BRIEFING PAPER Number 9048, 9 November 2020

Social security powers in By Andrew Mackley

the UK

Contents: 1. Introduction 2. Historical background 3. Social union and welfare pluralism 4. Reserved social security benefits 5. Social security in Northern Ireland 6. Social security in , 1997-2016 7. Social security in Scotland, 2016 onwards

www.parliament.uk/commons-library | intranet.parliament.uk/commons-library | [email protected] | @commonslibrary 2 Social security powers in the UK

Contents

Summary 4 1. Introduction 7 1.1 A centralised social security system 7 1.2 Devolution of social security 7 1.3 Social security expenditure in the UK 10 2. Historical background 13 2.1 Before the welfare state 13 2.2 Liberal welfare reforms 13 2.3 Unified social security provision in the post-war ‘welfare state’ 14 2.4 Centralised social security provision 16 2.5 Northern Ireland – the exception 16 3. Social union and welfare pluralism 18 3.1 Social citizenship rights 18 3.2 Maintaining the ‘Social Union’ 19 3.3 ‘Welfare pluralism’ 21 3.4 Devolution of social security within the UK 22 3.5 Social security systems in the UK 24 4. Reserved social security benefits 25 4.1 Reserved benefits in Great Britain 25 4.2 Means-tested benefits 25 4.3 Contributory benefits 26 4.4 Other reserved categorical benefits 26 4.5 Disability and carer benefits 26 4.6 Other ‘extra costs’ benefits 27 5. Social security in Northern Ireland 28 5.1 The ‘principle of parity’ 28 5.2 Differences in the Northern Ireland social security system 29 5.3 Mitigating welfare reform 30 5.4 in Northern Ireland 32 Mitigation of Universal Credit 32 Universal Credit payment flexibilities in Northern Ireland 33 5.5 Mitigation beyond March 2020 34 6. Social security in Scotland, 1997-2016 36 6.1 Scottish devolution in 1997 36 6.2 The Calman Commission (2009) 37 6.3 Welfare Assistance 38 6.4 Council Tax Reduction schemes 39 6.5 Scottish Independence Referendum (2014) 39 Proposals for further devolution 40 Proposals for the social security system in an independent Scotland 41 6.6 The 41 7. Social security in Scotland, 2016 onwards 43 7.1 The 43 7.2 Caseload of devolved benefits 44 7.3 A new Scottish social security system 45 7.4 Social Security Scotland 46 7.5 Transitional arrangements for devolved social security 47 3 Commons Library Briefing, 9 November 2020

7.6 Funding devolved social security 48 7.7 Delivery timetable 49 7.8 Devolved benefits in Scotland 51 Benefits available before 2020 51 Benefits to be delivered between 2020 and 2025 53 plans for devolved disability benefits 55 7.9 Universal Credit Scottish Choices 56 Take-up of Scottish Choices or DWP APAs in Scotland 57 Cost and implementation of Scottish Choices 58 Additional UC flexibilities 59 Scottish Affairs Committee inquiry 2020-21 60

Contributing Authors: Roderick McInnes - all charts and statistics Sandip Samra - Projected Structure of Social Security in the UK chart, designed with Andrew Mackley

Cover page image copyright The Senedd - The Welsh Assembly Building by UKWiki at en.wikipedia - Own work Transferred from en.wikipedia image cropped. Volunteer's Reception, Assembly Buildings, Stormont, Belfast by Joel Riley. Licensed under CC BY 2.0 / image cropped. Building, Holyrood by Kim Traynor. Licenced under Creative Commons Attribution-Share Alike 3.0 Unported license / image cropped. Westminster. Licenced under CC0 Creative Commons – no attribution required

4 Social security powers in the UK

Summary

Until 2016, social security was organised on a Great Britain-wide basis. This contrasted with other forms of social policy, including health, education, and housing, which are devolved areas, and are therefore run and administered separately in different parts of the UK. Northern Ireland has always been an exception to this, with social security being an entirely devolved (or ‘transferred’) power. The Scotland Act 2016, however, devolved significant new social security powers to the Scottish Parliament and Government. Within Great Britain, the devolution of social security is a relatively new and ongoing process. This briefing paper provides a high-level overview of recent changes to social security provision in Northern Ireland and Scotland in particular – including the devolution of significant welfare powers – and how this has affected the structure of the UK social security system as a whole. Centralised social security in Great Britain The centralisation of social security policy in Great Britain dates from the creation of the post-war welfare state, based on the principles espoused by William Beveridge in his report, Social Insurance and Allied Services, published in November 1942. Beveridge envisioned a single system of social insurance (the National Insurance system) delivered to all citizens based on need and not geography. Whereas there had previously been separate arrangements for the provision of social security in England, Scotland, and Northern Ireland, a new Great Britain-wide Ministry of National Insurance was created in 1944, and thereafter a new, unified scheme of National Insurance was introduced, applying to all people in Great Britain. Centralised and uniform provision of social security thus continued to be a hallmark of public policy until recently. The rationale behind retaining social security as a largely reserved power, it has been argued, is that it is a fundamental part of the ‘Social Union’. That is the sharing and funding of social rights, with protections offered to all citizens, regardless of where they live. In 2009, the Labour Government said in its White Paper – Scotland’s Future in the United Kingdom: building on ten years of Scottish devolution – that the ‘Social Union’ had its “most explicit expression in our social security system, which ensures that people across the UK have access to the same support in time of need”. Against this, there have been calls for more ‘welfare pluralism’ whereby, it has been argued, the devolution of certain aspects of social security policy might lead to “more joined-up” public policy in the nations of the UK where other aspects of social policy are already devolved. Reserved social security In Great Britain, any and all social security benefits not explicitly devolved to Scotland by the Scotland Act 2016 are reserved to the UK Government. Furthermore, , Guardian’s Allowance, , and (all administered by HMRC), are reserved throughout the United Kingdom (including Northern Ireland). Since the devolution of most disability, industrial injury, and carer benefits by the Scotland Act 2016, the main reserved social security benefits and tax credits in Scotland reserved to the UK Government are: • Universal Credit • Working and Child Tax Credits 5 Commons Library Briefing, 9 November 2020

• Jobseeker’s Allowance • Employment Support Allowance • • • Child Benefit • • Guardians Allowance • Bereavement Support Payment • State Pension All social security benefits, tax credits, allowances, and payments in Wales are reserved. Social security in Northern Ireland All social security powers are devolved formally to Northern Ireland, aside from Child Benefit, Guardian’s Allowance, Working Tax Credit, and Child Tax Credit, which are ‘excepted’ powers. By long-standing convention, however – and more recently, under section 87 of the Northern Ireland Act 1998 – Northern Ireland maintains ‘parity’ with social security, child maintenance, and pensions systems in Great Britain. In practice, this is an important limitation on the ability of the Northern Ireland Executive and Assembly to diverge from UK Government policy. The Department for Communities delivers social security benefits in Northern Ireland. There are, nevertheless, some differences in social security provision in Northern Ireland compared with Great Britain. The most recent example of this is a ‘mitigation package’ of measures in place from 2016 which enables the Northern Ireland Executive to reduce the impact of the UK Government’s welfare reforms on the most vulnerable in Northern Ireland with a series of Welfare Supplementary Payments, amongst other measures. These were due to expire in March 2020, but the Northern Ireland Executive is continuing to make contingency payments while it develops legislation to extend this package. Universal Credit is also delivered slightly differently in Northern Ireland to England and Wales. UC claimants in Northern Ireland have the option of certain payment flexibilities, including: • Twice monthly payments for all households as the default, with monthly payments available on request. • Payment of the housing element of UC direct to the landlord (“managed payment”) as the default position. Direct payment of the entire UC award including the housing element to the household is available on request. • Split payments (paid into separate bank accounts) are possible between parties in a household on request Social security in Scotland Whereas many social policy areas were devolved to the Scottish Parliament by the Scotland Act 1998, responsibility for social security (as well as child support and pensions) was designated a reserved power in Schedule 5 (Head F). After the implementation of the Scotland Act 2016, the following areas of social security are devolved: 6 Social security powers in the UK

• Disability, industrial injuries and carers’ benefits; • Benefits for maternity, funeral and heating expenses; • Discretionary Housing Payments; • Discretionary payments and assistance • Powers to top-up any benefit • Powers to create other new social security benefits; • Powers to legislate for welfare foods; and • Powers to vary the housing cost element and to change payment arrangements for Universal Credit The Scottish Government has stated that it intends to use the powers devolved by the Scotland Act 2016 to create a Scottish social security system based on “dignity, fairness and respect.” The Scottish Parliament has passed the Social Security (Scotland) Act 2018, which sets out the framework for a new Scottish social security system and the principles underpinning it. The Scottish Government has also set up an executive agency – Social Security Scotland – to deliver the devolved benefits (other than discretionary housing payments and the Scottish Welfare Fund, which are delivered by local authorities). This will eventually deliver devolved social security benefits in Scotland, but as a transitional measure the Scottish Government is using ‘agency agreements’ under which the Department for Work and Pensions (DWP) continues to deliver existing devolved benefits until they are replaced gradually by their new Scottish equivalent benefits. In April 2020, full financial and legal responsibility for social security benefits devolved by the Scotland Act 2016 was transferred to Scottish Ministers. Under the latest timetable, existing claimants were to begin to transfer from existing devolved DWP benefits to the Scottish Government’s equivalent benefits in 2020. The expectation was that full caseload transfer would be completed in 2025. The announcement of this schedule came before the outbreak of the coronavirus pandemic, however, which has delayed rollout of some of these new benefits. Universal Credit remains a reserved benefit, but under Universal Credit Scottish Choices the Scottish Government has used the powers conferred by the Scotland Act 2016 to change payment arrangements in Scotland for Universal Credit and to vary the housing cost element for rented accommodation. Scottish Choices is delivered by the DWP on behalf of the Scottish Government and provides the following options for UC claimants in Scotland: • Being paid Universal Credit twice a month rather than monthly • Having their Universal Credit housing element paid directly to their landlords Scottish Ministers also have the power to split UC payments between members of a couple, instead of making one payment per household. They can also vary the amount of housing costs paid to people in receipt of UC. Further detail on the implementation of these policies is still being developed by the DWP and the Scottish Government. 7 Commons Library Briefing, 9 November 2020

1. Introduction 1.1 A centralised social security system The social security system in Great Britain has, until recently, been recognised as particularly centralised by international standards. Writing in 2005, Robert Walker referred to social security provision in Britain as an “extreme case” of a centralised benefits system: “social security policies are both national in coverage and delivered by executive agencies of national government”.1 From the post-war period and the creation of the ‘welfare state’ until 2016, social security policy was organised on a Great Britain-wide basis. This contrasted with other features of the welfare state, including health, education, and housing policy, which are run and administered separately in different parts of the UK. This situation did not change in the aftermath of legislative devolution in Scotland and Wales in the late-1990s under the Blair Labour Government. Following legislative devolution in Scotland, responsibility for benefits policy and administration was designated a reserved function under the Scotland Act 1998, unlike other areas of social policy which came under the jurisdiction of the new Scottish Parliament. The UK Government therefore administered a single security system for England, Scotland, and Wales. Northern Ireland has always been an exception in this regard, however, with social security being an entirely devolved (or ‘transferred’) power. Nevertheless, the ‘principle of parity’ means that, while there are some differences in social security provision in Northern Ireland compared with Great Britain, these are generally relatively minor and as regards the range of benefits available, conditions of entitlement and benefit rates, the two systems essentially operate as one.

