Social security spending makes up 13% of the entire budget
In 2024-25, the Scottish Fiscal Commission forecast social security benefit spend of £6,283 million. This makes up 13% of the entire Scottish Government resource budget of £47,594 million. It is third in size after health and local government. As you can see from the chart below, most of this is for Adult Disability Payment which on its own takes up 7% of the entire Scottish resource budget.
Explainer: The Scottish Fiscal Commission and Scottish Government present figures slightly differently. This blog uses the SFC figures. The key differences relevant for this blog are:
Scottish Fiscal Commission | Scottish Government |
Compares latest position for 2023-24 with forecast for 2024-25. | Compares initial budget for 2023-24 with budget for 2024-25. |
Total resource funding for discretionary spend of £46,083 rising to £47,594 | Total fiscal resource of £41,745 rising to £44,323. Differences relate to the exclusion of non-domestic rates income and the inclusion of the adjustments for IFRS16 accounting adjustments in the Scottish Government figures. |
Social Security latest forecast £5,299 in 2023-24 rising to £6,283 in 24-25. Includes employability and DHPs, but does not include Young Carer Grant and Job Start Grant | Social security initial budget of £5,138 in 2023-24 rising to £6,169. Includes Young Carer Grant and Job Start Grant, but not employability or DHPs |
As other budgets are squeezed, social security spend increases
Total Scottish Government resource funding in 2024-25 is increasing by £1,511 million compared to the latest budget position for 2023-24 (SFC fig S2.1). Social Security benefit spending is increasing by £984 million (SFC fig 5.2).
As the next chart shows, this leaves limited room in 2024-25 for any increases in the rest of the entire Scottish budget. In future years, current forecasts suggest that less of the increase will be absorbed by increased social security spend. That said, these future forecasts are quite uncertain.
Social security BGA covers most of the increase to the social security budget
Most of the £984 million increase in Social Security budget is covered by a £787 million increase to the funding received from the UK Government through the social security Block Grant Adjustments (BGAs).
Of the remaining £197 million, most (60%) is an additional £117 million forecast spend on Adult Disability Payment. This is the combined impact of assumptions that caseload and average payments will increase. Higher payments are in part due to uprating for inflation, but also reflect assumptions about different decision making in Social Security Scotland compared to the Department of Work and Pensions.
The other main increase is an additional £30 million for the Scottish Child Payment. This is largely due to uprating from £25 per week to £26.70 per week combined with assumptions that take-up will increase slightly.
Explainer: What’s a BGA?
| There is a BGA for each benefit that has been devolved. Funding increases in proportion to England and Wales. For example, if UK government spending on Personal Independence Payment goes up by 2%, then, broadly speaking, so does the BGA for the Scottish equivalent benefit – Adult Disability Payment. (There is also an adjustment for differences in population growth, but to date this has had minimal impact). This funding is not ring-fenced for social security, but it can be useful to think of it as what the Scottish Government is receiving to enable it to match UK government social security policy. Not all benefits have a BGA – some benefits, such as Scottish Child Payment only exist in Scotland and so there is no specific UK government funding for it. |
£1 billion ‘spend above BGA’ in 2024-25
The BGA system means that rather than looking at the total spend on devolved social security, it can be more useful to look at what the Scottish Government plans to spend above the level of BGA.
In 2024-25 the Scottish Government is forecast to receive £5,191 million in Social Security BGA but plans to spend £6,283 million – a difference of £1,092 million. The next chart shows how this difference is forecast to increase over the next five years, reaching £1,502 million by 2028-29.
Most additional spend is on Adult Disability Payment and Scottish Child Payment
The extra spending is mostly going on two benefits – Adult Disability Payment and the Scottish Child Payment. In 2024-25 the main areas of spend ‘above BGA’ are:
- £300 million additional spend on ADP compared to the BGA for devolution of PIP
- £457 million on Scottish Child Payment, which has no BGA
Together these make up 69% of the difference between forecast spend and BGA in 2024-25. These two benefits will continue to dominate this ‘additional spending’ in future years. In 2028-29, 65% of the forecast £1,502 ‘spend above BGA’ is on Adult Disability Payment and Scottish Child Payment.
ADP forecasts are very uncertain
ADP is a new benefit, still in the process of replacing Personal Independence Payment and working age Disability Living Allowance. While it is clear that more people are applying, it is not yet clear whether the principles of dignity and respect which underpin Social Security Scotland are leading to paying higher amounts. This matters because, as pointed out above – ADP is 7% of the Scottish resource budget in 2024-25.
DWP’s role in administering devolved benefits is reducing
Up until now, most devolved social security has been administered by the Department for Work and Pensions under agency agreements. The next chart shows how this will reduce over time.
In 2024-25, for the first time, it’s expected that Social Security Scotland will administer most devolved benefit expenditure itself. This is driven mainly by the expectation that the transfer of people from PIP to ADP will be completed during 2024-25.
At £4,209 million, Social Security Scotland will be directly administering around double the expenditure they administered in 2023-24. This is also more than double the £1,925 million devolved benefit expenditure that the DWP is expected administer in 2024-25. This is quite uncertain though as much depends on how quickly clients are transferred from PIP and DLA to ADP.
As more and more clients transfer from DWP to Social Security Scotland the impact of Social Security Scotland’s different ethos will start to become more evident in benefit spending.
The animation below shows this change for individual devolved benefits.
Conclusion
In a very tight fiscal settlement it’s striking that 13% of the entire budget is demand led social security. Uncertainty over the trends in newly created benefits – particularly ADP – could have a significant impact on wider Scottish Government decision making on the budget. Where trends are mirrored in England and Wales then there is some protection through the BGA. As Scotland diverges in policy, the ‘spend above BGA’ becomes an increasingly important factor to consider in balancing the Scottish budget as a whole.
Camilla Kidner, SPICe, February 2024.