Leaked paper shows SNP fears over cost of benefits

Thursday 7 March 2013

SNP ministers have privately voiced concerns about an independent Scotland being able to afford state pensions and unemployment benefits.

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Magnus Gardham and Michael Settle

A secret cabinet briefing paper by Finance Secretary John Swinney, which has now been leaked, revealed fears at the heart of the Government about the state of the country's finances and the impact on public spending.

Mr Swinney acknowledged in the document that an independent Scotland, heavily dependent on volatile and declining oil revenues, and fully responsible for economic growth, would face uncertainty over its future spending power. He also warned that paying off Scotland's share of the UK's national debt – a bill estimated at £5.2 billion in 2016/17 alone – would be a significant feature of Scotland's budget after independence. Mr Swinney drew up the analysis nearly a year ago but the Government said last night it had been overtaken by events. The row emerged as official figures showed the country was in a stronger fiscal position than the rest of the UK last year. Alistair Darling, head of the pro-UK Better Together campaign, which published the document in annotated form on its website, said: "This secret report is a hammer blow to the credibility of the SNP. "It shows they will tell tales to the people of Scotland even although, in private, they know the opposite to be true. In public they tell us oil will pay for everything, but in private they know it won't." In his briefing, Mr Swinney acknowledged cost pressures on public services as a result of falling oil revenues. On the Government's long-standing plan for an oil fund, the Finance Secretary warned: "This would, on present assumptions, require some downward revision in current spending." Mr Swinney said the group of economic advisers, who presented a macro-economic framework for independence, would consider the affordability of state pensions. He added consideration was being given to how an independent Scotland would pay unemployment benefits when the economy was doing poorly. The paper revealed it would cost between £575 million and £625m a year to operate a Scottish tax collection system. Mr Swinney also warned that military spending would have to be less than the £3.5bn Scotland contributes to UK defence. The SNP has pledged a £2.5bn defence budget. He also accepted economic policies would have to be in line with the terms of any deal with the UK Treasury to keep the pound. Scottish Secretary Michael Moore said: "The Scottish Government is admitting in private what we have long said in public: volatility and falling North Sea revenues would leave an independent Scotland facing financial uncertainty. Ministers are right to say Scotland would need to make stark choices on tax, borrowing and funding for hospitals, pensions and defence. "Now they should be open about what those choices are and how they would pay for them." Scots Labour leader Johann Lamont said: "This shows the chasm between what SNP ministers say to each other in private and what they are prepared to tell the public. In private, John Swinney tells colleagues he doubts the affordability of the state pension in a separate Scotland – in public he won't admit it to pensioners." Scottish Conservative leader Ruth Davidson said: "The difference between what the SNP say in public and what they know in private is astonishing." Deputy First Minister Nicola Sturgeon played down the importance of the document, insisting it was an early draft of the paper. She said: "We must be the only country on the planet where some people see oil as some kind of negative in the economy." A Scottish Government spokeswoman said the paper was about 12 months old and had been overtaken by events. She added: "As this paper makes clear, Scotland has nothing to fear and everything to gain in grasping the opportunities of independence. It also shows the depth of detailed work the Scottish Government is undertaking on financial planning."

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Leaked paper shows SNP fears over cost of benefits

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