1.2 Devolution of social security The Scotland Act 2016 devolved significant new social security powers to the Scottish Government and Parliament, thereby altering the centralised nature of the UK’s social security system by allowing for a separate and distinctive welfare offering in Scotland. In particular, these devolved powers include responsibility for disabled and carer’s benefits; benefits for maternity, funeral and heating expenses; as well as powers to vary the housing cost element and payment arrangements of Universal Credit. The Social Security (Scotland) Act 2018, passed by the Scottish Parliament, set out the legal framework for this separate system, as well as the principles which will underpin it. As of April 2020, Scottish Ministers have full legal and financial responsibility for devolved benefits. The Scottish Government’s timetable for the full delivery of its new benefits has been delayed since its original commitment to complete its rollout by the end of the current

1 Robert Walker, Social Security and Welfare: Concepts and Comparison, 2005, p93 8 Social security powers in the UK

Scottish Parliament (i.e. by May 2021).2 Under its most recent schedule, all claimants of existing benefits will transfer to devolved benefits delivered by Social Security Scotland (the Scottish Government’s new agency) by 2025, although completion date was announced before the outbreak of coronavirus and may be subject to change.3 Until then, the Department for Work and Pensions (DWP) will continue to deliver existing disability and carer benefits on the Scottish Government’s behalf under agency agreements. Universal Credit (UC), on the other hand, remains a reserved benefit in Great Britain, where it is administered and delivered by the DWP. While the Scottish Parliament has the power to vary the housing costs element of UC and change the frequency of UC payments – which it is doing through Universal Credit Scottish Choices – these different options are delivered by the DWP on behalf of the Scottish Government. Contributory benefits, such as ‘New Style’ Jobseeker’s Allowance and ‘New Style’ Employment Support Allowance, also remain reserved. Social security policy in Northern Ireland, while devolved, remains largely the same as that provided by the DWP in Great Britain, although it is delivered by the Department for Communities. HMRC benefits and tax credits are, however, reserved to the UK Government. There are, nevertheless, some differences in social security provision in Northern Ireland compared with Great Britain. The most recent example of this is a ‘mitigation package’ of measures in place from 2016 which enables the Northern Ireland Executive to reduce the impact of the UK Government’s welfare reforms on the most vulnerable in Northern Ireland with a series of Welfare Supplementary Payments, amongst other measures. UC payment flexibilities are also available in Northern Ireland. Social security policy remains an entirely reserved matter in Wales. Overall, therefore, while significant aspects of social security policymaking remain reserved in Great Britain (with largely equivalent provision in Northern Ireland), devolution of some social security powers to Scotland has substantially altered the structure of welfare provision in the UK. The following chart illustrates how this is expected to look in 2025 when the Scottish Government is scheduled to have completed rollout of its new devolved benefits delivered by Social Security Scotland, and when the DWP expects to have completed the caseload rollout of Universal Credit.4 It should be reiterated that both of these forecasts were made before the coronavirus crisis and so the date may be subject to change.

2 See for example the statement to the Scottish Parliament by the then Minister for Social Security, , on 17 April 2017 3 Scottish Government, Devolved social security benefits: stakeholder engagement toolkit, December 2019 4 The DWP’s latest forecast expects full caseload rollout of UC to be completed by September 2024, although this was the assumption before the outbreak of coronavirus: Letter from Thérèse Coffey to Stephen Timms, 3 February 2020 (DEP2020-0049). 9 Commons Library Briefing, 9 November 2020

10 Social security powers in the UK

1.3 Social security expenditure in the UK In 2019/20 around £228.5 billion was spent was spent in the UK on social security benefits and tax credits. Of this: • £19.2 billion (8.4%) was spent in Scotland, and • £7.6 billion (3.3%) was spent in Northern Ireland.5 The table below breaks down expenditure in Great Britain and Scotland in 2019/20 by benefit type. Of the total £19.2 billion spent in Scotland in 2019/20, £3.3 billion related to benefits for which responsibility has been devolved to the Scottish Government (although as shown in the table, the DWP still had responsibility for £2.9 billion of this spending in 2019/20, with the remaining £0.4 billion spent by the Scottish Government). Devolved benefits account for 17% of total social security expenditure in Scotland. The remainder (£15.8 billion, 83%) related to benefits and tax credits for which the UK Government has reserved responsibility. The bulk of the devolved expenditure relates to disability and carers’ benefits. Nearly four-fifths of the devolved expenditure (£2.6 billion) is accounted for by the main extra-cost disability benefits (Personal Independence Payment, Disability Living Allowance, Attendance Allowance).

5 HoC Library calculation based on DWP Benefit expenditure and caseload tables 2020; Scottish Fiscal Commission Scotland’s Economic and Fiscal Forecasts February 2020 chapter 5; HMRC tax receipts and National Insurance contributions for the UK; HMRC Disaggregation of HMRC tax receipts; OBR Economic and Fiscal Outlook March 2020 supplementary fiscal tables: expenditure. The UK total includes expenditure on benefit entitlements for overseas residents. 11 Commons Library Briefing, 9 November 2020

Great Britain welfare expenditure, 2019/20 Benefits for which sub-Great Britain expenditure can be identified (a)

Great Britain of which: and abroad in Scotland £ million £ million % of total

Total expenditure on welfare 220,383 19,172 8.7%

of which: DWP expenditure on benefits which are devolved in Scotland 31,654 2,893 9.1% (b) Personal Independence Payment 12,503 1,303 10.4% Disability Living Allowance 7,233 801 11.1% Attendance Allowance 5,908 527 8.9% Carer's Allowance (DWP) 2,941 0 0.0% (c) Winter Fuel Payments 1,974 171 8.7% Industrial Injuries Disablement Benefit 811 81 10.0% Discretionary Housing Payments (DWP) 132 0 0.0% (c) Severe Disablement Allowance 89 9 9.6% Funeral Expenses Payments 38 1 4.0% (d) Sure Start Maternity Grant 26 0 0.0% (e) Cold Weather Payments 0 0 100.0%

Scottish Government expenditure 443 443 100.0% Carer's Allowance (Scottish Govt) 276 276 100.0% Carer’s Allowance Supplement 37 37 100.0% Best Start Grants 20 20 100.0% (e) Best Start Foods 3 3 100.0% Healthy Start Vouchers 3 3 100.0% Funeral Support Payment 4 4 100.0% (d) Discretionary Housing Payments (Scot G.) 67 67 100.0% Scottish Welfare Fund 33 33 100.0%

Other (DWP except where stated) 188,285 15,835 8.4% State Pension 98,807 8,316 8.4% (f) Universal Credit 18,377 1,504 8.2% Housing Benefit 18,364 1,441 7.8% Employment and Support Allowance 13,851 1,603 11.6% Pension Credit 5,061 425 8.4% other DWP benefits 5,431 462 8.5% Tax Credits (HMRC) 17,316 1,245 7.2% Child Benefit (HMRC) 11,078 839 7.6%

Notes and sources: see next page.

12 Social security powers in the UK

Notes

(a) Excludes around £511m (0.3%) of total DWP expenditure that cannot be disaggregated to countries and regions. (b) Benefits passing to Scottish Government responsibility in or before 2020/21. (c) See 'Scottish Government expenditure' below for expenditure in Scotland.

(d) In September 2019, Funeral Expenses Payments were replaced in Scotland by Funeral Support Payment.

(e) In December 2018, SSMG was replaced by Best Start Grant Pregnancy and Baby Payment for residents in Scotland.

(f) Total State Pension expenditure of £98.8bn includes £4.2bn on overseas residents (4.3% of total DWP expenditure on State Pensions)

Sources

DWP Benefit expenditure and caseload tables 2020

Scottish Fiscal Commission Scotland’s Economic and Fiscal Forecasts February 2020 chapter 5

HMRC tax receipts and National Insurance contributions for the UK

HMRC Disaggregation of HMRC tax receipts and HoC Library calculations

13 Commons Library Briefing, 9 November 2020

2. Historical background

The centralised structure of the social security system in Great Britain is largely a product of the post-war welfare state. Welfare provision before this was administered separately in each of the countries of the UK, and largely borne of different poor law arrangements. This section provides an historical overview of how social security provision became uniform throughout Great Britain until 2016.

