Impact on the UK of Scottish independence: social security and tax credits

Following the creation of the Scottish Parliament, welfare (i.e. social security and tax credits) remained one of the few areas of domestic policy wholly reserved to the United Kingdom Parliament.

In the event Scotland becoming an independent country, the Scottish and Westminster governments would have to address two main issues:

• How to deliver benefits, pensions and tax credits during the initial transitional period following independence, given existing unified systems and structures; and

• In the longer term, how the welfare systems of Scotland and the rest of the UK should deal with cross border matters, such as individuals moving from one territory to the other, and whether one country’s benefits should be exportable to the other.

Key points which emerge from consideration of these matters include:

• Sharing administration of benefits between Scotland and the rest of the UK for a transitional period following independence would minimise risks but limit divergence of policies.

• Agreement would have to be reached on how the two countries’ welfare systems should relate to each other in the longer term.

• The EU social security co-ordination rules would provide a detailed framework for how the two systems should interact, and Scotland remaining part of the “Common Travel Area” would make it easier for people moving between the two countries.

This note looks in more detail at these issues. It does not consider the welfare policies a Scottish Government might pursue, and related issues such as affordability.

A separate Library briefing – SN06914 – looks at the implications for pensions in the continuing UK of Scotland becoming independent.