Devolving Social Security – Key Challenges and Opportunities

Published: 8 October 2014
Author: Nicola McEwen

Opinion polls have consistently suggested strong support for the Scottish parliament to have powers over social security. Over the next 6 weeks, the Smith commission now has an opportunity to consider, as part of its broader process, whether agreement can be reached over welfare devolution.

The UK parties favour maintaining Westminster control over most social security policies, but Labour and the Conservatives have proposals to devolve power to the Scottish parliament over two policies: Attendance Allowance and Housing Benefit. But what would the devolution of power over these benefits entail, and with what implications?

Attendance Allowance is a benefit paid to those of state pension age who need help with their personal care because of their disability. Processed in DWP centres in Preston and Blackpool, it amounted to £489m in 2012-13 - around 3% of Scotland’s welfare spend. The most likely form of devolution would see the Scottish government opting out of the UK-wide scheme of Attendance Allowance, receiving compensation in the form of a fiscal transfer. It would then be free, in principle, to redirect resources to its own programme of delivering free personal care, which serves a broadly similar purpose at a similar cost. Although in the longer term, this should generate cost savings, in the short term in may be politically difficult if it is viewed as withdrawing entitlement from those who currently receive both the cash benefit and the public service.

Housing Benefit presents more challenges. Amounting to £1,789 million in 2012-13 - around 9% of welfare spend in Scotland - housing benefit has undergone significant changes in recent years. These changes - of which the spare room subsidy/bedroom tax is the best known - were intended to curtail entitlement and cap or cut expenditure. Moreover, housing benefit is one of six working-age benefits/tax credits to be merged into the Universal Credit and so is set to be abolished as a stand-alone benefit. It is not yet clear how it could be disentangled from the rest of Universal Credit, which devolution of Housing Benefit alone would necessitate. There are clear opportunities, too, if resource could be redirected towards more affordable social housing, but this would only be achievable in the longer term.

The Smith process is likely to involve debates about devolving other areas of social security too, emerging from the SNP government, the Scottish Greens and civic Scotland. These discussions should consider some key questions common to the devolution of almost any social security policy:

Would devolution bring the power to make substantive policy changes, or would the Scottish government and parliament have to operate within a UK framework?

How and on what basis would the Scottish government be financially compensated for ‘opting out’ of UK social security programmes?

  • If calculations were made on the basis of UK budgets after the imposition of reforms designed to curb expenditure, with annual adjustments reflecting future changes in the UK (à la Barnett), this could adversely affect the Scottish government’s capacity to deliver social security, reverse cuts or effect change.

How would the new service or cash benefit be calculated, delivered and supported strategically?

  • If devolution went hand in hand with sharing the DWP’s bureaucracy for processing and delivering benefits, as well as the IT and Central Payment System for calculating entitlement and benefit levels, it would curtail significantly the capacity for the Scottish authorities to develop distinctive policies or to opt-out of further British welfare reforms
  • Developing a new welfare infrastructure in Scotland would bring more autonomy, but would carry set-up and operational costs and determining how and by whom these are met should form part of the early discussions.

These questions raise issues that are fundamental to the nature and scope of devolution. They will determine how much power the Scottish parliament will have to shape any new social security policies, as well as its capacity to deliver for those in need. They are not matters we should allow to be deferred to some later implementation stage. 

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