2.1 Before the welfare state The centralised welfare state as it exists in the early 21st century is widely regarded as a product of the 20th century, and a radical departure from the systems which preceded it. The different poor laws in England and Wales, Scotland, and Ireland – the earliest of which had their origins in the sixteenth century – were run as separate systems under different legislation in the three legal jurisdictions and were administered locally.6 While these poor law systems have been referred to as “a welfare state in miniature”,7 support was largely exclusive to the ‘destitute’ and ‘disabled’, arising from an attitude that saw poverty a result of personal failing, rather than of social or economic forces. Poor law policy was seen more as a way to counter the threat of civil disorder than as a way to reduce poverty. By the beginning of the twentieth century it had a declining role in terms of relief and was being replaced by other sources of assistance, such as friendly societies, trade unions, and insurance companies. Nevertheless, these three poor law systems remained the only state-sponsored public assistance designed specifically to deal with poverty throughout the United Kingdom.8

2.2 Liberal welfare reforms The Liberal Government, which came to power in late 1905, embarked upon a radical programme of social reform. While the most important measure concerned with income was the Old Age Pension in 1908 – a means-tested pension for those aged over 70 – the general welfare principal adopted was that of social insurance, as with the introduction of National Insurance in March 1912. This system was chosen for unemployment and sickness, in part because of its overlap with features of the old poor law systems, namely individual responsibility and investment in personal resources.9 In one important respect, however, it was similar to the poor law system it was designed to supersede in that it was administered separately in the different constituent nations of the United Kingdom. The new social

6 David Englander, Poverty and Poor Law Reform in Nineteenth-Century Britain, 1834- 1914: From Chadwick to Booth,1998. 7 Mark Blaug, ‘The Poor Law Report Reexamined’, The Journal of Economic History, June 1964 8 N.J. Wikeley and A.I. Ogus, The Law of Social Security, 5th edition, 2002, p2 9 Neville Harris, ‘Social Security Prior to Beveridge’ in idem. (ed.), Social Security Law in Context, 2000, pp73-6 14 Social security powers in the UK

insurance scheme required new government machinery to administer it, and so the National Insurance Act 1911 created separate National Insurance Commissions in England, Scotland, Wales, and Ireland. This was not inevitable, and there was some discussion of it being provided for on a UK-wide basis – indeed this was David Lloyd George’s (then Chancellor of the Exchequer) preferred option – but the Government eventually agreed to “defer to sentiment” by creating separate Scottish, Irish, and Welsh Commissions. A Joint Committee of the four Commissions coordinated work and ensured some level of uniformity, under the Financial Secretary of the Treasury.10 Not long thereafter, in 1919, the Scottish Insurance Commission was moved under the purview of the Scottish Board of Health within the Scottish Office. Similarly, in the same year, the England and Welsh commissions became part of the newly established Ministry of Health.11

2.3 Unified social security provision in the post-war ‘welfare state’ This general principle of social insurance was favoured by William Beveridge in his report, Social Insurance and Allied Service, published in November 1942. His aims were to expand the existing insurance scheme by increasing the minimum payment to a level of ‘subsistence’, rather than ‘survival’, and to make it universal and comprehensive. This in turn required “unification of administrative responsibility”: For each insured person there will be a single weekly contribution, in respect of all his benefits. There will be in each locality a Security Office able to deal with claims of every kind and all sides of security. The methods of paying different kinds of cash benefit will be different and will take account of the circumstances of insured persons, providing for payment at the home or elsewhere, as is necessary. All contributions will be paid into a single Social Insurance Fund and all benefits and other insurance payments will be paid from that fund.12 The idea, therefore, was that this single insurance fund for social protections would depend on need and not geography. Social insurance benefits were to include unemployment benefit, disability benefit, benefits in respect of industrial accident and disease, training benefit, funeral grants, maternity grant, maternity benefit, compulsory retirement pension, widow’s benefit, and temporary separation benefit. Establishing this new insurance-based system, it was therefore decided, would require uniformity across Great Britain.13 In implementing Beveridge’s scheme, the Government engaged in what the political scientist James Mitchell has called “a rare example of reverse devolution”.14 A new Great Britain-wide Ministry of National

10 James Mitchell, Devolution in the United Kingdom, 2009, p42 11 Ibid., p22 12 William Beveridge, Social Insurance and Allied Services, Cmd 6404, November 1942, para. 306 13 Neville Harris, ‘Social Security Prior to Beveridge’ in idem. (ed.), Social Security Law in Context, 2000, p89 14 James Mitchell, Devolution in the United Kingdom, 2009, p22 15 Commons Library Briefing, 9 November 2020

Insurance was created, with responsibility for National Insurance in Scotland transferring to it from the Scottish Office. Echoing Beveridge’s recommendation, the Cabinet Machinery of Government Committee in December 1943 argued that “we consider that unified responsibility in this sphere is essential”. It noted, however, that this might prove controversial, particularly in Scotland, where it represented a form of ‘reverse devolution’.15 When proposals to centralise National Insurance administration under a Ministry of National Insurance came before the Commons, it did indeed provoke controversy among various Scottish Members. Adam McKinlay, the Labour Member for Dunbartonshire, noted: The Bill proposes to transfer to London work which is at the moment efficiently done in Edinburgh. I am satisfied that the machinery existing in Scotland is ample to give the Secretary of State all the information he wants. Nothing has been said against the present system of the Secretary of State being responsible for old age pensions, widows' and orphans' pensions, and health insurance. The bigger scheme may be more comprehensive, but no one will convince me that the capacity of the Department in Edinburgh is not such that it could not cope with the additional responsibility. […] The devolution indicated by the Minister simply means that whoever is responsible in Scotland will hold only a secondary responsibility, and will be able to do nothing without consulting headquarters in London. It is no narrow nationalism which prompts me to take up this attitude. Scotland has at the moment an efficient machine, and we have been given no adequate reason why it should be scrapped.16 Nevertheless, despite these protestations, the Ministry of National Insurance was created in 1944. Following the victory of the Labour Party in the 1945 General Election, this ministry, under Jim Griffiths as its Minister, oversaw the passage of the Industrial Injuries Act 1946, the National Insurance Act 1946, and the National Assistance Act 1948.17 In particular, the new scheme of National Insurance was now unified, and applied to all people in Great Britain above school leaving age, aside from married women.18 In addition, the new means-tested National Assistance scheme was created for those not covered by National Insurance benefits. Whereas previously means-tested assistance had been administered by local government-based Public Assistance Committees, a new centralised National Assistance Board now had a duty to “assist persons in Great Britain who are without resources to meet their requirements, or whose resources…must be supplemented to meet their requirements”.19

15 Ibid., pp22-3 16 HC Deb 14 November 1944 cc1875-6 17 Nicholas Timmins, The Five Giants: A Biography of the Welfare State, 3rd edition, 2017, p134-7 18 Ibid, p135 19 Ibid, p136 16 Social security powers in the UK

2.4 Centralised social security provision Uniform provision of social security benefits throughout Great Britain was in stark contrast with other features of the post-war welfare state. Both the Education Act 1944 and the National Health Service Act 1946 applied only to England and Wales, with parallel legislation passed by the UK Parliament for a separate NHS in Scotland in 1947, and by the Parliament of Northern Ireland in 1948 for Health and Social Care in Northern Ireland. This demonstrated a preference to continue to devolve major aspects of social policy – whether administrative in the case of Scotland, or legislative in the case of Northern Ireland – and maintain territorial distinctiveness within the UK, which did not include social security. On the contrary, a different post-war consensus emerged which saw social security within the welfare state as a nation- building enterprise, with social protections dependent on need and not geography, in line with Beveridge’s principles.20 Centralisation of benefit provision throughout Great Britain continued when in 1966 the new Ministry of Social Security was created. This incorporated the National Assistance Board and the Ministry of Pensions and National Insurance, and worked alongside a new Supplementary Benefits Commission (which delivered the new means-tested ). This ensured that contributory and income- related benefits for the whole of Great Britain would be administered jointly through the same Whitehall department. This allowed the continued central administration of social security policymaking and benefit provision throughout Great Britain as insurance benefits declined in importance, and correspondingly dependence on means- tested benefits increased.21

2.5 Northern Ireland – the exception While social security policy provision became centralised as part of the post-war British welfare state, this did not include Northern Ireland. The creation of Northern Ireland in 1921 pre-dated the Beveridge conception of the welfare state, and the introduction of National Insurance in 1912 in Ireland had, in any event, seen a more limited service than in Great Britain, in return for paying a lower rate of insurance contributions.22 The Government of Ireland Act 1920 designated social security a devolved matter (or a “transferred” power, in the parlance of the legislation), with National Insurance benefits administered through a separate commission and fund. In the post-war period, the National Insurance Act 1946 permitted reciprocal arrangements for coordinating the two national insurance systems. Various legislative agreements have ensured the parity of the

20 Nicola McEwan and Richard Parry, ‘Devolution and the preservation of the United Kingdom welfare state’ in Nicola McEwan and Luis Moreno (eds), The Territorial Politics of Welfare, 2005, p45 21 N.J. Wikeley and A.I. Ogus, The Law of Social Security, 5th edition, 2002, pp4-5 22 Patrick Buckland, Factory of Grievances: Devolved Government in Northern Ireland 1921-39, 1979. 17 Commons Library Briefing, 9 November 2020

contribution and benefit rates, since when the respective National Insurance Funds have operated almost as a single system.23 As part of this, the UK Government is committed to meeting the shortfall in social security spending in Northern Ireland which receives an annual subvention from the Great Britain National Insurance Fund to cover benefit costs that cannot be met from its contributions. Further details about social security provision in Northern Ireland are outlined in section 5 of this briefing paper.

23 Derek Birrell and Deirdre Heenan, ‘Devolution and social security: the anomaly of Northern Ireland’, Journal of Poverty and Social Justice, October 2010, p282 18 Social security powers in the UK

3. Social union and welfare pluralism

3.1 Social citizenship rights The centralisation of social security powers in the UK is unusual compared to other social policy areas, such as housing, health and education. This can be traced to the idea of ‘social citizenship rights’, as conceptualised by the sociologist T.H. Marshall in an essay titled ‘Citizenship and Social Class’, published in 1950.24 He identified three inter-related features of citizenship which had developed from the eighteenth century onwards: civil rights, political rights, and social rights. These social rights provide citizens with access to a basic level of welfare, such as health, education, and cash benefits so that they can ‘live the life of a civilised being’.25 These rights, according to Marshall, should be distributed equally to every citizen, and should therefore be available nationally, which at the time he was writing, was embodied in the creation in the UK of a ‘national’ welfare state – delivered by the ‘national’ UK Government. The locus for these social rights, and the “sharing community” which supported them, was therefore the UK state. The idea that social rights could vary geographically was not permitted in the Marshallian conception of social citizenship, and this has been a powerful influence on a key assumption underpinning the welfare state since its creation: that social provision should be organised according to need and not geography. While there was, to a certain extent, ‘administrative devolution’ in the provision of social rights, such as health and education, to the territorial offices of Scotland and Wales during the second half of the twentieth century, affording a degree of policy autonomy to a limited extent, basic social rights did not vary across the UK.26 This has what has led some political scientists to refer to the welfare state as a ‘nation-building’ project,27 and what Michael Billig referred to as “unmindful reminders” of nationhood.28 Although administrative devolution from the 1950s – and in particular the Balfour Royal Commission of 1954 – increased with the transfer of certain powers to territorial offices, social security policy was delivered with little regard for the territorial distinctiveness of the different parts of the UK. For example, under the Benefits Agency in the

24 T.H. Marshall, Citizenship and Social Class, and Other Essays, 1950 25 Ibid., p11 26 D. Wincott, ‘Social Policy and Social Citizenship: Britain’s Welfare States’, Publius: The Journal of Federalism, January 2006, p172 27 Nicola McEwen, ‘The Welfare State and the Nation-State’, in Michael Keating (ed.), Debating Scotland: Issues of Independence and Union in the 2014 Referendum, 2017, p94 28 Michael Billig, Banal Nationalism, 1995. The historian, Richard Finlay, has charted the growth of a certain conception of Britishness founded upon social welfare during the second half of the twentieth century: R. Finlay, A Partnership for Good? Scottish Politics and the Union since 1830, 1997. 19 Commons Library Briefing, 9 November 2020

1990s, territorial and field organisation grouped Scotland and the North of England together, and was initially managed in England.29 As, therefore, legislative devolution in Scotland, Wales, and Northern Ireland from 1999 onwards allowed for an even greater degree of policy divergence in areas where there was already some degree of territorial distinctiveness, social security stood out as a significant part of the welfare state which was reserved to the central UK Government (except for in Northern Ireland). In that sense it has become a focus for debates over the maintenance of a ‘social union’ against the desire for greater social policy autonomy in the devolved nations of the UK.

