It is time to debunk another myth that has sprung up about the Labour Party.
Even though it is only the fourth day since the Scottish independence referendum, adherents of the ‘Yes’ camp have been working hard to claim some kind of moral victory, on the grounds that the unionist parties and the ‘Better Together’ campaign lied to voters, aided by the media.
One such claim is that former UK Prime Minister Gordon Brown falsely stated that Scottish people’s pensions might be threatened if Scotland broke away from the union. It has been presented as “Labour lied to us about pensions.”
Mr Brown voiced his fear in February, when it was reported in the Daily Record. “You are expecting, quite rightly, that you will get a British pension. But if there is independence, the British pension stops, the national insurance fund that you’re paying into is broken up,” the paper quotes him as saying. The report does not state that he was representing any particular organisation.
It continued: “Brown published figures showing the cash received across Scotland from the state pension, pension credit, winter fuel allowance and free TV licences.
“The statistics showed people in Scotland get a higher share of the UK pot, amounting to £200 more on average each year than their English counterparts – a total of £200 million for the country.”
Brown was said to have dismissed claims that an independent Scotland could make up the shortfall by relying on North Sea oil revenues. ‘Yes’ voters on the Vox Political Facebook page have claimed that Tony Blair took away all Scotland’s rights to North Sea oil before the Holyrood Parliament was set up, so it will be interesting to see how they tackle that part of the issue.
“He referred to a leaked document from SNP Finance Secretary John Swinney that also questioned the affordability of pensions after independence,” the paper added.
The ‘Yes’ campaign published its own claims about pensions, stating: “The Scottish Government has made clear that accrued pension rights will continue to be honoured after independence.
“So state pensions will continue to be paid as before. And so will public sector pensions – including civil service, armed forces, police, fire-fighters, NHS, universities, teachers and local government pensions. Some of these schemes are already administered by the Scottish Government.
“There will be agreement between the Scottish and UK governments as to the exact share of pension liabilities to be taken on by the Scottish Government – but it has repeatedly been made clear that no accrued pension rights will be lost.
“Private pensions will continue to operate as before. The Scottish Government will ensure there are suitable protections in place for final salary occupational schemes.”
As you can see, no mention is made of the £200 million shortfall mentioned by Mr Brown and so there is no statement about how an independent Scotland would cope with it.
Was he making it up?
For a possible answer, let’s turn to the National Association of Pension Funds (NAPF). This independent organisation published ‘Scottish independence: The implications for pensions’ in November 2013.
On page seven of the document, it states: “The UK Government is responsible for the public service pension liabilities of unfunded public service schemes [unfunded means they are paid from general taxation; this applies to all state pension schemes], including the Principal Civil Service scheme and the NHS Scheme. At 31 March 2011, unfunded public service pension liabilities were £893 billion. This represents 93 per cent of public sector pension liabilities and 37 per cent of all UK pensions liabilities. The Scottish Government currently has responsibility for a small number of public service schemes, which represent less than one per cent of devolved activities. There are clear questions for the Scottish and UK Governments about how these liabilities will be divided.”
The language takes a bit of translating but this seems to be the issue to which Mr Brown was referring. State pension schemes are funded from general taxation, and the amount Scotland takes in pensions means it is subsidised to a certain extent by the rest of the UK.
It seems clear that the ‘Yes’ campaigners had no right to say that there would be no shortfall, if there remained “clear questions” on how state liabilities would be divided.
It could be argued that the statement “some of these schemes are already administered by the Scottish government” may also be misleading. How many readers were aware that this related to just one per cent of “devolved activities”, with the rest administered centrally?
That isn’t all, though. The NAPF document’s executive summary outlines four headline points of concern on which it was suggested that both the UK and Scottish governments needed to provide “greater clarity”:
“Under EU law, pension schemes with members in Scotland and in the UK could become ‘crossborder’ schemes and would, therefore, need to be fully funded at all times. A more demanding funding regime is likely to lead to the closure of defined benefit (DB) schemes [these are private schemes run by employers or sponsors]. At the very least, there should be a grace period (and an exemption) to help schemes manage any transition.
“There remains a lack of clarity about how the regulatory structure for pension schemes in an independent Scotland would work, and how any transition would be managed. Unpicking the current compensation regime would be extremely difficult and require careful management (over a long period of time). It is also likely to lead to substantial costs.
“The Scottish Government’s commitment to the introduction of the single-tier pension provides welcome clarity. However, there remain unanswered questions about how they will manage the abolition of contracting-out. It is important that employers are assisted in managing this process; otherwise there is an increased likelihood of more DB schemes closing.
“While the Pensions Paper sets out no immediate plans to alter pensions tax relief arrangements, a later Scottish Government may wish to make changes to the policy. Such changes would have implications for pension schemes administering pensions for Scottish, as well as English and Welsh, taxpayers. Any complexity in tax regimes is likely to add significant costs for employers and schemes, which are in turn likely to be passed onto pension scheme members.”
All of these had significant cost implications; none of these appear to have been addressed by the ‘Yes’ campaign in its documentation which, where it says anything at all, states only that these matters would be negotiated with the UK government.
In May 2014, three months after Mr Brown voiced his concerns, and six months after the NAPF published its document, UK pensions minister Steve Webb (Liberal Democrat) said that Scottish people who had “accumulated rights” would be entitled to current levels of the UK state pension on retirement, if Scotland voted ‘Yes’.
This was mistakenly taken by the SNP to support the ‘Yes’ campaigns claims about pensions. It did not. Mr Webb was saying that pension entitlement would be unaffected. But – as state pensions are ‘unfunded’ (they come from general taxation rather than a dedicated pension ‘pot’) he didn’t say who would pay it. Decisions on which government would pay that money had not been made. That is likely to have been a highly contentious issue if ‘Yes’ had won the day.
Furthermore, any payout of UK state pension would continue to be tied to the UK’s rules, meaning citizens of an independent Scotland would not receive it until they reached UK retirement age, no matter whether the Scottish government had changed the age limit.
So much for “independence offers the people of Scotland full control over the type of pensions system that they would like to see. It would be for the different political parties to outline their proposals, including the retirement age,” as the ‘Yes’ campaign had claimed.
It seems clear, therefore, that Mr Brown was right to raise these concerns and point out that issues needed to be addressed. It is appropriate to ask whether Mr Webb would ever have addressed these concerns publicly, had Mr Brown not raised them first.
He was not lying to anybody. Labour was not lying to anybody.
Don’t let anybody lie to you about it.
Follow me on Twitter: @MidWalesMike
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