds a year at the moment
100:36
to deliver social security benefits and
100:38
pensions to the people of scotland
100:39
that's the sort of scale of what we're
100:41
talking about here um
100:43
it inevitably there is an infrastructure
100:46
to all of this
100:47
and um having to set all of that up from
100:50
scratch
100:51
clearly there are fixed costs to doing
100:53
all of that
100:54
and also ongoing running costs so for
100:56
example um
100:58
one of the things that we try and do is
101:00
pull call center
101:02
capacity so uh you know you you phone up
101:05
and this call centers at capacity so you
101:07
can divert to another one
101:09
uh there's a big rush on phone calls
101:11
about jsa this month and next month it's
101:13
about esa and so
101:15
the dwp we took we have this phrase
101:17
within department one dwp
101:20
where we pull all of these things and
101:21
then you can flex the system
101:23
clearly if you're doing all of these
101:24
things at a much smaller scale the
101:26
potential for flexibility is smaller
101:28
you probably can have surplus capacity i
101:30
think so i think
101:31
it is of course it's doable small
101:32
countries on social security systems
101:34
uh but i think clearly the cost per head
101:37
is bound to be higher
101:38
and there would be substantial set up
101:40
costs as well
101:42
yes and if you were disaggregating the
101:45
dwp
101:46
within scotland and then presumably
101:48
there'll be
101:49
a kind of knock-on cost effect to the
101:51
rest of the uk
101:52
because it would have to fine-tune its
101:55
system
101:55
and scheme as well has there been any
101:58
assessment undertaken of the financial
102:00
implications of that as well
102:02
um not specifically i mean so as you
102:05
rightly say
102:05
so we we have just to give you a feel we
102:07
have 94 job centres
102:09
in scotland three contact centers seven
102:11
benefit processing centers two pension
102:12
centres you know three child maintenance
102:14
centers you know
102:15
we do obviously a lot throughout the
102:17
united kingdom so there would be clearly
102:19
a knock-on cost to the continuing united
102:21
kingdom of
102:22
disentangling all of that uh you know
102:24
which would be obviously a deadweight
102:26
cost to
102:26
to the rest of the uk as well and you
102:29
point
102:30
earlier about sharing the wwp resources
102:33
call centers in particular
102:35
then presumably there would be you know
102:38
a disadvantage
102:39
to scotland and the rest of the uk
102:42
in terms of losing the advantages of
102:45
economies of scale yes
102:46
yes and clearly in a sense the the uk is
102:49
losing a tenth or whatever of its
102:51
capacity
102:52
scotland is operating at 10 of the uk
102:54
scale give or take
102:56
so so that the cost hit on scotland is
102:58
clearly significant
102:59
could i just if i if i may because we
103:02
just i i just mentioned child
103:03
maintenance which does get a mention in
103:05
the scotland paper
103:06
and i think it's a neglected area you
103:08
know we have a child maintenance system
103:10
undergoing reform so wherever you are in
103:12
the uk you're a separated parent
103:14
the other parent there's a mechanism
103:16
trying to make sure they sort things out
103:17
between themselves and if not as a
103:19
statutory scheme to try and recover
103:20
money
103:21
um all of that you know in a
103:24
post-independence situation well what
103:25
does that look like does does the
103:27
scottish government have to set up a
103:28
scottish csa that would be a joy i
103:30
imagine
103:31
um with a whole set of rules obviously
103:33
um scottish legal system's different
103:35
anyway which might complicate things
103:36
and but then you know you've got a a an
103:39
ex partner
103:40
the other side of the border suddenly
103:42
you're chasing someone for money in
103:44
another country
103:45
we know from our own experience just how
103:47
difficult complicated that is
103:48
you're getting court orders in other
103:50
countries you know just just in terms of
103:51
simple things like the infrastructure of
103:53
child maintenance it's just one of those
103:54
things we just say well
103:56
we don't take it for granted it's just
103:57
not an issue if your ex is living the
103:59
other side of the board it's just not an
104:00
issue
104:01
and you know is that something else
104:02
that's going to have to be reinvented
104:03
yeah
104:04
if you take the number of wp staff
104:08
working and living in scotland yeah what
104:10
assessment have you undertaken in
104:12
relation to
104:13
um you know is there a disproportionate
104:15
larger amount
104:16
of these staff in scotland compared to
104:19
the rest of the uk
104:20
if you look at it on the basis of share
104:23
of the population and per capita
104:25
yeah um in general
104:29
because of scotland geography there's
104:31
probably slightly more job centres per
104:33
head
104:33
because you have to cover a rural area
104:35
and clearly the coverage is limited i
104:37
understand that but you know
104:38
probably slightly more up ahead on the
104:40
other hand as i say out of
104:41
um 32 contact centers three in scotland
104:44
so i think it's different for the
104:45
different services
104:46
there hasn't been a deliberate drive to
104:48
over or under represent scotland
104:50
uh but different services would be
104:51
differentially affected i think
104:53
but i think it's an important point that
104:56
the
104:56
the services provided are not geographic
104:59
and so
105:00
i when i recently visited a the north
105:03
gate
105:04
a in glasgow where about 1300 dwp