3.2 Maintaining the ‘Social Union’ The rationale behind retaining social security as a largely reserved power in the UK was outlined by the Commission on Scottish Devolution – or the ‘Calman Commission’. This commission was set up by the UK Government to investigate further devolution of powers in Scotland, and it published its final report – Serving Scotland Better: Scotland and the United Kingdom in the 21st Century: Final Report – in June 2009. While it proposed increasing the powers of the Scottish Parliament in certain significant respects, including sharing responsibility for setting income-tax rates, it also articulated the need to protect a number of shared UK-wide entitlements as part of what it called the ‘social Union’ (emphasis added): 2.24 Finally, there are areas where the people of Scotland have over many years shared rights and responsibilities, and pooled risks and resources, with the rest of the Union. These are areas of common welfare. The most notable is social security – old age pensions, benefits paid to people seeking work or those unable to do so, and allowances and credits supporting children and families. It is in principle possible to envisage a Union in which such rights and responsibilities are decentralised, and differ in different parts of the country – for example on the basis of what can be afforded there. Even in federal states, however, it is common (though not universal) for social protection of this kind to be a federal, rather than state or provincial, responsibility. This makes both economic and social sense: economic sense because one part of the country may be differently affected, or affected at different times, by economic change or shocks; social sense because providing people whose circumstances are the same with the same financial support wherever they are in the UK shows solidarity and mutual support. 2.25 At present social protection is financed by UK-wide resources. Tax revenues are pooled and shared out on the basis of need to individuals (and thus indirectly, to different parts of the UK). This seems to us to be a fundamental part of the Union, and the evidence is that Scottish people wish it to continue. The risks, and the resources to deal with them, are shared. It has a very explicit expression in the form of National Insurance, which is linked to benefit entitlements. But it is also seen in pooling other taxation like income tax or VAT and even in

29 Richard Parry, ‘Devolution and social security in Scotland’, Benefits, October 2004, p170 20 Social security powers in the UK

the pooling of windfalls like taxes from oil revenues and other natural resources. While the Commission proposed increased legislative devolution in Scotland, it nevertheless believed in avoiding a break in the “bonds of common social citizenship which we describe as the social Union”, which included maintaining social security as a reserved power.30 In reply, the Labour Government published a White Paper, Scotland’s Future in the United Kingdom: building on ten years of Scottish devolution, in 25 November 2009, in which it elaborated on its understanding of social security policy and its place in the “social union” (emphasis added): The United Kingdom has also been described as a social union. People in these islands share family ties, and cultural, professional and business links, and they do so to a profound extent. This binds the countries of the United Kingdom together very deeply, and is of great importance. The Government will do nothing to undermine that. But, as the Calman Commission noted, there is another sense in which the UK is a social union. This has its most explicit expression in our social security system, which ensures that people across the UK have access to the same support in time of need. The Government is deeply committed to this. Fairness is a fundamental value for the UK. What this aspect of the social union means is that resources are pooled from taxation across the UK, so that wherever and whenever risks occur – risks like unemployment or the inability to work through ill health – help is there to meet them. This will continue to be a founding principle in our proposals for devolution.31 In advance of the referendum of Scottish independence in September 2014, the 2010 Coalition Government expanded on this in its ‘Scotland Analysis’ with regard to Work and Pensions, published in April 2014, by explaining its idea of a social union in a specifically Scottish context. It argued that the higher levels of social security spending in Scotland were sustainable because they were backed by broader UK resources (original emphasis): The social security system benefits every single person in the UK, regardless of where they live. Each successive government tries to ensure that the social security system caters appropriately for individuals and supports the needs of the labour market. While the shape and size of the system has evolved over time, and different governments may pursue their objectives in different ways, the basic aspirations remain unchanged, namely: providing financial support for individuals and households in times of need; ensuring work pays; and maintaining a system that is affordable and sustainable, accessible to all, which is as easy to understand and as hard to abuse as possible. The UK’s broad tax base ensures Scotland benefits from secure and stable funding that is not vulnerable to fluctuations in North Sea oil revenues. By pooling the resources of the diverse UK economy, variations in demand for social security support in one

30 Calman Commission, Serving Scotland Better: Scotland and the United Kingdom in the 21st Century: Final Report, paras 2.24-5, and para 3.207 31 Scotland Office, Scotland’s Future in the United Kingdom, November 2009, para. 2.7 21 Commons Library Briefing, 9 November 2020

part of the UK can be absorbed without varying the levels of funding received by individuals. By remaining in the UK the higher levels of social security expenditure in Scotland (and future costs pressures from an ageing population) are more affordable.32

3.3 ‘Welfare pluralism’ The conception of a ‘social union’ which necessitates the central organisation of social security policy has been subject to critique, however. Some academics have questioned whether the state need be the only appropriate guardian of social citizenship, and that social solidarity can often by more strongly felt at a more local level. They have argued, in particular, that devolution of social security benefits to Scotland is possible within a wider UK-framework which would allow for the creation of a separate “package of measures to ensure social equity and efficient labour markets”.33 A balanced approach to devolving social security policy was advocated by some organisations in the lead up to the Scottish independence referendum in 2014. The Institute for Public Policy Research (IPPR), for example, conducted a ‘Devo More’ project, in which it explored arrangements for enhanced devolution within the UK. As part of this, it published a report – Devo More and Welfare: Devolving Benefits and Policy for a Stronger Union – in March 2014. This argued on the one hand that “there is no strong argument for devolving those benefits which are core to the UK’s social union”, which it cited as JSA, ESA, and the State Pension. On the other hand, it argued that devolution of “aspects of welfare” would “improve social and economic outcomes in the devolved nations” and would enable a “more joined-up public policy”. In addition to recommending the devolution of specific benefits, such as Housing Benefit and Attendance Allowance, it further argued that devolved governments such be given a general power to “supplement UK levels of welfare”. It argued that this would balance the need to preserve the social union, and allow for what it called “welfare pluralism”: Devolved governments should be given a general power to supplement UK levels of welfare, so that they can use cash payments as well as other policy levers to deliver social policy. In this approach, the level of benefits set by the UK government would serve as a floor, but not a ceiling, for devolved welfare payments. Any increase in a particular benefit would have to be funded exclusively from devolved budgets. Such a model is therefore compatible with both the social union – since all UK citizens would continue to be entitled to a set of defined benefits that comprise social citizenship – and the principles of decentralisation.34

32 Department for Work and Pensions, Scotland analysis: Work and Pensions, Cm 8849, April 2014, pp6-7 33 Michael Keating, The Independence of Scotland: Self-Government & the Shifting Politics of Union, 2009, pp153-4 34 IPPR, Devo More and Welfare: Devolving Benefits and Policy for a Stronger Union, March 2014, p41 and passim. It also proposed a “new approach to National Insurance” to make the NI Fund pay for a “smaller number of explicitly UK-wide benefits” on p44 22 Social security powers in the UK

On the other hand, others have argued that complete control of the social security system in Scotland would not be practicable without a much greater degree of fiscal independence. In its response to the Calman Commission, for example, the SNP Scottish Government argued in its White Paper – Your Scotland, Your Voice – published on 30 November 2009, that it “would be possible for Scotland to develop a devolved benefits system within the United Kingdom”, but that full devolution of social security would require greater fiscal autonomy in Scotland to fund the changes it would seek to make.35 And in the SNP Scottish Government’s White Paper on Scottish independence – Scotland’s Future – published in November 2013, it argued that only independence could provide the necessary space for it to develop a different approach to social security: We do not accept Westminster’s approach to welfare. We believe that it is possible to design an efficient and fair welfare system that meets the needs of those who depend on it, and treats them with dignity and respect while supporting those who can into work. However, it is only with the powers of independence that we will be able to build such a system.36 Some academics have also proposed that the issue of fiscal autonomy should be considered alongside further devolution of social security policy, given the high levels of spending on welfare.37

3.4 Devolution of social security within the UK Within the context of these debates in Great Britain, devolution of social security policy took place for Scotland as a result of cross-party agreement following the ‘No’ vote in the Scottish independence referendum. The three main pro-Union parties in Scotland had produced different plans for the devolution of certain benefits, and so had accepted the principle of some degree of welfare plurality.38 Together with the pro-independence parties they agreed to a set of proposals for further devolution in the Smith Commission, which reported in November 2014. This recommended devolution of certain carer and disability benefits, whilst retaining means-tested and contributory benefits as reserved powers, which is now being implemented as a result of the Scotland Act 2016. For more information, see sections 6 and 7 of this briefing paper. In Wales, a Commission on Devolution in Wales was established by the 2010 Coalition Government in Westminster on 11 October 2011, and it published Part II of its report, Empowerment and Responsibility: Legislative powers to strengthen Wales, on 3 March 2014, with

35 Scotland Office, Scotland’s future in the United Kingdom: building on ten years of Scottish devolution, 24 November 2009, paras 4.14-15 36 Scottish Government, Scotland’s Future: Your Guide to an independent Scotland, November 2013, pp155-6 37 Richard Parry, ‘Devolution and social security in Scotland’, Benefits, October 2004, p174 38 See section 6 of this briefing paper for further detail. 23 Commons Library Briefing, 9 November 2020

proposed changes to the legislative power of the Welsh Parliament (then known as the National Assembly for Wales). It rejected the devolution of social security policy, partly because it considered it an important part of the ‘social union’, but also because of the cost and risk it would bring to Wales: We do not recommend devolution of the social security system. It is an important part of the United Kingdom social and economic union and this brings substantial advantages to the people of Wales. We agree with the evidence received that the transfer of costs and risks to Wales from devolution would not be justified. In keeping with our principle of equity, we do not believe that the welfare and benefits a citizen receives should be dependent on the local community’s ability to pay for them.39 In its submission to the Commission on this issue, the Welsh Government stated it did not wish for the devolution of social security for similar reasons: [..] while it would in theory be possible to devolve responsibility for Social Security (including Child Support and Pensions) to the Assembly and Welsh Government (as is the case in Northern Ireland), the Welsh Government would not support such a proposition, for two reasons. First, any such move could expose the Welsh Government to unmanageable budgetary risks, and as we said earlier, our approach to the issues requires that we do not lightly enter into new commitments having such potentially damaging financial consequences. Secondly, we believe that the pooling of risks and responsibilities across the countries of the United Kingdom, so securing a common level of social protection for all our citizens, is fundamental to that continuation of the UK to which we are committed. The Welsh Government is clear, therefore, that Social Security is a matter that should be Reserved to Westminster.40 Nevertheless, more recently analyses of the potential devolution of social security to Wales have been more positive. Whilst rejecting full devolution, and noting the strength of the case for maintain the ‘social union’, the Bevan Foundation recommended in 2016 further devolution of some working-age benefits to the Welsh Government, including Housing Benefit and the housing costs element of Universal Credit.41 Following an inquiry on ‘Benefits in Wales’, the Welsh Parliament’s (then the National Assembly for Wales’) Equality, Local Government, and Communities Committee recommended that the Welsh Government seek devolution of a number of social security powers, including: • Payment flexibilities for Universal Credit • Housing Benefit for specific groups of people (outside UC) • Assessment process for sickness and disability benefits • Rules and regulations around sanctions

