Scottish independence: Gordon Brown warns of pensions 'timebomb'

Gordon Brown: ‘It is right and proper that the British welfare state bears the rising cost of Scottish pensions.' Photograph: Murdo Macleod for the Guardian

Gordon Brown is to highlight Scotland's age "timebomb" on Tuesday as he makes his first public foray into the struggling Better Together campaign with a speech designed to persuade the country's pensioners that they will be better off staying part of the UK.

The former prime minister will enter the increasingly tight independence battle using leaked documents from the Department for Work andPensions (DWP) to illustrate how the Treasury will help pay for the escalating cost of retirement for Scotland's ageing population if the no side wins the referendum in September.

Brown will also say that 600,000 jobs in Scotland are in UK-owned companies or depend on trade with the rest of Britain. He will also argue that the first minister, Alex Salmond, wants Scotland to "opt out of the UK but opt into the UK currency without having any control over it".

Alarmed by the way in which the debate has become a question of whether people are "for Scotland or for Britain", Brown will seek to make a positive case for the union in terms of jobs, pensions, the NHS and influence over the setting of interest rates.

His first intervention for the Better Together campaign comes as the latest opinion polls show the no side with a lead of just three points, despite warnings from senior cabinet ministers in recent weeks over defence jobs, tax and whether an independent Scotland would be able to use the pound.

Brown has spoken out against independence before, but only through Labour's United with Labour campaign, not the cross-party Better Together, which is headed by Alistair Darling, Brown's former chancellor. There has been speculation that the acrimony that crept into their relationship towards the end of their time in office, and afterwards when Darling published his memoirs, has stopped Brown – whose standing with voters is much higher in Scotland than in the rest of the UK – from playing a role until now.

"For too long, the referendum debate has been presented as one side representing Scotland and the other side representing Britain," Brown will say in a speech at Glasgow University.

"In fact, the real debate is between two Scottish visions of Scotland's future – the nationalist one based on the breaking of all political links with the UK and our vision based on a strong Scottish parliament backed up by a system of pooling and sharing risks and resources across the UK."

But the thrust of his speech will be aimed at Scotland's pensioner vote, the group that the polls suggest are the most sceptical about independence.

Using unpublished internal DWP figures, Brown will say that Scotland will be better off as a result of his campaign to "keep our pensions British". The number of Scottish pensioners is expected to rise from 1 million to 1.3 million in the next two decades – a quicker increase than in the rest of the UK – so Brown will argue that Scotland will reap an increasingly large dividend from a system that sees it pay 8% of UK national insurance but receive 8.8% of the benefits.

By 2030, 30% of Scots will be over 60 compared with just over 20% now. The bonus matters to Scotland, says Brown, because of the timebomb revealed in the internal DWP review. It shows, he says, how a slow growing Scottish working-age population would otherwise have to bear the rising costs of pensions alone. The review says "under the principal migration variant in 20 years' time, there are projected to be 2.84 working age people per pensioner in Scotland compared with 2.98 in the whole of the UK".

Brown will add that the UK is underwriting what the DWP privately estimates to be a £100bn Scottish public sector pensions bill. Although Scotland accounts for only 8% of the UK population, it accounts for 10% of the public sector pension liabilities.

He claims a third pensions gain for Scotland would be the removal of the £1bn cost facing a new government in Edinburgh to administer the first years of a separate pensions system once IT costs were included. He claims that on top of £720m running costs, there would be £300m-400m in computer bills. Those costs, he will say, will be incurred because of "unnecessary duplication".

"The whole point of sharing risks and resources across the UK is that it is right and proper that the British welfare state bears the rising cost of Scottish pensions as the number of old people will rise from 1 million to 1.3 million," he will say.

"As the internal DWP document makes clear, it is fairer and better for everyone that Britain's faster rising working-age population rather than Scotland's slow rising working-age population covers the cost of the rising numbers of elderly in Scotland, because we have contributed in UK national insurance all our lives to spread the risks of poverty in retirement."

Brown's speech will say that unpublished Registrar General and DWP statistics show that Scotland currently receives £9.6bn a year in overall pensioner benefits but would get just £9.1bn in pensioner benefits if the money was allocated on the basis of population rather than need.

With a relatively less well off and less healthy population, Scotland gains from pensioner credits and disability benefits, Brown will argue. The average Scottish pensioner receives £25 a week in pension credit and £20 a week from disability support. Brown argues that the two measures explain why pensioner poverty fell dramatically from 33% to 11% while Labour was in office from 1997 to 2010.

"So while it costs the UK £1,725 per head of the population for all pensioner benefits, Scotland receives £1,805 per head – a gap of £80 per person that will rise to £120 over the next two decades.

As the Scottish pensions bill escalates, social security spending will be rising in Scotland by 3% a year compared with the UK's 2% a year."

He will add: "If the SNP deny there is a problem they have to explain why they have set up a working party on 'the affordability' of future pensions.

"The SNP government has said the case for independence should be judged on whether Scotland would benefit financially or not.

"It is clear that pensioners are better protected when the risks are spread across the UK and it is also clear that in the year the SNP want independence the Scots pension bill alone is three times the income from oil revenues."

In their white paper on independence, Salmond's Scottish National party says all accrued state and public sector pension rights would be protected in an independent Scotland. They acknowledge that all western governments "need to take account of ageing populations", but they say that such decisions would be better taken by an independent Scotland.

Eilidh Whiteford, the SNP's work and pensions spokesperson, claimed that Brown was scaremongering.

"Gordon Brown is simply repeating the same economically illiterate claims the Tories and Lib Dems made over a year ago," she said.

"On this backwards logic, the UK pensions bill is 25 times the value of its oil and gas – making it impossible for the UK to afford to pay for pensions."

"The only new thing in this contribution is that Gordon Brown has finally ended the charade and joined his Labour colleagues in the Tory no campaign.

"Far from relaunching as a positive campaign, this contribution is negative, repetitive and lacks any credibility."