105:08
staff uh work they're providing support
105:11
to people right across
105:13
the united kingdom that they're not
105:15
providing a geographic
105:17
service which is solely to a to scotland
105:20
i think that's a helpful intervention i
105:22
think that was the point i was driving
105:24
out and that being the case
105:25
would we ultimately see less
105:28
people employed in scotland compared to
105:32
what we have
105:33
currently within the dwp providing that
105:35
that service
105:37
um i mean just just to give you some
105:39
some sense of scale so
105:40
um about 11 percent of dwp staff
105:44
are in scotland uh as against about nine
105:46
percent of claimants so you could argue
105:48
that slightly more i mean i wouldn't
105:50
make a huge
105:51
huge issue of it but but clearly there
105:53
would be huge disruption because you
105:54
know i visited the dundee pension center
105:56
for example
105:57
and as david says those folk are
105:59
providing uk wide services and that
106:01
would all have to be sorted out
106:02
well it's part of a wider issue
106:06
which i i think is one of the a
106:10
little known facts which we perhaps
106:12
haven't in the past made clear enough
106:14
there are twice as many uk government
106:17
civil servants in scotland as scottish
106:19
government
106:20
a civil servants a
106:24
tangent i visited uh the hmrc
106:28
offices in aberdeen recently for example
106:30
where again people are providing
106:31
specialist
106:32
and uk wide a uk-wide support
106:36
and i think there is a clear sense of
106:39
uncertainty amongst those people
106:41
as to what their role would be uh
106:44
in an independent scotland given that
106:47
the scottish government
106:48
you know have not indicated that they
106:50
would wish to have a scottish civil
106:52
servant
106:52
of 30 000 people yes i think i think
106:56
that's
106:57
just ask if you'd possibly help us um
107:00
by coming back just with some
107:02
information about that i mean i was in
107:03
stone away recently
107:05
and it was drawn to my attention that
107:06
there's a service in stoneware that's
107:08
providing
107:09
a service you know uk wide or certainly
107:11
beyond the western isles
107:13
can you give us a new of of how many dwp
107:16
people that are in scotland
107:18
and where they're based who are
107:19
providing a uk-wide service or a service
107:22
you know fourth of scotland if it's not
107:24
for the for the whole
107:25
um of the uk i think that would be quite
107:27
helpful for us
107:31
as well all the uk government the
107:33
victims that we have today
107:41
you know to provide a that information
107:44
because i i think
107:46
you know and i accept that perhaps uk
107:49
government hasn't in the past
107:50
just made it as clear as possible you
107:53
know we are a major
107:54
employer in in scotland regardless of
107:57
all our other
107:58
interests fine well if steve can do the
108:00
stuff for the dwp and then david
108:02
arranged
108:02
for it to be done with the with the
108:04
other departments i think i'm very
108:05
helpful
108:06
yeah yeah thanks sir the dwt has stated
108:10
that scotland does not
108:11
use sterling then scotland and the uk
108:13
cannot share a benefit system
108:16
even for a transitional period can you
108:18
explain why
108:20
um well clearly our our systems are
108:23
geared up to make payments in sterling
108:26
and
108:26
uh it is astonishing how difficult it is
108:29
to change these systems it wouldn't be
108:31
willful
108:32
hostility and if i just give you one
108:33
example
108:35
we currently have a cold weather payment
108:37
system
108:38
and there are just under 100 separate
108:40
cold weather stations across the united
108:42
kingdom
108:43
and we had a report that recommended
108:44
that we should go from just under 100 to
108:46
just over 100
108:47
and i was told that this would be
108:49
incredibly expensive because the
108:51
computer
108:51
was hard-coded to have a two-digit
108:53
number for the number of for the code
108:55
for the cold weather station and to have
108:56
a three-digit number
108:58
would require vast amounts of consultant
109:00
time expert
109:01
just to make a tiny little change like
109:03
that so what seems to allay person a
109:05
trivial change
109:06
because a lot of these systems are very
109:07
old and are very rigid changes are very
109:10
difficult
109:12
i absolutely believe that yes yes
109:16
and so um we would be geared up to make
109:19
payments in sterling now of course
109:20
interesting question you are in scotland
109:23
under some scottish system with the
109:24
legal right to a payment of a set amount
109:26
in a scottish currency we deliver a
109:28
payment in sterling so is
109:30
the scottish government then taking on
109:32
an exchange rate risk because we're only
109:33
going to promise that
109:34
you know it that so we we would not be
109:37
changing our systems we would be paying
109:38
sterling benefits if we had that deal
109:43
okay can i we've got one other major
109:46
area that we want to cover relating to
109:47
the bedroom tax but
109:48
i just want to pursue some elements of
109:51
this a bit about partly about the timing
109:54
of the introduction um of universal
109:57
credit and the various changes now it's
109:58
not
109:59
as far as i'm aware running quite the
110:01
time is it
110:02
um and therefore you know it has been
110:04
suggested
110:05
that it might not be um entirely
110:08
implemented
110:09
by the day either of the referendum or
110:11
obviously or of the
110:12
um or of separation in the event of um
110:16
