Devolving Welfare

Published: 29 June 2015
Author: Nicola McEwen
As the House of Commons prepares to debate the welfare clauses in the Scotland Bill, Professor Nicola McEwen reflects on some of the challenges and opportunities the new welfare powers may present.
The Scotland Bill, once implemented, will represent a marked increase in the Scottish Parliament’s responsibilities over social security. Though pensions and benefits for the unemployed will remain reserved to Westminster, the Scottish Parliament will have law-making powers over a range of other benefits, including benefits for people with disabilities, carer’s benefits, discretionary housing payments, and those like the winter fuel allowance and cold weather payments that come under the umbrella of the ‘regulated social fund’.
The Scottish Government recently launched a programme of public and civic engagement activities to generate ideas about how these powers might be used. But what are the prospects for a distinctive social security system in Scotland?
Before considering the opportunities, we need to first think about some of the boundaries within which policy decisions will have to be made. Several come to mind.
First are the legislative boundaries. In social security, the Scotland Bill devolves specific benefits to Scotland, and while there would be an opportunity to deviate from these benefits or to replace them altogether, this power could only be exercised within the terms set out in legislation. In some cases, most obviously with respect to Carer’s benefit, the bill pre-defines who would be entitled to such a benefit. Some civic groups have also raised concerns about the definition of disability within the legislation. Devolving specific social security benefits – as opposed to broader social security powers – places some legislative constraints on the potential for expanding welfare entitlement or developing innovative policies.
Second are the financial limitations. In addition to the financial challenges presented by an ageing population – especially significant here given that around half of the benefits to be devolved are directed towards senior citizens – we do not yet know how these benefits will be financed. As additional responsibilities, they will require an additional fiscal transfer from the UK government, which at current levels should be in the region of £2.5 billion. How that transfer will be determined - and crucially, how it will be adjusted year on year - is yet to be agreed and will doubtless be the subject of intense intergovernmental negotiation. But whatever system is applied, it is likely that the fiscal transfers from the Treasury to Scotland will decrease in tandem with cuts to the UK Government’s welfare budget. So, any decision by the Scottish Government to either resist these cuts or to expand welfare provision would have to be funded from within Scotland, by reallocating money from other budgets, reducing inefficiencies, and/or raising revenue.
The institutions for the delivery of welfare may also determine what is possible in terms of changing social security in Scotland. The Smith Report left open the option of whether Scotland should develop its own welfare bureaucracy or continue to access the Department of Work and Pensions as an agent to deliver devolved benefits on behalf of the Scottish Government. The former would incur additional set up costs that would have to be borne by the Scottish budget. The latter could make it difficult to develop benefits for Scotland that were markedly different from the benefits which DWP were delivering for England and Wales.
Either way, the interdependence between reserved UK benefits and Scottish devolved benefits will create a need for greater cooperation between the two governments. Early signs seem quite positive, with a joint ministerial group on welfare and regular meetings and discussions among policy officials in the DWP and the Scottish Government.  
There are opportunities too. Rescaling social security delivery from a population of over 60 million to a population of 5 million ought to make it easier, at least in the longer term, to design and develop a system for the delivery of welfare benefits in Scotland that would be simpler, more efficient and more accessible from a citizen’s perspective. That alone could address some of the biggest problems in the current system, which has seen some citizens face delays in receiving benefits to which they are entitled as a result of bureaucratic complexity and inefficiency. 
A further opportunity suggested by the new settlement will be to not look at social security in isolation, but to reflect upon how new welfare powers can be used in conjunction with existing policy responsibilities in health and social care, or new tax powers. 
A fresh approach also opens the door to strengthening partnerships outside of government. The best way to design a system which is responsive to the needs of those who will depend on it may be to involve them in the design process as early as possible. There is an opportunity, too, to develop and nurture relationships with the third sector as well as employers who are key to effective policy implementation and can also usefully shape policy development. 
Finally, social security systems come in many shapes and sizes. There are more options beyond either trying to preserve the UK system of old or going with the flow of UK welfare reform. This constitutional moment opens up the opportunity to rethink and perhaps redefine the principles and ethos underpinning the developing welfare system in Scotland. 

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