39 Commission on Devolution in Wales, Empowerment and Responsibility: Legislative powers to strengthen Wales, 3 March 2014, para. 11.3.7 40 Quoted in ibid., p129 41 Bevan Foundation, Making welfare work for Wales: Should benefits for people of working age be devolved, June 2016 24 Social security powers in the UK

• The power to create new benefits • The power to top-up reserved benefits • The Discretionary Housing Payments scheme It also recommended that the Welsh Government explore the practicalities in devolving Attendance Allowance and benefits for heating, maternity, and funeral expenses.42 In response, the Welsh Government accepted in principle the recommendation to seek payment flexibilities for UC, but said that it could not answer any of the other recommendations for devolved benefits as it was awaiting further evidence which it had commissioned to be collected by the Wales Centre for Public Policy.43 This evidence was published subsequently on the 14 January 2020 in a report entitled ‘Administering Social Security in Wales’.44

3.5 Social security systems in the UK The devolution of social security in the UK has therefore taken place within the context of debates around the maintenance of the ‘social union’, the need for welfare pluralism within the UK, and practical consequences of this for devolved authorities. Within Great Britain, the implementation of devolution in this area is still relatively new and an ongoing process, but some academics, such as Nicola McEwan at the University of Edinburgh, have posited questions as to how separate benefits systems will work within a UK policy and service framework: At present the social security system is deeply integrated, with corporate functions and IT systems managed centrally. Service delivery is dependent upon an integrated payment and accounting system […] This core engine at the heart of the system calculates benefit entitlements based upon a UK policy framework. Such a system can accommodate relatively minor modifications, as in Northern Ireland, but in practical terms, it would be extremely difficult to share the administration and delivery of services in the context of markedly different entitlements north and south of the border.45 The next section of this briefing paper examines the reserved benefits system in the UK, before turning to devolved social security arrangements in Northern Ireland and Scotland in the following three sections.

42 Equality, Local Government and Communities Committee, Benefits in Wales: Options for Better Delivery, October 2019, pp6-8 43 Welsh Government, National Assembly for Wales Equalities, Local Government and Communities Committee Report Benefits in Wales: Options for Better Delivery, Welsh Government response, 6 December 2019 44 Welsh Centre for Public Policy, Administering Social Security in Wales, January 2020 45 Nicola McEwan, ‘Contesting Communities of Solidarity’ in Michael Keating (ed.), Debating Scotland: Issues of Independence and Union in the 2014 Referendum, 2017, p99 25 Commons Library Briefing, 9 November 2020

4. Reserved social security benefits

4.1 Reserved benefits in Great Britain

Box 1: Reserved benefits in Great Britain Since the devolution of most disability, industrial injury, and carer benefits by the Scotland Act 2016, the main reserved social security benefits and tax credits in Scotland reserved to the UK Government are: • Universal Credit • Working and Child Tax Credits • Income-related Jobseeker’s Allowance • Contributory (or ‘New Style’) Jobseeker’s Allowance • Income-related Employment Support Allowance • Contributory (or ‘New Style’) Employment Support Allowance • Income Support • Pension Credit • Child Benefit • Housing Benefit • Guardians Allowance • Bereavement Support Payment • State Pension

All social security benefits, allowances, and payments in Wales are reserved.

In Great Britain, any and all social security benefits not explicitly devolved to Scotland by the Scotland Act 2016 are reserved to the UK Government. Furthermore, in Northern Ireland, Child Benefit, Guardian’s Allowance, Working Tax Credit, and Child Tax Credit (all administered by HMRC), are ‘excepted’ powers and are therefore also reserved to the UK Government.

Box 2: Reserved matters Reserved matters are political powers – legislative or executive – that are held exclusively by a particular political authority, such as the UK Parliament in Westminster. Devolution in the UK currently operates on what is known as the ‘reserved powers’ model. This means that everything not specifically set out in statute as ‘reserved’ to Westminster is therefore assumed to be devolved. For further information, see Commons Library briefing CBP-8544, Reserved matters in the United Kingdom, 5 April 2019.

4.2 Means-tested benefits Means-tested benefits and tax credits (also referred to as “income- related” benefits) are only paid to people who have limited income and/or capital. These remain reserved and are: • Universal Credit (UC) • Pension Credit 26 Social security powers in the UK

These also include ‘legacy’ benefits and tax credits being replaced by UC which are no longer available to new claimants, but are still being paid: • Income-related Jobseeker’s Allowance • Income Support • Income-related Employment Support Allowance • Housing Benefit • Working Tax Credit • Child Tax Credit 4.3 Contributory benefits Entitlement to contributory benefits depends upon a claimant having made sufficient National Insurance contributions.46 These remain reserved in Great Britain as they are funded centrally through the National Insurance Fund by contributions from workers, employers, and in some years with a supplement from the Treasury.47 They are primarily to cover loss of earnings for specific reasons, such as unemployment, sickness, and bereavement. They include: • Contributory (or ‘New Style’) Jobseeker’s Allowance • Contributory (or ‘New Style’) Employment and Support Allowance • Bereavement Support Payment • Widowed Parent’s Allowance (replaced by Bereavement Support, although those already receiving WPA on 6 April 2017 continue to receive it for as long as they have dependent children. • State Pension 4.4 Other reserved categorical benefits In addition to Child and Working Tax Credit, HMRC provides several other benefits through the tax system, although these are “categorical” benefits, and are not entirely means-tested. This means they are paid to those who fit the designated category and are listed here as they do not fit easily under any of the other headings listed in this section. They include: • Child Benefit • Guardian’s Allowance 4.5 Disability and carer benefits In the UK reserved benefits system, the main disability, industrial injuries, and carers’ benefits are currently available to all claimants throughout Great Britain, although responsibility to deliver these benefits, or create new ones, has been fully devolved to the Scottish

46 Commons Library Insight, Contributory benefits and social insurance in the UK, 29 October 2020 47 Commons Library briefing SN04517, National Insurance contributions: an introduction, 16 December 2019 27 Commons Library Briefing, 9 November 2020

Government. For the time being, they are still provided to Scottish claimants by the DWP, although they will eventually be replaced (see section 7 for more details). In the future, they will only be available to claimants in England and Wales as provided by the DWP, and in Northern Ireland as provided by the Department for Communities. They include: • Attendance Allowance • Carer’s Allowance • Disability Living Allowance (new claims are only available to children under 16). • Personal Independence Payment • Industrial Injuries Disablement Benefit (IIDB) 4.6 Other ‘extra costs’ benefits Like disability benefits in the UK reserved system, other benefits designed to provide for the extra costs faced by people in particular situations are currently available to claimants throughout Great Britain, but have been devolved to the Scottish Government. They will therefore only be available to claimants in England, Wales, and Northern Ireland when they have been replaced in Scotland. They include: • Maternity Allowance • Sure Start Maternity Grant • Winter Fuel Payment • Cold Weather Payment • Funeral Expenses Payment 28 Social security powers in the UK

5. Social security in Northern Ireland

Box 3: Social security powers in Northern Ireland All social security powers are devolved formally to Northern Ireland, aside from Child Benefit, Guardian’s Allowance, Working Tax Credit, and Child Tax Credit, which are ‘excepted’ powers. By long- standing convention, however – and more recently, under section 87 of the Northern Ireland Act 1998 – Northern Ireland maintains ‘parity’ with social security, child maintenance, and pensions systems in Great Britain. In practice, this is an important limitation on the ability of the Northern Ireland Executive and Assembly to diverge from UK Government policy. The Department for Communities delivers social security benefits in Northern Ireland.

5.1 The ‘principle of parity’ One of the intentions behind the division of functions in the Government of Ireland Act 1920 was to designate social security policy a devolved matter in Northern Ireland. Following the creation of the post-war welfare state, however, a ‘principle of parity’ of services and taxation between Great Britain and Northern Ireland was established. As part of this, the UK Government agreed to meet any excess in the separate Northern Ireland National Insurance Fund.48 The National Insurance Act 1946 enabled reciprocal arrangements for coordinating the two National Insurance systems in Great Britain and in Northern Ireland, so that they could operate as one system. Additionally, the Social Services (Agreement) Act 1949 maintained parity in the rates of contributions and payments for a range of benefits. Reciprocal transfers were a key part of this arrangement so that reserves in each fund per contribution were equalised, although in practice these flows were mainly to Northern Ireland. The UK Government has remained committed to meeting the shortfall in social security spending in Northern Ireland, on condition that people in Northern Ireland pay the same rate of income tax and National Insurance, so that they enjoy the same rights and benefits as people in Great Britain.49 While various minor policy differences were pursued in Northern Ireland in the 1950s and ‘60s – such as residence qualifications to deter population movement across the Irish border – these reciprocal arrangements allowed for the creation of two broadly equivalent social security systems.50 The ‘principle of parity’ was codified in legislation by section 87 of the Northern Ireland Act 1998. It provides that the Northern Ireland Minister responsible for social security and the Secretary of State for Work and Pensions should consult one another with a view to securing a single system of social security, child support, and pensions for the UK. The

48 Derek Birrell and Deirdre Heenan, ‘Devolution and social security: the anomaly of Northern Ireland’, Journal of Poverty and Social Justice, October 2010, p282 49 Derek Birrell, The Impact of Devolution on Social Policy, 2009, p. 105 50 Ibid. 29 Commons Library Briefing, 9 November 2020