scotland voting to leave now to what
110:20
extent does that make a substantial
110:22
difference
110:23
if you're still transitioning presumably
110:26
it would be possible to have a situation
110:28
where you're
110:29
operating both anyway you just simply
110:32
change the geographical areas
110:34
that are operating the existing system
110:37
and
110:38
don't you know don't transition it and
110:40
move do the transition
110:41
into the new system elsewhere so just to
110:44
be clear there's two sorts of transition
110:46
going on here one is geographic so for
110:48
example i think from memory
110:49
uh universal credits started being
110:50
rolled out in vanessa
110:52
for example um and then there is
110:54
transition by family type
110:56
so i understand that that's starting
110:58
with what's regarded as the simplest
110:59
cases you know the young single
111:01
unemployed person
111:02
moving to couples moving to families and
111:03
so on so over the coming months and
111:05
years there's a set of
111:07
phases clearly that process won't have
111:10
finished
111:10
by the referendum or by the dates that
111:12
the scottish government has indicated it
111:14
wants
111:15
this process to be completed um it will
111:17
be
111:18
in terms of dwp investment and so on
111:21
there will be no interest whatsoever
111:23
in maintaining computer systems and
111:25
capacity to deliver
111:26
what we call legacy benefits so we will
111:29
have no interest in diverting
111:31
so the crucial point here is we the
111:33
continuing uk will want to deliver the
111:35
best we can for our citizens through
111:37
universal credit etc
111:38
we won't want to take our computer
111:40
people off our policy people off our
111:41
lawyers off
111:42
to set up maintain modify legacy systems
111:46
to keep them going in scotland
111:48
will you refuse to do it
111:52
um we will refuse to do anything
111:55
which is to the detriment of the
111:58
citizens that continue united kingdom so
112:00
we will not prejudice
112:02
the well-being of the citizens of the
112:03
united kingdom to deliver services to
112:05
the people of scotland
112:07
well i mean i think this is obviously a
112:09
crucial question because i think
112:10
we've had discussion with a number of
112:12
ministers about what they
112:14
they might prefer to do and what they
112:15
wouldn't prefer to do
112:17
but we've not been entirely clear except
112:20
um for i think david willetts and some
112:23
ministers may be coming about currency
112:25
about whether or not they would actually
112:26
decline or refuse
112:28
to do certain things now i i think you
112:30
are saying to us and i just
112:32
want to be absolutely clear about this
112:34
um that the dwp
112:36
would refuse to operate two parallel
112:38
systems
112:39
simply because of the question of
112:41
complexity and would also refuse to
112:44
maintain a a legacy system
112:48
for a separate scotland and i mean the
112:50
implication of that
112:51
unless i'm mistaken is that a scotland
112:54
that voted for separation
112:56
would end up with at least for a period
112:59
being
113:00
bound in to the uk benefits system
113:04
and if they wanted to make changes in
113:06
transition to a new system
113:08
then they would have to develop their
113:10
own system over quite a substantial
113:12
period
113:13
and it was you know to suggest that they
113:15
could either
113:16
have a change or retain the existing
113:18
system at the time of separation
113:20
or have a transition to their own system
113:23
operated by the uk
113:25
um neither of those is feasible or
113:27
practical
113:29
let me put it in in my own words uh so
113:32
um i entirely agree with the point that
113:35
uh if this if the future independent
113:39
scotland
113:40
wanted the uk government to administer
113:43
benefits
113:44
we would be administering uk benefits on
113:46
the uk rules
113:48
that's what that's what we want to be
113:50
doing the idea that scotland can design
113:52
its own benefit system
113:53
and ask us to tweak our computer systems
113:56
and so on i just don't see
113:57
i don't see that happening so we're we
114:00
are running our own systems under our
114:02
own rules
114:02
uh as david has said we have obviously
114:05
got the editor
114:06
agreements to work constructively
114:09
but not to the detriment of uk citizens
114:12
so
114:12
so us diverting our policy people our
114:14
computer people our lawyers and so on
114:16
off to doing any of that work i can't
114:18
see that happening
114:21
can i just pick up if i may just just to
114:23
make sure i'm absolutely clear on the
114:24
currency point just just to get to get
114:26
this absolutely right
114:27
um obviously our systems assess in
114:30
sterling that's what they're set up to
114:32
do
114:32
and that's something that we couldn't
114:34
change clearly we can in principle as i
114:35
said earlier on in my remarks
114:37
we can press the button and pay out in
114:39
another currency so it's not
114:40
as i said with australia we can pay out
114:42
in another currency but our systems are
114:44
set up to assess in sterling
114:46
and that's the thing that we wouldn't be
114:47
able to change so the rights as it were
114:49
the rules and the rights would be in
114:50
sterling whatever the currency
114:52
and i just wanted to put that on the
114:53
record just to clarify so so to go back
114:55
to you
114:56
to your earlier points um our guiding
114:59
principle
115:00
without being hostile or unhelpful is
115:02
that we've got an ambitious program of
115:04
welfare reform going on big computer
115:06
systems big evolution and all the rest
