Social Security in Six Charts – update

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Scottish social security is growing fast.  In December 2022, David Wallace, Chief Executive of Social Security Scotland said that:

We are just past the midway point of the biggest agile delivery programme in the history of Scottish devolution

David Wallace, 22 December 2022

By the end of 2022, Social Security Scotland employed over 4,000 staff and was directly responsible for administering £0.6 billion of benefit spending.  By 2027-28 that figure will be around £7 billion. 

This blog explores that growth, updating the blog published in October 2022 with revised spending forecasts published in December 2022 and the revised business case published in February 2023.

A ten-year programme: 2016 to 2025

New devolved powers for social security were included in the Scotland Act 2016

Social Security Scotland was created in 2018 and currently administers 13 benefits (counting Best Start Grant as three benefits). It is due to launch six more over the next few years – starting with the pilot for Carer Support Payment later this year.  The only benefit still without a start date is the replacement for Industrial Injuries Disablement Benefit – Employment Injury Assistance. A consultation is due this year.

There is also a complex programme transferring clients from the Department of Work and Pensions (DWP). The Minister for Social Security and Local Government, Ben Macpherson, told the Scottish Parliament that;

I am pleased to confirm that we continue to make steady progress on the safe and secure transfer of 700,000 disability and carer cases from the DWP to Social Security Scotland and that we remain on track to complete that work by December 2025

Ben Macpherson, MSP, Scottish Parliament, 7 February 2023

Social Security Scotland’s share of spending is increasing

Total spending on devolved social security is forecast to grow to around £7.2 billion by 2027-28. Almost all of this (£7.1 billion) will be administered by Social Security Scotland, with most of the rest administered by local authorities.

Currently the DWP administers several benefits on behalf of the Scottish Government.  In 2023-24, £3 billion of devolved benefit spending is under these ‘agency agreements.’

The animation shows how Social Security Scotland’s share of spending is forecast to grow rapidly over the next couple of years as people move across from DWP benefits.  Under current plans, only Severe Disablement Allowance will stay with DWP because it is closed to new clients.

Animation: devolved social security spend by agency 2018-19 to 2027-28

Scottish spending is growing faster than UK funding

The Scottish Government spends more on social security than it gets from the UK Government in funding – around £776 million more in 2023-24 and forecast to rise to £1,416 million more in 2027-28.

As discussed in a recent blog, this additional spending is mostly needed for the Scottish Child Payment and to fund the differences between Scottish Adult Disability Payment (ADP) and the DWP’s Personal Independence Payment (PIP).  Much is still uncertain though – as it depends on how different ADP turns out to be in practice compared to PIP. 

Even without considering the potential impact of disability benefit changes, existing policy is already boosting the incomes of lower income families.  The IFS recently looked at tax and benefit policy differences between Scotland and the rest of the UK.  Not including the potential impact of differences in disability benefits they found that:

Poorer households benefit from new benefits and top-ups, as well as slightly lower rates of income tax for low-earning taxpayers. The poorest 10% will be £580 per year better off as a result of the Scottish policies we model, or 4.6% of what their incomes would be under UK government policy

Institute for Fiscal Studies, February 2023

While they don’t model the impact of disability benefit changes, they do note that their impact is likely to be most felt at the bottom of the income distribution, saying:

… an increased leniency in disability benefits (if that is indeed what ADP ends up delivering) will be broadly targeted at households with low living standards. This means that the gap in progressivity between Scotland, and England and Wales is likely to eventually be even larger.

Institute for Fiscal Studies, February 2023

Since 2016, many have hoped that devolution would lead to more fundamental changes to disability benefits.  However, in the context of tight budgets, the scope for further change may be limited.  An independent review later this year will consider changes to ADP eligibility criteria.  The consultation running up to that review refers to budget pressures, and states that:

Major changes which result in new, additional spending will therefore not be deliverable within this parliamentary term.

Scottish Government, January 2023

Social Security Scotland’s caseloads are increasing

The number of clients that Social Security Scotland deals with is going to increase hugely over the next couple of years.  This includes:

  • Over 400,000 clients getting Winter Heating Payment when it replaces Cold Weather Payments in February and March 2023.
  • Over 1,000,000 clients getting Pension Age Winter Heating when it replaces Winter Fuel Payment in 2024.
  • Over 300,000 clients transferring from Personal Independence Payment to Adult Disability Payment over the next couple of years.

The chart below shows the expected caseloads in 2027-28, showing how Pension Age Winter Heating Payment will by far the largest benefit in terms of number of clients.  It’s the largest benefit because it will go to everyone over pension age, regardless of income.

The Scottish Government estimates that, once the current programme is complete, Social Security Scotland will be delivering benefits to around 1.8 million people.

Administration and development costs have possibly peaked, but it’s all costing more than first expected

In 2017 the total cost of developing Scottish social security was expected to be £308 million over four years (2018-19 to 2021-22). Even at the time it was acknowledged that this was a very rough estimate and that ‘costs would change materially’.  It is now forecast to cost £715 million over eight years.  

Staff costs have more than tripled since the original estimates – largely in response to the longer timescale.  For more detailed discussion see Audit Scotland report in May 2022.

The final chart looks at operating costs as well as development (implementation investment) costs.  They compare estimates made in February 2020 with those published on 7 February this year and show how the cost profile has changed.  

Looking at costs to date it’s clear that actual costs – particularly Social Security Scotland’s operating costs – have risen more slowly than expected, reflecting delays to the timetable.

Looking forwards, costs are expected to peak this year and then fall quite rapidly. In particular, by April this year, most of the implementation investment will have been spent (£516 million out of the £715 million). 

This would suggest that the bulk of the development work is done.  However there are four major benefits still to develop and launch (replacements for Carer’s Allowance (pilot late 2023), Winter Fuel Payment (late 2024), Attendance Allowance (pilot late 2024) and Industrial Injuries Disablement Benefit (tbc)).  

Whether or not 2022-23 does turn out to be the peak year of development spending will be something to keep an eye on over the next few years.

Camilla Kidner, SPICe, February 2023