1998 Act contained a list of legislation where reciprocal consultation is required, and this is updated on a regular basis.51 The two systems are formally distinct, with entirely separate statute books. In almost all circumstances, however, the legislation in Northern Ireland makes corresponding provision to its equivalent in Great Britain. Benefits in Northern Ireland are also delivered by the Department for Communities, rather than the DWP. HMRC, however, is responsible for tax credits and (since 2003) Child Benefit. These are delivered on a UK- wide basis, with the legislation concerning both applying to Northern Ireland as well as Great Britain. For all other benefits, however, Northern Ireland could decide to follow different policies from the UK Government, but the expectation is that any additional costs involved would have to be met by the Executive.52

Box 4: Further reading on ‘parity’ in Northern Ireland More detailed background information on devolution and the principle of parity is provided in the following briefings: • Professor Gráinne McKeever (Ulster University), Social security devolution: Northern Ireland and Scotland, September 2017 • Northern Ireland Assembly Research Service Briefing Paper 99/11, Parity and Social Security in Northern Ireland, May 2011. • Northern Ireland Department for Social Development, Understanding “Parity”: Departmental briefing paper. • Law Centre NI, Social Security Parity: A note for the Social Development Assembly Committee, May 2011

5.2 Differences in the Northern Ireland social security system In 2020, while there are some differences in social security provision in Northern Ireland compared with Great Britain, these are generally relatively minor. In terms of the range of benefits available, conditions of entitlement and benefit rates, the two systems essentially operate as one. Examples of where policy and practice do differ include: • Rules around the definition of part-time students for certain benefits: in Northern Ireland, the student’s academic institution can determine the definition of part-time study. • The recovery of overpayments deducted from benefits: in Northern Ireland, the rate of recovery is higher and deductions can be made from a greater range of benefits. • Residence tests for benefits: in Northern Ireland, more onerous tests apply for certain benefits to block eligibility for claimants in the Republic of Ireland • The process of appealing social security decisions: Northern Ireland has a different tribunal structure from Britain.

51 Derek Birrell and Deirdre Heenan, ‘Devolution and social security: the anomaly of Northern Ireland’, Journal of Poverty and Social Justice, October 2010, p283 52 Derek Birrell, The Impact of Devolution on Social Policy, 2009, p106 30 Social security powers in the UK

While social security legislation in Northern Ireland has remained largely in parity with the rest of the UK, the nature of the devolved settlement can allow for aspects of divergence. The Welfare Reform Act (Northern Ireland) 2007, for example, was introduced to make the same provisions on those in the Welfare Reform Act 2007, passed in Westminster. One aspect of this was opposed in the Northern Ireland Assembly Committee because it introduced the practice of paying Housing Benefit to claimants in the private rented sector, rather than the landlord, as was the practice in Northern Ireland. This resulted in the Social Development Minister deciding to retain the existing arrangements.53 This issue of divergence has become more significant since 2010 owing to substantial debate in Northern Ireland as whether, and to what extent, it should implement the 2010 Coalition Governments’ programme of welfare reforms contained in the Welfare Reform Act 2012. A Welfare Reform Bill was introduced to the Northern Ireland Assembly in October 2012, but stalled in February 2013 owing to deadlock between the political parties. In March 2015, Sinn Féin withdrew its support for the Bill and, supported by the SDLP, lodged a ‘petition of concern’. A further petition of concern was presented on Friday 22 May by Sinn Féin and the SDLP, and was also signed by the Green Party. As a result, on 26 May 2015 the Welfare Reform Bill failed to pass its final stage in the Assembly.54 This political impasse resulted in the November 2015 Fresh Start Agreement, following which the Northern Ireland (Welfare Reform) Bill was fast-tracked through the UK Parliament to enable Westminster – rather than the Northern Ireland Assembly – to legislate for welfare reform in Northern Ireland. This enabling measure paved the way for the Welfare Reform (Northern Ireland) Order 2015, which included provisions equivalent to the Welfare Reform Act 2012 in Great Britain, and the Welfare Reform and Work (Northern Ireland) Order 2016, which mirrored the Welfare Reform and Work Act 2016. The intention was to restore parity between Northern Ireland and the rest of the UK. Between January 2017 and January 2020, neither the Northern Irish Assembly, nor Executive, were fully-functioning. In that time, benefits changes announced in Great Britain have been followed almost immediately by corresponding and equivalent changes in Northern Ireland – in line with the ‘principle of parity’.

5.3 Mitigating welfare reform As part of the Fresh Start Agreement (Section C), the Northern Ireland Executive agreed to set aside £585 million from the Northern Ireland block grant for four years until 2020 to “top-up” reductions in benefit

53 Ibid., p107 54 A ‘petition of concern’ is an aspect of voting in the Northern Ireland Assembly where when 30 or more MLAs petition the Assembly expressing concern about a matter to be voted on, it then requires cross-community support to pass. For further information, see Commons Library briefing CBP-8439, Devolution in Northern Ireland, 1998-2020, 3 February 2020, section 1.3 and section 8. 31 Commons Library Briefing, 9 November 2020

payments resulting from the UK Government’s welfare reforms, and to establish a Working Group to consider the best use of this funding.55 In January 2016, this Group proposed a series of Welfare Supplementary Payments (WSPs) to reduce the impact of welfare reforms on the most vulnerable in Northern Ireland and to provide support to claimants as they adapted to the changes, including the rollout of Universal Credit. Specifically, the Working Group recommended that £501 million should be set aside for mitigation measures over four years from 2016 to 2020, and that a further £8 million should be used to fund additional independent advice services.56 The mitigation measures, based on the proposals of the Welfare Reform Mitigations Working Group, include: • The highest level of sanction set at 18 months rather than 3 years (although in May 2019, it was announced the maximum period for sanctions in Great Britain would be reduced from three years to six months, by the end of 2019). • A one-year supplementary payment, and exemption from the Benefit Cap, for carers who lose Carer’s Allowance when the person they care for does not migrate successfully from DLA to PIP. • A one-year supplementary payment for claimants who lose entitlement to contributory ESA after 365 days, who are not entitled to income-related ESA. • Supplementary payments for DLA claimants appealing a decision not to award PIP, pending the outcome of their appeal. • For DLA claimants migrated to PIP whose PIP award is more than £10 per week less than their DLA, a one-year supplementary payment equivalent to 75 per cent of the loss. • The automatic award of an additional four points for PIP claimants with injuries relating to the Northern Ireland conflict, who scored at least four points in the PIP assessment. • One-year supplementary payment for claimants who lose premiums on moving from DLA to PIP. • Supplementary payments for families with children impacted by the benefit cap. • Supplementary payments, until 31 March 2020, for those affected by the social sector size criteria, (also known as the under- occupation penalty or “bedroom tax”), to protect tenants from any reduction in housing support for their existing tenancies. • A Discretionary Support Scheme to replace the Social Fund.

55 Northern Ireland Office, A Fresh Start: The Stormont Agreement and Implementation Plan, 17 November 2015, paras 1.1-1.4 56 NI Executive Office, Welfare Reform Mitigations Working Group Report, 19 January 2016 32 Social security powers in the UK

5.4 Universal Credit in Northern Ireland Universal Credit (UC) was introduced to Northern Ireland on a separate timetable to the rest of the UK, although completion of the Full Service roll-out took place on the same date as in Great Britain in December 2018.57 Therefore, as in Great Britain, new claims are taken from all claimant groups, including people with health conditions and disabilities, people with children, carers, and those in work. Existing claimants of the ‘legacy’ benefits (i.e. those income-related benefits which UC has replaced) may transfer to UC following a change in their circumstances. At May 2020 there were 108,620 households on UC in Northern Ireland.58 Mitigation of Universal Credit The Working Group created to allocate funding for the ‘mitigation package’ described above did not recommend specific mitigation for all claimants who migrate to Universal Credit. It did, however, provide funding for tax credit claimants migrating to UC as well as funding for a ‘Cost of Work Allowance’ scheme, which provides supplementary payment for Working Tax Credit and UC claimants to mitigate reductions in the Universal Credit work allowance. This, however, was not implemented as the secondary legislation required could not be passed owing to the Assembly not sitting. It also recommended that £2 million a year be made available until March 2020 for the provision of emergency financial support to alleviate short-term financial hardship suffered by UC claimants. In response, the Department for Communities developed the Discretionary Support Scheme and the Universal Credit ‘Contingency Fund’. Discretionary Support Awards are one-off payments made to claimants in case of a need arising from a crisis situation. Payments from the Universal Credit Contingency Fund are made through the Discretionary Support Scheme in the form of non-repayable grants. The Department for Communities’ Annual Report 2018/2019 on WSPs, published in November 2019, states that during the 2018/19 financial year 4,230 UC claimants in Northern Ireland received Contingency Fund payments. The total number of Discretionary Support awards made in the same period was 56,431.59 UC claimants in Northern Ireland may be entitled to ‘administrative payments’ if, prior to migrating to UC, they were in receipt of WSPs because they were affected by other welfare reforms. UC claimants may also be eligible for administrative payments if they are subsequently affected by the Benefit Cap and/or the Social Sector Size criteria. During 2018/19 a total of 2,540 UC claimants received such payments.60

57 The ‘Live Service’ – the initial version of UC – was not introduced in Northern Ireland, as it was in Great Britain between April 2013 and Spring 2016. 58 Department for Communities, Universal Credit Statistics - May 2020, 26 August 2020 59 Department for Communities, Annual Report 2018/19, October 2019, pp19 and 21 60 Ibid., p18 33 Commons Library Briefing, 9 November 2020

Universal Credit payment flexibilities in Northern Ireland While the Welfare Reform Bill was before the Northern Ireland Assembly, the Northern Ireland Executive and the UK Government agreed certain payment flexibilities for Universal Credit claimants in Northern Ireland. On 22 October 2012, the then Social Security Further information Minister, Nelson McCausland, said that agreement had been reached on Universal Credit with Lord Freud, the DWP Minister, on “operational flexibilities” to the in Northern Ireland welfare reform programme to reflect Northern Ireland’s unique is available on the Revenue Benefits circumstances and protect vulnerable claimants.61 These comprise: website: at • Twice monthly payments for all households as the default, Universal Credit: with monthly payments available on request. Northern Ireland, and on the • Payment of the housing element of UC direct to the landlord Northern Ireland (“managed payment”) as the default position. Direct payment of Department for the entire UC award including the housing element to the Communities household is available on request. website: at • Split payments (paid into separate bank accounts) are possible Universal Credit. between parties in a household on request.62 The Permanent Secretary of the Department of Communities reported in February 2019 that the “overwhelming majority” of UC claimants in Northern Ireland receive their payments fortnightly.63 The Commons Work and Pensions and Northern Ireland Affairs committees, in a joint report on Welfare Policy in Northern Ireland published in September 2019, concluded that this had “worked well”, and that the same payment arrangement should be offered to claimants in England and Wales. The report noted, however, that UC claimants in Northern Ireland still received monthly statements which the committees argued “causes confusion and potential anxiety” and recommended that fortnightly statements should be introduced to coincide with payment arrangements.64 The committees also concluded that “managed payments” to landlords were “working well”, although it noted that there were some outstanding technical errors, in particular technical rent arrears that have occurred because the payment schedules and payments due do not match.65 Similar problems have been encountered with direct payments to landlords in Scotland.66