115:07
of it
115:08
which we which we would not want to
115:10
detriment our own citizens as the uk
115:12
government from
115:13
by running you know tweaking legacy
115:15
systems for example
115:16
can i just clarify i mean in the event
115:19
of a change of government
115:20
in the uk leaving aside the question of
115:22
separation
115:23
um a change of government in the uk
115:25
maybe a different coalition
115:27
you might still be there but who knows
115:30
um
115:30
you're not telling us um you are not
115:34
telling us though that there could be no
115:36
change
115:37
made to the system that's being proposed
115:39
at the moment are you
115:41
it's obviously at the disposal of the uk
115:43
government of the day to form a judgment
115:45
as to
115:46
whether its reform program needs to be
115:48
changed or not clearly the uk government
115:50
thinking that that's in the best
115:51
interests of uk citizens is of course
115:54
able to do that what i'm saying is as
115:56
far from where we stand now
115:58
we the future uk government would not
116:00
want to do anything to the detriment of
116:01
you
116:02
no no i understand that i understand i
116:04
just wanted to be clear
116:05
that you're not telling us that the um
116:08
the scheme that you've got at the moment
116:09
in no both its strategy and its detail
116:12
is so set in stone unamendable
116:16
things can always change fine i just
116:17
wanted to be clear about that but
116:19
the point that you were making about you
116:22
didn't see
116:23
um operating two parallel systems and
116:25
you can't see
116:27
operating at two parallel systems and he
116:29
phrased it in various different ways
116:31
am i am i clear that you are saying that
116:33
you won't
116:35
i mean you will refuse to do so we will
116:37
form a judgment if the question is asked
116:39
so we're in the multiple hypotheticals
116:41
here
116:42
if there's a yes vote if the question is
116:44
asked
116:45
will you the uk government yeah would
116:47
you do you mind running us another
116:48
system over here
116:49
with our you know with our own with
116:51
different rules say
116:53
the first question we would ask
116:54
ourselves is can we do that
116:56
without doing it to the detriment of our
116:58
own citizens
116:59
i think is implausible to be honest that
117:02
we could you know given the the stress
117:03
on resources and all the technical
117:04
skills that we have in running a system
117:06
it's hard to see how that would be
117:07
possible i mean why why i labor this
117:10
is that one of the most most important
117:13
significant drivers
117:14
um of the move towards separation
117:17
is to break away from what they see is
117:20
basically tory you know anti-welfare
117:22
policy
117:23
and people who are campaigning for
117:25
separation
117:26
would be horrified at the idea that they
117:29
were going to end up with it anyway
117:30
even if they voted for separation and
117:33
that's that's why i'm trying to just
117:35
be absolutely clear i mean i i think
117:37
you're saying to us
117:39
um that the 18-month period would not be
117:42
sufficient
117:43
for uh for a scottish government to
117:44
develop its own system
117:46
and therefore in the event of a vote for
117:48
separation
117:50
you would not be willing to operate two
117:52
systems in parallel
117:54
and therefore in the event of a even a
117:56
vote for separation and even a
117:57
declaration
117:58
of independence the only system that
118:01
could actually be operated
118:03
is the is the existing or with
118:06
variations
118:07
um uk system it's very hard to see a
118:11
scenario in which
118:13
independence has been declared or
118:15
whatever and there is immediately in
118:17
place either system the scottish
118:18
government can run for
118:19
itself or a continuing uk government
118:22
that would be willing to run a bespoke
118:25
scottish system according to scottish
118:26
specifications it's very hard to see
118:28
that scenario happening
118:29
so the best those who were voting for
118:32
for separation
118:33
good envisage would be um reducing the
118:36
period
118:37
um that they have you know they
118:39
inherited uk system
118:41
and the introduction of a of a separate
118:43
scottish system which might take what
118:45
six or seven years i mean i'm
118:47
i'm not quite clear how long these
118:48
things might take illustrative
118:50
lead time from and bear in mind that
118:52
when this government introduced the
118:53
universal credits
118:54
in the first year or so of government
118:57
that was based on years of policy making
118:59
and thinking and all the rest of it so
119:01
so many years down the track but i mean
119:03
how long did it take to
119:04
reduce from the time the decision was
119:06
made to have it paying out the csa for
119:08
example
119:09
now leaving aside that the csa was not
119:12
was not a raging success immediately
119:13
well again
119:15
if you think about the reforms we're
119:16
doing to the child maintenance system
119:18
now what we call the 2012 system
119:21
which which just started on a small
119:23
scale in 2012
119:25
won't we've got another three years of
119:26
moving people closing places and
119:28
bringing people on
119:30
until 2017-ish so that's five
119:32
operational years
119:33
preceded by legislation and all the rest
119:35
of it so again we're in the five to ten
119:37
year
119:38
lead time territory right i mean i think
119:41
i think i think you could maybe reflect
119:42
on this and if you feel
119:44
um whether the the five to ten year
119:47
period
119:48
