At approaching £7 billion, social security makes up around 14% of the 2025-26 Scottish resource budget. This blog looks at the additional spending by the Scottish Government on social security as well as operating and development costs.
Growth in spending is slowing down
Social security spending is increasing by 11% (£693 million) in 2025-26. This is considerably less than the £984 million increase last year. The main factors contributing to this £693 million growth are:
- £428 million additional spend on Adult Disability Payment, reflecting a UK-wide trend in increased disability benefit spending.
- £94 million additional spend on Child Disability Payment.
- £68 million additional spend on Pension Age Winter Heating Payment – £67 million of which reflects the new policy to provide a payment to all pensioner households.
While spending is expected to continue to grow, the rate of growth is expected to slow down over the next five years. Despite this, as the chart shows, it will still be around £8,684 million by the end of the decade.
Scotland is spending £1.3 billion more than it gets in funding from UK Government
Most social security is covered by UK Government funding through Block Grant Adjustments (BGA). The BGA broadly reflects what it would cost the Scottish Government to provide social security benefits equivalent to those available in England and Wales. What really matters for the Scottish Budget is the additional spending in Scotland compared to this UK Government funding. That is, the spend ‘above BGA’ for those benefits that have an equivalent in England and Wales, such as Adult Disability Payment, and the spend on payments that only exist in Scotland, such as Scottish Child Payment.
The next chart shows how this spend above BGA increased dramatically between 2023-24 and 2025-26 to £1.3 billion but is then expected to stabilise, albeit at still a high level of around £1.5 billion from 2026-27 onwards.
The largest elements of additional Scottish spending above UK funding in 2025-26 are:
- £471 million on the Scottish Child Payment
- £314 million additional spend on Adult Disability Payment (ADP) compared to its UK equivalent, Personal Independence Payment (PIP)
- £103 million additional spending on winter payments. Most (£67 million) of this is for extending Pension Age Winter Heating Payment to give at least £100 to all pensioner households)
- £100 million additional spending on carer benefits.
Two-child limit
The announcement on budget day of mitigating the two-child limit doesn’t apply to the 2025-26 budget. None of the above figures take account of this policy which will add further to ‘spend above BGA’ as it is a divergence from policy elsewhere in the UK. The Scottish Fiscal Commission will publish a costing in the new year, but their indicative costing is that it could add £150 million in 2026-27 rising to over £200 million in 2029-30. The Institute for Fiscal Studies suggest it could add £250 million from 2026-27 onwards. That higher estimate would increase the additional spending in Scotland to around £1.7 billion and make mitigating the two-child limit the third most expensive element of additional spend – after the Scottish Child Payment and additional spend on ADP compared to PIP.
Other new policies
Other new and recent policies are expected to add little to the ‘spend above BGA’. These are:
- Extending the duty to uprate to include all Social Security Scotland benefits. As the largest benefits are already uprated, and are also uprated by the UK Government, this additional duty adds very little cost. It is forecast to add just £2 million in 2025-26 rising to £19 million in 2029-30.
- The introduction of Scottish Adult Disability Living Allowance from March 2025 has a broadly neutral effect on the budget – as it is just transferring older adults who get Disability Living Allowance from DWP to Social Security Scotland.
- Increasing the earnings threshold for Carer Support Payment mirrors UK Government policy, and so does not create additional cost.
- The intention at some future date to create a Care Leaver Payment is likely to cost under £3 million per year.
DWP’s role in delivering devolved benefits is diminishing
2025-26 marks the planned end point for the programme of social security devolution that began with the Smith Commission in 2016. Since 2020, the Scottish Government has had agency agreements with the DWP to deliver devolved benefits on its behalf while it develops ‘Scottish versions’ of them. This process is approaching completion – with the notable exception of Employment Injury Assistance. This means that in 2025-26 almost all (92%) of devolved benefit spend will be directly administered by Social Security Scotland. The chart and animation below shows how this has developed since the agency was established in 2018.
The animation below shows this change for individual devolved benefits.
Social Security Scotland operating costs are around 5% of benefit spend
Despite this huge growth in function, Social Security Scotland’s operating budget has not increased to the same extent. This may reflect that previous budget allocations have allowed the agency to prepare for the eventual scale of delivery. Over the years, as the chart below shows, outturn expenditure by the agency has generally been under-budget.
Now that case transfer is approaching completion, it is possible to consider Social Security Scotland’s operating costs relative to benefit spend as it moves from establishing new systems to a more of a ‘steady state’. In 2025-26 its total operating budget of £321 million is around 5% of the £6,332 million benefit spending it will be administering. This compares favourably to the 5.2% set out in table 5.11 of the Financial Business Case in 2020.
The Social Security Programme is winding down
The Social Security Programme was set up within the Scottish Government to develop social security benefits, which it then passes to Social Security Scotland for ‘live running’. As the programme of social security devolution nears completion the Programme is winding down. This is reflected in a budget reduction this year. After 2025, its expected that remaining Programme functions will pass to Social Security Scotland. This transfer from the Programme to the agency is highly complex and rated as one of the highest scoring risks faced by the agency. There is now the added issue of developing plans for mitigation of the two-child limit.
The chart below shows a total of £1,395 million on ‘Advice Policy and Programme’ since the start of social security devolution in 2018. (A total of £880 million operating and £515 million capital over 8 years). This is a rough estimate of the cost of developing new systems and benefits.
Looking to 2026 and beyond
The largest single benefit is Adult Disability Payment which is forecast to cost around £5 billion by 2029-30. Most (£4.7 billion) of this is expected to be funded through the Block Grant Adjustment. The UK Government plans to issue a green paper in Spring 2025 on health and disability benefit reform. If this leads to reduced spending on Personal Independence Payment this will also reduce the Block Grant Adjustment and could put considerable pressure on the Scottish Budget.
Camilla Kidner, SPICe research.