61 Northern Ireland Assembly, 22 October 2012 62 ‘Universal Credit payments and advance payments’, NI Direct webpage [accessed 6 November 2020] 63 Letter from Permanent Secretary, Department for Communities NI, to Chair of the Work and Pensions Committee, 11 February 2019 64 Work and Pensions and Northern Ireland Affairs Committees, Welfare Policy in Northern Ireland, HC2100, 9 September 2019, paras 103-105 65 Ibid., paras 113-4 66 Scottish Parliament Social Security Committee, Social Security Support for Housing, SP Paper 550, 12 June 2019, para. 17 34 Social security powers in the UK

The joint report noted, however, that take-up of UC split payments had been “extremely low” and that in early 2019 there were only two households in Northern Ireland which took advantage of this flexibility.67

5.5 Mitigation beyond March 2020 The existing mitigation package was due to expire on 31 March 2020.68 The Northern Ireland Affairs and Work and Pensions committees argued that it should be continued beyond this point and that not doing so would create a “cliff edge” for claimants: The ending of the mitigation payments in March 2020—in particular, the ending of Social Sector Size Criteria and benefit cap mitigations—would mean that tens of thousands of households in Northern Ireland would see their incomes suddenly fall, some by hundreds of pounds per month. The impact on households would be exacerbated by the fact that many people simply would not be expecting the payments to end. Support organisations in Northern Ireland have rightly described this prospect as a “cliff edge”. None of the special circumstances that justified the mitigation package have changed in the last four years.69 On 9 January 2020, the UK and Irish governments published the text of an agreement to restore devolved government in Northern Ireland, entitled “New Decade, New Approach”. This was agreed by the main Northern Ireland parties the following day. It included a provision that: The Executive will extend existing welfare mitigation measures beyond March 2020, when they are currently due to expire.70 On 22 January, newly-appointed Northern Ireland Communities minister, Deirdre Hargey, confirmed the Executive’s commitment to extend the existing welfare mitigation measures.71 On Monday 3 February she confirmed that this would include the Social Size Sector Criteria mitigation scheme (to mitigate the so-called ‘bedroom tax’), and committed to introducing new legislation to continuing this mitigation “in the coming weeks”. She also committed to look at “other mitigations” as part of a wider review.72 On 11 February, the Northern Ireland Executive confirmed that a Welfare Mitigation/Social Sector Size Criteria Bill will be included in its new Legislative Programme. In a written ministerial statement, it confirmed that The Welfare Mitigation / Social Sector Size Criteria Bill will remove the current end date of 31 March 2020 in respect of mitigation payments for the Social Sector Size Criteria, usually referred to as the Bedroom Tax. This will fulfil the commitment in the New

67 Work and Pensions and Northern Ireland Affairs Committees, Welfare Policy in Northern Ireland, HC2100, 9 September 2019, para. 118 68 As provided for in Welfare Reform (Northern Ireland) Order 2015 (as amended by the Welfare Reform and Work (Northern Ireland) Order 2016) 69 Work and Pensions and Northern Ireland Affairs Committees, Welfare Policy in Northern Ireland, HC2100, 9 September 2019, para. 65 70 Northern Ireland Office, New Decade, New Approach, 9 January 2020, p9 71 ‘Hargey discusses welfare mitigations with key stakeholders’, Department for Communities, 21 January 2020 72 ‘Minister announces extension of protections from bedroom tax’, Department for Communities, 3 February 2020

35 Commons Library Briefing, 9 November 2020

Decade, New Approach deal that existing mitigation payments should continue beyond the 31 March.73 A week previous to this, Deirdre Hargey noted that welfare mitigation payments in Northern Ireland would not be interrupted if legislation to extend the measures was delayed beyond March 2020.74 Subsequently, on 9 April, Ms Hargey revealed that this legislation was yet to be presented to the Assembly, but that under provisions in the Budget (Northern Ireland) Act 2020, the Department for Communities had implemented “contingency arrangements”. This means that, as an “exceptional measure” until the legislation to extend the mitigation schemes is approved by the Assembly, payments will continue to be made to people who would otherwise be entitled to a Welfare Supplementary Payment.75 In his opening statement to the Assembly on the Budget Bill on 25 February 2020, Conor Murphy, the Minister of Finance, noted that expenditure for this by the Department for Communities would fall under the sole authority of the Budget Act (Northern Ireland) 2020 at an estimated cost of £7 million until 31 May 2020.76 In September, new Communities Minister, Carál Ní Chuilín, noted that mitigation payments were continuing under the authority of the Budget (No. 2) Act (Northern Ireland) 2002 as a contingency. She also noted that new primary and secondary legislation to extend the mitigation package more broadly was forthcoming and reported that a draft Bill would be introduced to the Assembly “as a matter of urgency”.77

73 Statement by the First Minister and Deputy First Minister on the Legislative Programme, 11 February 2020 74 AQW 834/17-22, 5 February 2020 75 Statement to Assembly Covid-19 Ad Hoc Committee: Minister for Communities, Deirdre Hargey MLA’, Department for Communities, 9 April 2020 76 NI Assembly Office Report, 25 February 2020 77 AQW 6328/17-22, 4 September 2020 36 Social security powers in the UK

6. Social security in Scotland, 1997-2016

6.1 Scottish devolution in 1997 Whereas many social policy areas, such as education, health, social care, and housing were devolved to the new Scottish Parliament by the Scotland Act 1998, responsibility for social security policy (as well as child support and pensions policy) was designated a reserved power in Schedule 5 (Head F). This had been agreed earlier in the Scottish Constitutional Convention’s final proposals in 1995. This noted, nevertheless, that: Within the UK framework of benefits and allowances, Scotland's parliament will co-operate with the Scottish offices of the Department of Social Security and with other agencies in the field to ensure that benefits are administered in a way sensitive to Scotland's needs. This role, coupled with direct responsibility for community care, health and social work, will give the parliament a powerful capability to plan strategically all welfare service provision in Scotland.78 A concordat was published in 1999 – as was a similar document for the new Welsh Assembly Government (as it was then known) – setting out guidance for cooperation between the new Scottish Executive and the then UK Department of Social Security. This covered working and liaison arrangements for officials, such as exchange of information, communication, correspondence, parliamentary proceedings (questions, debates, committees), finance, and the resolution of disputes. It only vaguely touched upon policy issues, however.79 This had consequences where there was interaction between reserved social security policy and devolved competencies – creating what one academic called “jagged edges” in social provision.80 One prominent example of this was the introduction in Scotland of free personal care in 2002 by the Labour-Liberal Democrat Scottish Executive. Some Scottish interests argued that this would lead to money being saved for the Department of Work and Pensions which it might otherwise have been spent on Attendance Allowance (which is not paid to those whose care is paid by public funds). They argued that the UK Treasury ought to transfer additional funds to the Scottish Executive because of the money the latter had saved the DWP in benefits payments. Following a debate between the two, the UK Government insisted that the Executive fund its policy on personal care from its existing block grant allocation.81

78 Scottish Constitutional Convention, Scotland’s Parliament: Scotland’s Right,1995 79 Derek Birrell, The Impact of Devolution on Social Policy, 2009, p108 80 Nicola McEwan, ‘Contesting Communities of Solidarity’ in Michael Keating (ed.), Debating Scotland: Issues of Independence and Union in the 2014 Referendum, 2017, p88 81 Commons Library briefing SN05136, The future of Attendance Allowance, 20 October 2009, section 3.1; Richard Parry, ‘Devolution and social security in Scotland’, Benefits, October 2004, p173 37 Commons Library Briefing, 9 November 2020

Social security policy, therefore – at least in the first decade of legislative devolution in Scotland – stood apart from other social policy areas, where there had been a defined emphasis on Scottish policy delivery.82 To a certain extent, this rested on the fact that the devolution settlement between 1999 and 2016 operated within a clearly-defined UK fiscal framework in which devolved services were, as they largely still are, financed by a UK Government block grant determined by the Barnett Formula.83 As some academics noted nearer the time, social security was therefore the “spectre” at the feast of a broader debate about fiscal autonomy, given that it represented such a large proportion of public spending.84 It was also argued that this acted as a constraint on any devolved administration’s anti-poverty policies, given that they had little power to redistribute income and resources. Additionally, it meant that, to a large extent, a devolved Scottish welfare regime remained firmly integrated within the wider UK welfare state.85

6.2 The Calman Commission (2009) The Commission on Scottish Devolution, or the “Calman Commission”, was established by the UK Government under the chairmanship of Sir Kenneth Calman in March 2008, and was tasked with reviewing “the provisions of the Scotland Act 1998” and recommending “any changes to the present constitutional arrangements that would enable a Scottish Parliament to serve the people of Scotland better”.86 It published The Future of Scottish Devolution Within the Union: A First Report in December 2008, and Serving Scotland Better: Scotland and the United Kingdom in the 21st Century: Final Report in June 2009. Whilst recommending the devolution of further responsibilities to Scotland, such as certain minor revenue-raising powers, it noted that it made “economic and social sense” for social security policy to remain largely a reserved matter. It considered the devolution of Attendance Allowance and Disability Living Allowance, but noted that: …interdependencies with other parts of the social security and tax credit systems mean that it would be extremely difficult to devolve policy responsibility for these benefits. If the link to GB-wide benefits was maintained then any easing of the rules governing eligibility for AA and DLA would have knock-on consequences for expenditure on more “mainstream” benefits. The Commission therefore recommends retaining the reservation of Attendance Allowance and Disability Living Allowance.87

82 Richard Parry, ‘Devolution and social security in Scotland’, Benefits, October 2004, p173 83 Ibid., pp173-4 84 Ibid. 85 Nicola McEwan and Richard Parry, ‘Devolution and the preservation of the United Kingdom welfare state’ in Nicola McEwan and Luis Morena (eds), The Territorial Politics of Welfare, 2005, p51 86 Commons Library briefing paper CBP-8441, "The settled will"? Devolution in Scotland, 1998-2018, 19 November 2018 87 Commission on Scottish Devolution, Serving Scotland Better: Scotland and the United Kingdom in the 21st Century: Final Report, para. 5.243. 38 Social security powers in the UK