is is unrealistic one way or the other i
119:51
think it would be helpful
119:52
um if you could come back yes because i
119:54
think this is some considerable
119:55
significance
119:56
and for people in scotland and it's one
119:58
of the areas that we are trying to
120:00
provide clarification
120:01
for people who will be voting in the
120:03
next six months or so
120:04
okay lindsay gentleman we are aware that
120:08
the bedroom tax is welcoming scotland as
120:11
a stinkbomb in a spacesuit
120:18
you'll be aware that it's a heated tax
120:22
and at the last meeting david you said
120:24
quite clearly that the scottish
120:26
government already had the first to
120:27
mitigate and nullify
120:28
the attacks within the party had he tell
120:31
us what they were
120:33
what they are at the last meeting i i
120:36
think we agreed that
120:37
that we may have different views in
120:39
relation to
120:41
a uh the spare room uh
120:44
subsidy but in but that we would focus
120:47
on
120:47
uh the the practical uh operation
120:51
in my uh previous evidence i i set out
120:54
that i believe the scottish government
120:56
did have powers
120:57
uh by which they could uh use funds
121:01
their own funds uh to mitigate
121:04
uh what they they said was was the
121:06
impact of these
121:08
measures
121:12
essentially they have they control the
121:15
funding of of local government
121:17
and a registered social
121:20
a landlords and therefore they would
121:24
they were they were able to direct
121:26
funding
121:27
to those bodies rather than to
121:29
individuals
121:30
in ways uh which would i
121:33
mean that a the the the
121:36
there was there was funding a support
121:39
available for some of the measures
121:41
which councils were already coming up
121:43
with a
121:44
uh to proactively uh take steps
121:47
to to to mitigate what they said were
121:50
the
121:50
impact of a uh of the change
121:54
particularly in relation to the
121:56
spare room subsidy what a has
121:59
what became clear to me uh
122:02
was that the scottish government either
122:05
was unwilling or did not have the
122:07
capacity
122:08
to develop those mechanisms
122:11
and in discussions that i subsequently
122:15
had with local authorities including i
122:18
think all the local authorities other
122:20
other than argyle and butte who i
122:22
previously met but i've met with your
122:24
own
122:24
a local authority with the city of
122:26
glasgow west lothian
122:28
and north uh lanarkshire uh that it be
122:31
it was clear to me that a
122:35
those local authorities were being put
122:37
in a position
122:38
uh potentially putting in a position
122:40
where we
122:42
the uk government were saying the
122:43
scottish government has power to spend
122:45
money
122:46
that it was forced to allocate
122:49
as we know to this matter by the
122:51
scottish parliament
122:52
i and the scottish government was saying
122:55
we can only
122:56
allocate this money through
122:58
discretionary housing payments
123:00
and i formed the view that i did not
123:02
want local authorities in scotland to be
123:05
caught
123:06
in a a a to and fro
123:09
between the uk government
123:12
and the scottish government particularly
123:15
obviously in this highly
123:16
a political period uh and that therefore
123:20
we it would be better to find a way
123:24
by which uh they by which they could
123:27
receive additional discretionary housing
123:29
payments but i remain firmly of the view
123:32
that the scottish government
123:33
could have developed their own
123:37
approach but they haven't they have not
123:39
done so you have evidence that the
123:40
facility was available
123:42
but they didn't have the determination
123:43
to see it through well i i set out i
123:45
mean
123:45
in in detail in our previous a uh
123:49
our previous meeting the sort of a range
123:52
of things
123:53
that that could be done now i mean
123:56
anecdotal
123:57
evidence and uh is that clearly
124:01
you know a large number of
124:04
scottish government officials are very
124:07
heavily focused
124:08
on the issue of independence and
124:10
therefore
124:12
they might not have the capacity to
124:14
determine
124:15
a a scheme they could operate in
124:18
scotland to
124:19
a uh to to putting forward
124:22
their own measures mitigating
124:26
uh mitigating a
124:29
spare room subsidy and as we saw with
124:32
the way in which they allocated the 20
124:34
million pounds that they spent
124:36
they didn't really spend a lot of time
124:39
determining which local authorities
124:41
should receive the money and which
124:43
wouldn't and how that
124:45
interacted with payments that that the
124:48
department of work and pensions had
124:50
already made so some local
124:52
authorities were in a very positive
124:54
position where they actually received
124:55
money from both the uk government
124:57
and a the scottish government
125:01
which indicated to me that a lot of
125:03
thought hadn't been given
125:05
to how to allocate that funding
125:09
but i i i think you would i hope would
125:11
agree
125:12
that the principle that we adopted was
125:15
you know
125:16
to to put the needs of a
125:20
the the local authorities first to come
125:23
forward with a way
125:24
in which they could achieve their
125:26
objectives because
125:27
what i respect about a local authorities
125:31
in scotland is although they don't agree
125:34
and i accept that many of them don't
125:35
agree with the government's
125:36
policy position they take a very
125:39
pragmatic
125:40
and professional approach in adopting
125:43
and taking forward a taking forward
125:47
