The Smith Commission Report: A focus on welfare - Devolution (Further Powers) Committee Meeting

Published: 10 December 2014
Author: Nicola McEwen

Devolution (Further Powers) Committee, 11 December 2014 - Evidence from Professor Nicola McEwen, ESRC Centre on Constitutional Change, University of Edinburgh

This paper outlines some of the issues that may emerge from the recommendations of the Smith Commission on the devolution and administration of social security. It begins with a general observation on the changing nature of the devolution settlement, the scope of the recommendations on welfare devolution and flexibility, and the challenges of increased policy interdependence.

1. General Observation

One of the strengths of the original devolution settlement was its emphasis upon defining the powers of the Scottish Parliament by setting out in specific reservations (Scotland Act, 1998, schedule 5) those areas where it could not legislate. The Scotland Act 2012 and in particular the Smith recommendations may herald a departure from that reserved powers model. Their focus has been on identifying new powers to be devolved, rather than redefining what is reserved. This may produce a settlement that is more restrictive than it would otherwise be.

The emerging devolution settlement is also more complicated. It will increase the powers of the Scottish Parliament and simultaneously increase the interdependence between these powers and the policies of the UK government, notably on taxation, economic policy, welfare and energy. The Smith commission recognised this increased complexity in its call for the “reform” and “scaling up” of intergovernmental machinery “as a matter of urgency”, including new bilateral arrangements. Revising IGR doesn’t require legislation, but it would require a cultural change in the relationship between the UK and Scottish Governments, new forums for coordination, potential implications for IGR involving Wales and Northern Ireland, and further challenges to the Scottish Parliament’s capacity to scrutinise policy decision-making.

2. Forms of Welfare Devolution

The UK government’s Command Paper outlined three approaches to devolving welfare, which allow for variable degrees of political autonomy:

  • Model 1: devolving a portion of the spending associated with a particular benefit, alongside the power to either vary the rate and rules of the benefit, replace it with a completely separate benefit, or to reallocate that funding to another area;
  • Model 2: devolving a proportion of the expenditure on a specific welfare service delivered to claimants in Scotland, alongside a statutory responsibility to deliver that service in Scotland, potentially with some flexibility over the scale of provision;
  • Model 3: powers to ‘top up’ benefits above the level set by the UK Government.

The recommendations in the Smith Report seem to incorporate all three models.

3. Devolved Benefits

The Smith Report recommended devolving Attendance Allowance, Carer’s Allowance, Industrial Injuries and Severe Disablement Allowance, Winter Fuel Payments and a range of small benefits which, together, accounted for around 6% of social security spend in Scotland in 2012/13. The report also recommended the devolution of Disability Living Allowance/Personal Independence Payments which, assuming it includes DLA/PIP for all age categories, is a more substantial benefit amounting to £1.45bn in 2012/13, or 8.2% of Scottish welfare spend. Around 86% of Scottish welfare spending, including pensions, child and family benefits, tax credits and work-related benefits, will remain reserved to Westminster after the new settlement is implemented.

The Report indicates that the Scottish Parliament will have ‘complete autonomy’ in determining the structure and value of these benefits. This would imply conformity with Model 1 above, but that may not be clear until legislation and subsequent agreement on how the block grant is to be adjusted.

The Smith Report suggests it is for the Scottish Parliament to determine whether it agrees a delivery partnership with DWP. A delivery partnership may be cost-effective, especially in light of the relatively modest transfer of social security spend, but it is likely to mean that the autonomy which could be exercised over these benefits would be less than ‘complete’, curtailing the scope for distinctive policy development.

4. Universal Credit

Universal Credit will remain reserved, with policy development, administration and delivery the responsibility of DWP. Within this reserved framework, the Scottish Government will have an opportunity to alter some delivery arrangements, and the Scottish Parliament will have the power to vary a range of housing cost elements, including ‘varying’ the underoccupancy charge and local housing allowance rates, eligible rent and deductions for nonpayment. This conforms to Model 2 above, incorporating some opportunities for modest policy innovation but ruling out others. The limits set on the power to vary housing elements will depend on a mix of statutory obligations, bureaucratic and financial constraints, with all costs to be met by the Scottish Government.

5. Employment Provision

The Smith report recommends some form of devolution over employment programmes to support the employability of unemployed people. It is not clear whether the recommendation conforms to model 1 or 2. Para 57 refers to the parliament being given ‘all powers’ over such support programmes on completion of current contracts. It then goes on to define this as ‘the power to decide how it operates these core employment support services’. Operational control over services does not necessarily imply legislative control. It is unclear, for example, whether the parliament would have the power, should it choose, to deliver these services through public or third sector bodies instead of the existing contracting arrangements or to completely redesign employment support programmes. Delivery of employment programmes will require close cooperation with Job Centre Plus, which is to remain reserved.

6. New/Top-up Benefits

The Smith Report includes the power ‘to create new benefits in areas of devolved responsibility’. It is not clear what this means, since the provision of ‘assistance for social security purposes to or in respect of individuals by way of benefits’ (Scotland Act, schedule 5, Head F) will remain reserved matters, save for those specific exceptions identified above. I assume it reinforces the Scottish Parliament’s power to replace those benefits which have, or will be, devolved with new alternative benefits aimed at a similar purpose.

The Report also includes provision to make discretionary payments to supplement any UK social security benefit. This power would be constrained by available finance, as well as the capacity for DWP or HMRC to incorporate these additional payments within their processing and delivery systems for welfare benefits or tax credits. It is not clear whether these systems would have the capacity to distinguish and process claims on the basis of distinct Scottish entitlements.

7. Social Security Interdependences

The complexities of the social security system will remain after the introduction of the Smith reforms, creating interdependencies which will have to be managed to avoid new anomalies in the system.

The Benefit Cap: The UK Government’s Benefit Cap limits the total amount of benefit available to households to £500/week for couples or single parents with children at home, and £350/week for adults without dependent children. Among those benefits included within the cap are two to be devolved – Carer’s Allowance and Severe Disablement Allowance. These should be excluded from the cap for Scottish claimants. The Smith report also recommended that the Benefit Cap be adjusted to accommodate additional benefit payments, which should include discretionary payments.

Benefit interdependence: Entitlement to some benefits depends upon eligibility for others. If the eligibility criteria for devolved benefits are altered, it could affect entitlement to UK benefits. My reading of para.55 suggests that any additional benefit received by Scottish claimants as a result of devolved benefits or Scottish discretionary payments should not adversely affect entitlement to UK benefits or tax credits, but in practice the new complexities generated may be difficult to administer.

Conditionality and Sanctions: The merger of Job Centres with the Benefits Agency combined employment support with the process of claiming and receiving benefits. This includes provisions for conditionality, which make claims for Job Seekers Allowance and Employment Support Allowance conditional upon claimants’ willingness to seek work, with those deemed not to meet these conditions potentially facing financial sanctions. There is a close relationship between these conditionality rules and the employment support programmes which are to be devolved under Smith. This is likely to generate operational challenges, political difficulties, and accountability issues, given the concerns expressed by DFP/S4/14/6/1 34 the Scottish Government and Parliament about the DWP’s conditionality and sanctions regime.

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