The Scottish Government will spend around £4 billion next year on devolved social security.
Social Security Scotland spend is increasing but most devolved spending is still on DWP benefits
About £610 million will be spent by Social Security Scotland on benefits it administers directly – a huge increase on £170 million this year. This is largely made up of three benefits:
- Scottish Child Payment (SCP) £197 million
- Child Disability Payment (CDP) £178 million
- Adult Disability Payment (ADP) £124 million
Social Security Scotland is an executive agency set up in autumn 2018 to administer the newly devolved social security benefits. The figures for CDP and ADP are for new claims and transfers from Disability Living Allowance (DLA) and Personal Independence Payment (PIP) during 2022-23.
Like last year, most devolved benefit spending (82%, £3.3 billion) is via Agency Agreements with the DWP. This is where the Scottish Government pays the DWP to continue to administer disability and carer benefits on its behalf.
The animation shows the growth of Social Security Scotland benefits since 2018. The start of agency agreements for disability benefits in April 2020 led to a large increase in Scottish Government spending on DWP benefits. Over time, this will transfer to benefits administered directly by Social Security Scotland. Local authority spending, initially a large part of the social security budget, is now dwarfed by DWP and Social Security Scotland spend. (Council Tax Reduction is included in the diagram to illustrate the scale of this scheme that replaced council tax benefit). You can see a static version of the animation, plus further detail on the figures, in the SPICe 2022-23 Budget briefing.
The headline measure is the doubling of the Scottish Child Payment – a decision forecast by the Scottish Fiscal Commission to cost an additional £103 million next year bringing the total forecast spend on the Scottish Child Payment to £197 million in 2022-23. This total cost rises to £362 million in 2023-24 as the first full year when the benefit is available up to the age of 16.
Arguably just as significant is the introduction of Adult Disability Payment (ADP).
From next spring ADP will start to replace the main working age disability benefit – Personal Independent Payment (PIP). The rules will be much the same, but the large scale of PIP means that even relatively minor changes have a big impact. Anything that makes ADP more expensive than PIP would have been has to be funded by the Scottish Government. Some of the things that will increase spending compared to PIP include:
- an initial increase in applications as the benefit is launched
- a different approach to the process resulting in more successful applications and more awards at the higher rates of the benefit
- different rules around terminal illness
Next year, these differences will cost an additional £38 million. This rises to an additional £567 million in ADP and Carer’s Allowance spending 2026-27. This is before any consideration is given to significant widening of eligibility.
Also new next year is Low Income Winter Heating Assistance – (£50 annual payment to people on low income benefits, replacing Cold Weather Payment and currently out for consultation). At £21 million it isn’t particularly large in spending terms but, at around 400,000, the caseload will be the largest so far administered by Social Security Scotland.
Operating costs are increasing
The new and expanded benefits starting next year means more work for Social Security Scotland. They plan to take on 2,000 additional staff taking their total numbers from 1,560 in June 2021 to 3,500 by autumn 2022 – that’s more than doubling over the space of around 15 months. Unsurprisingly their budget for administration is going up – from £271million this year to £311million next year – an increase of 14.6% (in cash terms).
The Social Security Programme is separate to Social Security Scotland and is part of the Scottish Government’s Social Security Directorate. It develops new benefits before handing them over to Social Security Scotland to deliver. As well as getting Low Income Winter Heating Assistance ready for next winter, over the course of this Parliament the Programme needs to develop Scottish versions of Carer’s Allowance, Winter Fuel Payment, Industrial Injuries benefits and Attendance Allowance. The operating budget for programme and policy is increasing 12.2% – from £196 million this year to £220 million in 2022-23 (in cash terms).
Benefit rates are mostly increasing
At a time of rising living costs changes in benefit rates take on a particular importance. CPI inflation for the year to November 2021 was 5.1%.
Most, but not all, Scottish benefits are increasing by 3.1% which was the CPI inflation rate in September 2021.
Child Winter Heating Assistance is an annual payment to families with severely disabled children and is increasing by 5% to £212.10.
Not everything is going up. Best Start Foods (BSF) and Best Start Grant (BSG) are not being uprated – effectively a ‘real terms’ cut.
Nearly everyone who qualifies for BSG and BSF will also qualify for the SCP. Doubling the SCP adds more to these families’ incomes than uprating BSF and BSG would have done. BSF was increased by 6% in August 2021.
A family with a new baby who are entitled to the Scottish Child Payment (£20 per week), Best Start Grant (£606 one-off payment) and Best Start Foods (£9 per week) will get £2,114 in total over the year. The increase to the Scottish Child Payment means that’s £520 more than they would have got in the current year. But if BSF and BSG had been uprated for inflation, they would have received a further £34.40 on top of that.
There are two other policy choices, which although not strictly ‘uprating’ decisions, do set the level of payments made.
The Carer’s Allowance Supplement is uprated for inflation, but there’s no repeat of the ‘double payment’ being made this month that was agreed in the Carer’s Allowance Supplement (Scotland) Act 2021. This is interesting given the intense discussion during that Bill’s parliamentary process about whether the ‘double payment’ should be continued in future years.
There is also a bridging payment for pupils getting free school meals. It’s an interim measure for the lowest income families until the Scottish Child Payment is extended to 6 to 15 year olds in December 2022. The £68 million budget suggests its staying at £10 per week and not increasing to £20 per week like the Scottish Child Payment.
The Scottish Government is likely to get around £360m less in UK funding than it is spending on social security.
In 2022-23 the Scottish Government will receive around £3.6 billion from the UK Government in the Block Grant Adjustment (BGA) for social security. Spending on devolved DWP and Social Security Scotland benefits is forecast to be around £4 billion – a difference of around £360 million. These are forecasts so these figures will change and some smaller benefits are funded outwith the BGA system. Never the less its clear that there is significant additional money for social security that needs to be found elsewhere in the Scottish budget or through changes to taxation policy. This reflects both policy decisions by the Scottish Government and different rates of growth in per capita benefit expenditure (which determine the BGA).
Longer term that ‘funding gap’ gets much bigger
Policy decisions made now build up into higher payments and increased caseload over the long term. By 2026-27 ADP will cost £567 million more than if PIP had continued and the SCP will cost £363 million in total – money that will have to be found from elsewhere in the Scottish Budget or through tax changes
The Scottish Fiscal Commission has said that:
“we now expect that by 2024-25 social security spending will exceed the corresponding funding by £750 million.”Scottish Fiscal Commission, Economic and Fiscal Forecasts, December 2021
The gap is very likely to be bigger than this:
- This £750 million doesn’t reflect the total additional cost of ADP compared to PIP
- The ‘Scottish versions’ of Carer’s Allowance, Attendance Allowance, Winter Fuel Payment and Industrial Injuries Disablement Benefit might be more generous, in the same way that ADP costs more than PIP.
- A review of ADP in 2023 will face calls to expand eligibility – which would cost more
- If the UK Green paper on health and disability reforms DWP disability benefits, then the amount provided through the BGA could change.
This scale of additional funding may require difficult policy choices elsewhere in the budget.
Camilla Kidner, SPICe research