a you know what what is what is
125:49
government policy they don't
125:51
they don't politic about it they get on
125:54
with what they have to do on the ground
125:56
and i don't
125:57
i did not feel a that they should be
126:00
drawn into
126:02
a political a a political battle between
126:06
a a perceived political battle anyway
126:09
between
126:10
a westminster and hollywood so your
126:12
experience was that local government had
126:14
used that
126:15
their enterprise and be pragmatic but
126:18
you're feeling words the scottish
126:19
government has put scotland on pause
126:21
in relation to their determination to
126:22
see this through
126:24
well as as we know this policy
126:28
again whether agreem there was agreement
126:30
or not was announced in june
126:32
2010 nothing happened
126:36
in relation to the scottish government
126:38
until september 2013
126:41
when they announced some additional
126:42
funding no proactive steps were taken
126:47
then in january a uh this year
126:50
just actually i think the day before
126:54
i i was due to appear this committee
126:57
a uh you know nicholas sturgeon was on
127:00
the radio announcing what
127:02
a uh again what approach they wanted
127:06
uh to follow a and
127:09
a since then again uh
127:13
we restated our we you know we've
127:15
restated our view
127:16
that dhp discretionary pain wasn't the
127:19
only way forward
127:20
i think margaret burgess came before
127:21
this committee and then
127:23
re-state reasserted that that it was
127:27
i you know i i just think that it
127:30
i just i mean i just came to the view
127:33
that it wasn't
127:34
it wasn't appropriate to simply be
127:37
engaged
127:38
in a in a situation where scottish local
127:42
government
127:43
uh and housing associations were caught
127:46
between
127:47
us saying you have the power to do this
127:50
and and the scottish government saying
127:52
they didn't
127:53
why do you think it took so long for the
127:54
scottish government to act
127:57
well my own personal view would be that
128:00
scottish government
128:01
obviously conclude this is a highly
128:02
political issue and wish to
128:05
derive the maximum benefit from
128:07
politicizing
128:09
a this issue and that's in marked
128:11
contrast
128:12
to local authorities in scotland you
128:14
know who have sought to achieve
128:16
uh the best outcome they could for their
128:19
uh tenants and wider
128:22
citizens so you like me think this is
128:24
about uh
128:26
particle capital from the situation that
128:29
that's the conclusion that
128:30
that i came to but i didn't but the
128:33
reason that we
128:34
we've gone forward to offer a the
128:38
discretionary a housing payment cap
128:41
to be determined by a scottish
128:44
government
128:45
uh you know is to allow uh local
128:48
government
128:49
allow the money that scottish parliament
128:52
which
128:53
as you as you know the scottish
128:55
parliament pressed the scottish
128:56
government to spend
128:57
additional money it wasn't it it wasn't
129:01
a entirely voluntary uh to allow them to
129:05
spend
129:05
the money in a way that meant that local
129:08
authorities and housing associations in
129:10
scotland
129:10
uh were able to receive the funds and
129:14
weren't
129:14
caught in our you know in a he
129:18
said she said a uh situation between the
129:21
scottish government and you kicked him
129:22
i think there's a welcome for the
129:24
increase in the car
129:26
but it's all the same money from the
129:28
scottish government there's no
129:28
additional funding from the uk
129:30
government is that right
129:31
there is no additional there is no
129:33
additional uh funding from
129:35
a the uk government we've put forward uh
129:38
approximately 15 a million pounds
129:42
the scottish government had intended to
129:44
put forward 20 million
129:46
the scottish parliament then then after
129:48
discussions there
129:50
the sum that sum was increased to 35
129:52
million
129:54
so to what extent will increasing the
129:55
cap nullify the problem bearing in mind
129:57
the evidence we've taken
129:59
about people with learning difficulties
130:01
and mental health issues
130:03
i i think that on the basis of the
130:07
of the funding um that's been
130:11
a put forward a
130:15
there is no uh there there's no
130:18
excuse from the scottish government in
130:21
relation to any specific
130:22
group that the there are measures in
130:25
place
130:26
a in individual local authorities to uh
130:30
mitigate any a a perceived adverse
130:34
impact
130:35
will it still be the case this isn't
130:36
after applying for dhp
130:39
it will be um it it will be
130:42
clearly for a individual
130:46
local authorities the basis in which
130:48
they administer
130:49
dhp under certain guidelines which
130:52
clearly come
130:52
from both the d from dwp and
130:56
uh the d8 the the a and from the
130:59
scottish government
131:00
but i mean across scotland and one of
131:02
the things that i've said in discussions
131:04
with scottish government with kosla with
131:06
others um
131:07
is is that some local authorities have
131:09
been much more
131:10
a proactive in terms of
131:14
uh what they what they've done i think
131:16
there's been some very good work if i
131:17
may say so in north lanarkshire
131:19
uh for example in fife as well
131:23
i had indeed both west loathing in the
131:24
city of glasgow it was let's say
131:26
i from because having visited all 32
131:29
local authorities i mean
131:30
there's some very proactive and good
131:32
work being done and i i i think
131:34
what we do want to look at uh is best
