Social Security Budget 2022-23 – SPICe Spotlight

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The Scottish government will spend around £ 4bn next year on decentralized social security.

Social security spending in Scotland is increasing, but most decentralized spending still relates to DWP benefits

Around £ 610million will be spent by Scottish Social Security on the benefits it administers directly – a huge increase from £ 170million this year. This largely consists of three advantages:

  • Scottish Payment for Children (SCP) £ 197million
  • Disabled Children Payment (CDP) £ 178million
  • Adult Disability Payment (ADP) £ 124million

Social Security Scotland is an executive agency established in the fall of 2018 to administer the newly devolved social security benefits. Figures for CDP and ADP relate to new claims and transfers of Disability Living Allowance (DLA) and Personal Independence Payment (PIP) during 2022-2023.

Like last year, most decentralized benefit spending (82%, £ 3.3bn) is through agency agreements with the DWP. This is where the Scottish Government pays the DWP to continue administering disability and compassionate care benefits on its behalf.

The animation shows the growth of Social Security Scotland benefits since 2018. The start of agency agreements for disability benefits in April 2020 resulted in a sharp increase in Scottish government spending on DWP benefits. Over time this will be transferred to benefits managed directly by Social Security Scotland. Local government spending, which initially represented a large part of the social security budget, is now eclipsed by that of DWP and Social Security Scotland. (The reduction in the housing tax is included in the diagram to illustrate the extent of this regime which replaced the advantage of the housing tax). You can see a static version of the animation, along with more details on the numbers, in the SPICe 2022-23 budget briefing.

What’s up?

The main measure is the doubling of the Scottish Child Payment – a move predicted by the Scottish Fiscal Commission to cost an additional £ 103million next year, bringing the total planned spending for the Scottish Child Payment to £ 197million in 2022-2023. That total cost rises to £ 362million in 2023-24, the first full year the benefit is available until the age of 16.

Equally important is the introduction of Adult Disability Payment (ADP).

From next spring ADP will start replacing the main disability benefit of working age – Personal Independent Payment (PIP). The rules will be much the same, but PIP’s large scale means that even relatively small changes have a big impact. Anything that makes ADP more expensive than PIP would have to be funded by the Scottish Government. Some of the things that will increase spending over PIP include:

  • an initial increase in requests as the service is launched
  • a different approach to the process resulting in more successful claims and more rewards at higher rates of delivery
  • different rules around terminal illness

Next year, those differences will cost an additional £ 38million. This amounts to an additional £ 567million in ADP and Carer’s Allowance 2026-2027 spending. This is before any consideration is given to a significant widening of eligibility.

Another novelty next year is the Winter Heating Aid for Low Income People – (annual payment of £ 50 to people on low income allowances, replacing the cold weather payment and currently in consultation). At £ 21million it’s not particularly big in terms of spending, but at around 400,000 the number of cases will be the highest yet administered by Scottish Social Security.

Operating costs increase

New extended benefits from next year mean more work for Scottish Social Security. They plan to hire 2,000 more people, bringing their total number from 1,560 in June 2021 to 3,500 by fall 2022, more than double in the space of about 15 months. Unsurprisingly, their administrative budget is growing – from £ 271million this year to £ 311million next year – an increase of 14.6% (in terms of cash flow).

The Social Security program is separate from Social Security Scotland and is part of the Scottish Government’s Social Security Directorate. He develops new services before handing them over to Social Security Scotland for delivery. In addition to preparing winter heating aid for low-income people for next winter, during this legislature the program is to develop Scottish versions of care allowance, winter fuel payment, compensation for accidents at work and care allowance. The operating budget for programs and policies is growing by 12.2% from £ 196million this year to £ 220million in 2022-2023 (in terms of cash flow).

Benefit rates are increasing for the most part

At a time when the cost of living is rising, changes in benefit rates are of particular importance. CPI inflation for the year ending November 2021 was 5.1%.

Most, but not all, Scottish benefits increase by 3.1% which was the CPI inflation rate in September 2021.

Children’s Winter Heating Assistance is an annual payment to families with severely disabled children and increases by 5% to £ 212.10.

Everything does not go up. Best Start Food (BSF) and Best Start Grant (BSG) are not revalued – in effect a reduction in “real terms”.

Almost anyone who qualifies for the GSO and the BSF will also qualify for the SCP. Doubling the SCP adds more to the income of these families than the increase in BSF and GSO would have done. The BSF was increased by 6% in August 2021.

A family with a new baby who is eligible for Scottish Child Payment (£ 20 per week), Best Start Grant (one-time payment of £ 606) and Best Start Foods (£ 9 per week) will receive a total of 2 £ 114 during the year. The increase in the Scottish Child Payment means it’s £ 520 more than they would have gotten in the current year. But if BSF and BSG had been revalued for inflation, they would have received an additional £ 34.40 on top of that.

There are two other policy choices, which, although not strictly “revalorization” decisions, determine the level of payments made.

The care allowance supplement is increased for inflation, but there is no repetition of the ‘double payment “made this month which was agreed in the Nursing Allowance Supplement Act 2021 (Scotland). This is interesting given the intense discussion during the parliamentary process of this bill as to whether the “double payment” should be maintained in the years to come.

There is also a transition payment for students who receive free school meals. This is an interim measure for lower-income families until the Scottish Child Payment is extended to 6-15 year olds in December 2022. The £ 68million budget suggests it remains to be £ 10 per week and does not increase to £ 20 per week like the Scottish Child Payment.

The Scottish government is set to get around £ 360million less in UK funding than it is spending on social security.

In 2022-2023, the Scottish government will receive around £ 3.6 billion from the UK government under the Block Grant Adjustment (BGA) for social security. Spending on decentralized DWP and Scottish Social Security benefits is expected to be around £ 4bn, a difference of around £ 360m. These are forecasts, so these numbers will change and some smaller services are funded outside the BGA system. Nonetheless, it is clear that there is significant additional funds for Social Security which need to be found elsewhere in the Scottish budget or through changes in tax policy. This reflects both the policy decisions of the Scottish Government and the different growth rates of benefit spending per capita (which determine the BGA).

In the longer term, this “financing gap” is growing

Political decisions taken now translate into higher payments and increased workload in the long run. By 2026-2027 the ADP will cost £ 567million more than if the PIP had continued and the SCP will cost £ 363million in total – money to be found elsewhere in the Scottish budget or through tax changes.

The Scottish Tax Commission has stated that:

“We now forecast that by 2024-25 Social Security spending will exceed the corresponding funding by £ 750million.”

Scottish Tax Commission, Economic and Fiscal Forecast, December 2021

The gap is most likely bigger than that:

  • This £ 750million does not reflect the total additional cost of ADP over PIP
  • The ‘Scottish versions’ of Nursing Allowance, Nursing Allowance, Winter Fuel Payment, and Work Injury Disability Allowance could be more generous, similarly to the ADP costs more than PIP.
  • ADP review in 2023 will face calls to expand eligibility – which would cost more
  • If the UK Green Paper on Health and Disability reformed DWP disability benefits, the amount provided by the BGA could change.

This additional scale of funding may require difficult policy choices elsewhere in the budget.

Camilla Kidner, SPICe research

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