Public expenditure

How small independent countries create a better, more equal society

Stephen Richard — Thu, 04 Nov 2021 18:21:38 +0000

How small independent countries create a better, more equal society

Primary Author or Creator

Believe in Scotland

Stephen Richard Thu, 11/04/2021 - 18:21

Category

Social welfare

Type of Resource

Article

Fast Facts

It has become clear that small, independent countries largely outperform the UK and offer greater security to their citizens.

More details

State pension

As we have already shown, the state pension is a gloomy aspect of the UK’s welfare system. So, how much exactly does the UK offer to old age pensioners?

A recent Believe in Scotland billboard highlighting the UK’s poor state pension

The UK former state pension consisted of two tiers – the basic state pension (£137.60 a week) and an earnings-related additional state pension. The new state pension provides a flat-rate pension worth up to £179.60 a week.

Let’s see how this compares to other countries.

Flat-rate state pensions in countries across Northern Europe: a comparison of full entitlement

Country Basic Pension As a % of UK new state pension

UK Up to £179.60 100%

Ireland £212.08 118%

Norway (basic rate) £162.66 91%

Norway (minimu) £330.38 184%

Denmark (basic rate)£172.27 96%

Denmark (with additional supplement)£366.14 204%

Small, independent countries offer a much greater state pension than the much larger UK

These figures highlight that small, independent countries offer a much greater state pension (including full entitlement) than the much larger UK. Therefore, it’s more likely that an independent Scotland would follow a similar path as its European neighbours. Indeed, the SNP has said that an independent Scotland would work to increase the Scottish state pension to match the EU average, effectively doubling it.

Net pension replacement rate

The net pension replacement rate is another interesting way of analysing and comparing the state pension schemes across various countries.

The Organisation for Economic Co-operation and Development (OECD) defines net pension replacement rate as “the individual net pension entitlement divided by net pre-retirement earnings, taking into account personal income taxes and social security contributions paid by workers and pensioners.”

The net pension replacement rate measures how effectively a pension system provides a retirement income to replace earnings as the main source of income before retirement.

Country Net pension replacement rate (% of pre-retirement earnings)

UK 28.4

Ireland 35.9

Norway 51.6

Denmark 70.9

This table demonstrates that the UK’s net pension replacement rate is significantly worse than several of the small independent countries across Europe. In fact, the only country that offers a state pension that constitutes a lower percentage of pre-retirement earnings is South Africa.

Public social spending

Public social spending is another important factor that should be considered when analysing the effectiveness of a country’s social support system. Public social spending includes health, old age, incapacity-related benefits, family, unemployment and housing, among other things.

Country Public social spending (% of GDP)

UK 20.6

Ireland 13.4

Norway 25.3

Denmark 28.3

These figures highlight that, with the exception of Ireland in this case, Scotland’s Northern European neighbours with a similar population size outperform the UK in terms of public social spending. Indeed, both Norway and Denmark spend a significantly great share of the country’s GDP on public social services than the UK.

Income distribution

Lastly, this article will consider the distribution of income – another important aspect of ensuring an equal and well-supported society.

The OECD provides an Income Distribution database that monitors the performances of countries in the field of income inequality and poverty. This is measured using the Gini coefficient, which is based on the comparison of cumulative proportions of the population against cumulative proportions of income they receive (ranging from 0, in the case of perfect equality, and 1, in the case of perfect inequality). Therefore, with reference to the OECD’s database, we have compared the case study countries of this article.

Country Income distribution

UK 0.366

Ireland 0.295

Norway 0.262

Denmark 0.264

This data, again, shows several small independent countries across Europe outperforming the UK. Indeed, Ireland, Norway and Denmark all provide greater income equality than the UK.

By analysing these various social support factors, it has become clear that small, independent countries largely outperform the UK and offer greater security to their citizens

Conclusions

This article has drawn upon data from various countries across Europe, including the UK, Ireland, Norway and Denmark. By analysing these various social support factors, it has become clear that small, independent countries largely outperform the UK and offer greater security to their citizens. This includes pensions, income distribution and public social spending. Overall, it can be suggested that an independent Scotland would behave similarly to these small European countries and the Scottish Government has already set out various goals for an independent Scotland to prioritise social wellbeing factors and match European targets.

Keywords

Pensions

Public expenditure

Income distribution

Language English

A Guide to the Government Expenditure and Revenue Scotland (GERS) Report

Stephen Richard — Wed, 29 Sep 2021 10:39:20 +0000

A Guide to the Government Expenditure and Revenue Scotland (GERS) Report

Primary Author or Creator

Fraser of Allander Institute

Stephen Richard Wed, 09/29/2021 - 11:39

Additional Author(s) / Creators

University of Strathclyde

Alternative Published Date

2021

Government Expenditure & Revenue Scotland 2020-21

Stephen Richard — Wed, 29 Sep 2021 10:03:17 +0000

Government Expenditure & Revenue Scotland 2020-21

Primary Author or Creator

Scottish Government

Stephen Richard Wed, 09/29/2021 - 11:03

Additional Author(s) / Creators

Add additional Authors and/or Publisher

Date Published

Wed, 08/18/2021 - 12:00