131:37
practice
131:38
in relation to how these steps uh have
131:41
been
131:41
have have been the steps that that have
131:44
been taken
131:45
but clearly that you know within that
131:46
there's a degree of discretion in
131:48
relation to the length of the payment
131:50
and in relation to
131:52
a um in relation to just how much
131:56
a a
131:59
how much information etc has to be
132:03
has to be provided right i think our
132:06
evidence indicated that 25
132:08
was eligible but hadn't taken it up for
132:10
people who had learning difficulties
132:13
and mental health issues is a
132:16
flexibility for the local authority to
132:18
deal with that in a different way
132:20
well a number of local soldiers have
132:21
been very proactive at identifying
132:24
a um identifying
132:27
individuals who
132:30
have have specific uh issues and have
132:33
sought to do that
132:35
you know by by effectively going out uh
132:38
uh and visiting them i think that's been
132:40
done in in life as i
132:42
as as i recall a i mean i think there is
132:45
a
132:46
i mean what a wider issues identified is
132:47
that there are i mean there are a group
132:49
of people inside
132:49
very very difficult to make to to make
132:53
contact with but
132:54
i mean i think different local
132:55
authorities have those local authorities
132:58
and housing associations
132:59
that have been most proactive have been
133:01
most successful in terms of
133:03
of signing up of signing people up and
133:06
as i say what i want and i think this
133:08
great scope to do
133:09
is to encourage the best practice in
133:12
terms
133:12
of of how uh how the how these issues
133:16
have been how these issues have been
133:18
approached you can look no further than
133:19
david ross and his wife council team
133:22
and thanks thanks for the plug
133:25
do you think in terms of equity and
133:27
fairness that those who scrimped and
133:29
saved to pay part of the dhp
133:32
or pay all of the dhp to be reimbursed
133:35
by the scottish government
133:37
well these are these are matt
133:40
in terms of of your issues within
133:43
a um the the
133:46
the responsibility of the scottish
133:48
government for them
133:50
and the scottish parliament a for the
133:53
scottish parliament understand
133:55
to determine what i can set out you know
133:58
is a factual background
134:00
that this this policy having been
134:02
announced in
134:03
2010 the scottish government did not
134:05
take any proactive steps
134:07
until september 2013 and i think people
134:10
in scott
134:11
you know people in scottish parliament
134:12
and scotland you know will
134:14
form their own conclusions on that basis
134:18
i understand where you're coming from by
134:20
ask you
134:21
in terms of social justice and fairness
134:23
do you think
134:24
the scottish government should reimburse
134:26
those who scrimped and saved
134:28
maybe gone without pay their victim
134:31
times
134:32
i i i i genuinely don't think that that
134:35
it that it's
134:36
it's it's for me or for ministers within
134:39
where you know westminster to tell
134:41
you the scottish government what to do i
134:44
i think
134:45
i think that the situ i think the
134:48
situation
134:49
is is clear that the scottish parliament
134:51
was able
134:52
in relation to a wish to see additional
134:55
funding in this
134:56
area they were able to demonstrate
135:00
their effectiveness the effectiveness of
135:02
the scottish parliament
135:03
in forcing the scottish government to
135:05
put in additional funding
135:07
and if the view of the scottish
135:08
parliament is uh
135:10
that there should be some recompense uh
135:13
then
135:14
i i think that would be the way a to
135:16
take it forward
135:17
you personally have no opinion on this i
135:20
don't think that it's from i i don't
135:22
think that it would be
135:23
helpful for me to be seen to be telling
135:26
the scottish government of scottish
135:27
parliament what to do
135:30
could i can i just seek clarification um
135:32
on a couple of points just arising from
135:34
what lindsay said i mean i think you've
135:35
given it
135:36
i just want to be absolutely clear i
135:38
think you were saying to us
135:40
that the lifting of the cap allows the
135:43
scottish government
135:44
to cancel effectively the impact of the
135:47
bedroom tax for everyone in scotland
135:50
this year is is that your understanding
135:53
well i wouldn't phrase it like that
135:55
but i i think that it could be that that
135:59
is my understanding right
136:00
and then following on from that then for
136:03
last year that's that's for this year
136:06
um for the last year my understanding
136:09
from previous discussions um that we've
136:12
had
136:12
is the the power that the scottish
136:15
government already had
136:17
did allow them if they wished to write
136:19
off any debts that had been
136:21
accumulated is that still your
136:24
understanding
136:25
that would that in in general terms
136:28
would
136:28
be my understand right and and i think
136:31
that the the final point without asking
136:32
you to
136:33
say whether or not you're in favor of it
136:36
the um my understanding is that the
136:38
scottish government
136:40
had before but certainly have no the
136:43
power
136:43
if they wish to refund any bedroom tax
136:47
payments that were made by anybody last
136:49
year
136:51
i i think that there might be this what
136:54
they um what they
136:57
can't do is clearly make payments
137:00
directly to
137:01
um individuals that could be construed
137:04
as
137:04
the operation of a of
137:07
a of a welfare um system because
137:11
obviously as we've discussed before
137:13
welfare
137:14
uh vis-a-vis payments to individuals is
137:16
a reserved
137:17
matter i i'm you know it would
137:21
it would seem to me that if thought was
137:22
applied
137:24
a a process some form of process
137:28
i could be drawn up to achieve the
137:31
objective you set out but i'm not
137:34
you know i i'm not able to set out what
137:36
that is
137:37
right and the final point i just wanted
137:39
to seek clarification on
137:41
um is we after you'd said to us
137:44
um in our in our hearings that you
137:47
thought that the
137:48
you know the scottish government had
137:49
powers to deal with various things
137:51
um we asked margaret burgess whether or
137:54
not she'd
137:54
pursued this with yourself to seek
137:57
clarification
137:58
can you can you let us know whether or
137:59
not um the scottish government
138:02
ever did come to you and say
138:05
you know when you indicated you thought
138:06
they had powers to go beyond
138:08
the powers they already had whether or
138:10
not they actually did
138:11
did that and pursued that with you there
138:14
was
138:15
no direct dialogue with me fine thank
138:18
you
138:19
lindsey yeah i mean finally
138:22
do you think that the housing benefit
138:26
from the welfare system should be
138:28
devolved
138:30
i i think that we we need to
138:33
look at a what you know
138:36
the the balance which is always the
138:38
balance
138:40
between reserved and devolved uh
138:42
responsibilities
138:44
uh to ensure the between local decision
138:47
making and
138:48
the circums and getting decisions which
138:50
are specific and relevant to people of
138:52
scotland
138:53
and the benefits of having uh the
138:55
uk-based
138:56
uh systems as a
138:59
panelist set out at the moment each of
139:02
the political parties
139:03
is coming forward with proposals for
139:06
additional
139:07
devolution conservative proposal will be
139:10
uh tabled at the uh
139:12
made public at the end uh end of may and
139:15
i know that the commission under
139:16
uh lord south clyde has looked at a
139:21
has looked at a uh this
139:24
issue so i i'm looking forward to seeing
139:27
what their
139:28
conclusion is because i think it is i
139:31
think it's an important
139:33
uh it's an important part of the debate
139:36
and it's it's the judging
139:38
because the benefits of the
139:41
the wider uk pensions and benefit
139:44
systems set against
139:46
uh a more more local uh
139:50
needs and and i think we just have to
139:52
you know we do have to debate and
139:54
discuss where that balance lies so it's
139:56
been on the table
139:56
and the answer at the moment is maybe i
140:00
think
140:00
i think it's an issue that that's worthy
140:02
of of substantia
140:04
of significance but to be fair it's not
140:06
also just simply a question of being
140:08
involved or retained i mean it's a
140:10
question of whether or not housing
140:11
benefit is to do with housing or to do
140:13
with benefit
140:14
it isn't it is where the ballot is where
140:16
that balance lies and i i i think that
140:19
a uh you know i think that's what we
140:22
should be discussing
140:23
not not discussing that if we don't like
140:27
a particular way the benefit system of
140:29
housing is administered
140:31
you know we tear up our country that's
140:33
not you know
140:34
my view that's not what we do we have a
140:36
debate people vote
140:38
and that's how policy is determined
140:41
right
140:42
well i think that covers all the points
140:44
that we had
140:45
um as i indicated to you privately
140:48
before we before we started we always
140:50
like to end these things by asking
140:52
whether or not there's any answers you
140:53
had prepared
140:54
the questions that we haven't asked you
140:56
know any issues that you feel we should
140:58
have touched on that we
141:00
that we haven't is there is there
141:02
anything that you would want to leave us
141:03
with that we haven't gone over
141:05
yeah if i may just a concluding
141:08
observation really which is
141:09
um for me the biggest message i have is
141:13
one of
141:15
uncertainty about people's future
141:18
pensions how they'll be paid what
141:19
they'll be how they'll be organized
141:22
which we're spending all our time as a
141:24
uk pension policy
141:25
i'm trying to give people greater
141:26
certainty trying to give people firm
141:28
foundations enabling people to plan
141:30
and i think part of the color of the
141:31
replies that i've given is in how many
141:33
of these areas it's actually very
141:35
difficult to know
141:35
what might happen uh we we clearly will
141:38
act in good faith of course we will but
141:40
but the the the prospect of independent
141:42
separation
141:43
creates huge uncertainties um and and
141:46
real costs you know real costs
141:48
uh you know setting up new systems and
141:50
all the rest of it but just periods of
141:51
great uncertainty and i think
141:52
we know we want people to plan ahead for
141:54
their retirement with confidence and
141:56
certainty
141:56
and uh so many of these issues would i
141:59
think just be thrown into uncertainty
142:01
uh in the event of a yes vote i
142:04
i think okay that that's a correct
142:08
and i think uh it's very interesting
142:12
this uh analysis paper i've launched it
142:14
with the secretary of state
142:16
i um along with with the institute of
142:19
uh actuaries so you can imagine that
142:21
that was a non-stop fun event
142:24
but a um i think
142:27
as in as in the course of
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