It did conclude, however, that there were “elements of the social security system which are closely aligned to areas of responsibility already devolved to Scotland” which could “usefully be exercised by Scottish Ministers” to achieve their domestic policy objectives. In particular, it highlighted Housing Benefit and Council Tax Benefit as “closely related to devolved responsibilities”, namely housing and council tax. It concluded that, while these benefits should, on balance, remain reserved, it recommended that there should be “greater scope…for Scottish variation in these policy areas, in line with the scope for variation in the devolved policy areas to which they are connected”. Its resulting recommendation was as follows: RECOMMENDATION 5.19: There should be scope for Scottish Ministers, with the agreement of the Scottish Parliament, to propose changes to the Housing Benefit and Council Tax Benefit systems (as they apply in Scotland) when these are connected to devolved policy changes, and for the UK Government – if it agrees – to make those changes by suitable regulation.88 On 25 November 2009 the UK Labour Government published a White Paper, Scotland’s Future in the United Kingdom: building on ten years of Scottish devolution, in which it stated that the UK-wide social security system was a “fundamental element of the social union” and rejected any change to Housing and Council Tax Benefit system for Scotland alone which would undermine this. It nevertheless accepted the “close linkage” between these reserved benefits, and the devolved responsibilities of housing and council tax, and committed therefore to “continue to consult Scottish Ministers” on any proposed changes to these benefit and to invite them to suggest possible changes to them.89

6.3 Welfare Assistance The Coalition Government legislated via the Welfare Reform Act 2012 for certain elements of the discretionary Social Fund scheme to be replaced by new locally-based provision delivered by local authorities in England and the devolved administrations in Scotland and Wales. The original scheme had consisted of Community Care Grants and Crisis Loans administered by the DWP. These were abolished in April 2013 and funding was made available to local authorities in England and to the devolved administrations in Scotland and in Wales to provide such assistance in their areas as they saw fit. The transfer of funding was not accompanied by the transfer of any new powers or the introduction of any new responsibilities.90 The Scottish Government created the Scottish Welfare Fund as a national scheme, delivered through local authorities “to provide a safety net for people on low incomes”. Following the creation of an interim scheme in 2013, the Scottish Government passed the Welfare Funds

88 Ibid., para. 5.231 89 Scotland Office, Scotland’s Future in the United Kingdom, November 2009, para 5.19 90 Commons Library briefing SN06413, Localisation of the Social Fund, 16 November 2012 39 Commons Library Briefing, 9 November 2020

(Scotland) Act 2015 which placed a statutory duty on each local authority in Scotland to maintain a welfare fund. This provides: • Crisis Grants to help people on low incomes who are in crisis because of a disaster or emergency • Community Care Grants which help vulnerable people The Scottish Government provides funding to local authorities which since 2016 has been distributed, at least in part, on the Income Domain of the Scottish Index of Multiple Deprivation so that it can be targeted to the most vulnerable communities. It has also issued statutory guidance – last updated in May 2019 – for local authorities in Scotland to operate within a general framework, although local authorities have extensive discretion over how the scheme is delivered in their area.91

6.4 Council Tax Reduction schemes The Welfare Reform Act 2012 also provided for the abolition of Council Tax Benefit (CTB) and provisions for the localisation of Council Tax support in England were included in the Local Government Finance Act 2012. Since 1 April 2013 local authorities in England have been responsible for administering their own Council Tax Reduction Schemes. The UK Government did not devolve Council Tax Reduction (CTR) schemes to Scotland per se, but the 2012 Act allowed the devolved administrations to be funded to bring forward new schemes within their existing powers. In 2013 the Scottish and Welsh Governments decided to devise centralised Council Tax support schemes rather than devolve policy to local authorities. Responsibility to administering and implementing these schemes rests with local authorities, however.92 The Scottish Government introduced its national CTR scheme on 1 April 2013. It works by reducing the council tax bill of someone who is liable to pay council tax and meets the qualifying criteria. It is not a social security benefit, but when it was introduced the Scottish Government’s policy intention was that the scheme would replicate entitlement to Council Tax Benefit as far as possible.93

6.5 Scottish Independence Referendum (2014) The lead-up to the Scottish independence referendum in September 2014 coincided with extensive reform of the UK social security system by the Coalition Government, including the creation of Universal Credit. Many of the reforms proved controversial, however, and opposition to them, particularly on the part of the SNP (and by extension, the Scottish Government), helped to define the discussion around welfare powers as part of the wider independence debate.

91 ‘Scottish Welfare Fund’, Scottish Government website [accessed 6 November 2020] 92 Commons Library briefing SN06672, Council Tax Reduction Schemes, 24 August 2020 93 SPICe briefing 17/24, Council Tax Reduction, 31 March 2017 40 Social security powers in the UK

In particular, the Coalition Government’s use of powers within the Welfare Reform Act 2012 to deal with under-occupancy – to reduce entitlement for some Housing Benefit claimants if they were deemed to be “under-occupying” their accommodation – was especially controversial (the so-called “bedroom tax”, or removal of the “spare room subsidy”).94 On 2 May 2014 the Coalition Government ultimately agreed to devolve the order making power which sets the statutory cap on Discretionary Housing Payments, which the Scottish Government said it would use to mitigate the under-occupancy provisions. Discretionary Housing Payments are allocated to local authorities to help tenants who are having trouble making their rent payments.95 Proposals for further devolution The pro-Union parties in Scotland – Scottish Labour, the Scottish Conservatives, and Scottish Liberal Democrats – set out proposals for further extending devolved powers in Scotland should the referendum result in a vote to reject independence. Each proposed some measure of devolution in relation to social security benefits. Scottish Labour’s Devolution Commission published a final set of recommendations in March 2014, proposing the devolution of Housing Benefit and Attendance Allowance. It was, however, opposed to devolving PIP. The Scottish Conservatives’ Commission on the Future Governance of Scotland (‘the Strathclyde Commission’) reported on 2 June 2014 and noted that there was “a case for devolving Housing Benefit” given that housing was already a devolved competency. But it also noted that this would be “highly complex (and expensive)” given that Housing Benefit was being replaced by the housing costs element of Universal Credit. It further argued that Attendance Allowance “should be considered for devolution” and said that there was a case for giving the Scottish Parliament the power to supplement reserved social security benefits. The Scottish Liberal Democrats’ Home Rule and Community Rule Commission did not recommend devolving any specific benefits as such, arguing instead that Scotland should be given “home rule” within a reformed, federal United Kingdom. As part of this, it argued that there should still be a single UK welfare and pensions system with common living standards and entitlements. It nevertheless proposed that there should be ‘partnership powers’ which would require cooperation between different levels of government, and cited changes by the UK Government to Housing Benefit as an example where it would be required to consult the Scottish Government formally.

94 Commons Library briefing SN0672, Under-occupying social housing: Housing Benefit entitlement, 1 November 2019 95 Commons Library briefing CBP-6899, Discretionary Housing Payments, 20 August 2020, section 4 41 Commons Library Briefing, 9 November 2020

Proposals for the social security system in an independent Scotland The SNP Scottish Government’s proposals for a welfare system in an For further independent Scotland was informed by the work of its Expert Working information about Group on Welfare. On 26 November 2013, the Scottish Government proposed changes published a White Paper – Scotland’s Future – which set out its to social security in proposals for an independent Scotland. This stated that the UK welfare Scotland during the system was now too complicated and in need of fundamental reform. independence The stated objective of a new system for Scotland would be to provide a referendum, see more personalised package of support, provide greater long-term SPICe briefing certainty for claimants and be focused on longer term goals. 14/56, Welfare in Scotland: Current In the event of a vote in favour of Scottish independence, the Scottish Changes and Future Government proposed to introduce policy changes from 2016 to better Proposals, 20 reflect Scottish needs, as it saw them. The White Paper set out the August 2014. following immediate priorities for action: • Halt the rollout of Universal Credit and Personal Independence Payment in Scotland; • Abolish the “bedroom tax” within the first year of the first independent Scottish parliament; • Ensure that benefits and tax credits increase in line with inflation; • Review the conditionality and sanctions regime; and • Abolish the Work Capability Assessment and review the system of assessments for disability benefits.96

6.6 The Smith Commission Following the result of the referendum on 18 September 2014, where the ‘No’ vote won with 55.3% of the vote, against 44.7% for independence, the Prime Minister, David Cameron, announced the formation of a Commission to be chaired by Lord Smith of Kelvin. This was to “convene cross-party talks” whose purpose was to develop “recommendations for further devolution of powers to the Scottish Parliament”. On 27 November 2014, the Smith Commission published its recommendations, including proposals on social security. It proposed that Universal Credit should remain a reserved benefit, but that the Scottish Parliament should have the power to vary the housing costs element in Scotland as well as the powers to vary UC payment arrangements. It further proposed that various benefits outside UC should, for the first time, be devolved fully. The Scottish Parliament would have “complete autonomy” over these benefits, and over any benefits or services which might replace them. Devolution of these powers would be accompanied by an increase in the block grant equivalent to the existing level of

96 Scottish Government, Scotland’s Future: Your Guide to an independent Scotland, November 2013, chapter 4 42 Social security powers in the UK

spending on these benefits in Scotland. The benefits which it recommended should be devolved were: • Disability Living Allowance, Attendance Allowance, Personal Independence Payment, Carer’s Allowance, Industrial Injuries Disablement Allowance, and Severe Disablement Allowance; • Benefits comprising the Regulated Social Fund - Winter Fuel Payments, Cold Weather Payments, Funeral Payments and the Sure Start Maternity Grant; and • Discretionary Housing Payments.97 In addition to having the power to create new benefits in the areas of devolved responsibility, the Smith Commission proposed that the Scottish Parliament should have new powers to make additional discretionary payments at its expense in any area of welfare. Prior permission from the DWP would not be required, although its agreement would have to be sought if it were to deliver any additional payments on behalf of the Scottish Government. The Commission stated that any new benefits or discretionary payments to top up reserved benefits “must provide additional income for a recipient and not result in an automatic offsetting reduction in their entitlement to other benefits or post-tax earnings if in employment.”98 The Commission further proposed a “no detriment principle”, which stated that where a decision by one government affects the tax and/or spending of the other, it is for the decision-making government to meet the cost (or retain the saving). This applied to policies across the board, but was expected to be particularly significant for social security policy. Following the publication of the Commission’s final proposals, it was reported that an earlier draft had included more radical recommendations on social security policy. This included devolving the power to vary all the key elements of Universal Credit, as well as Child Benefit, Guardian’s Allowance, Maternity Allowance, and the “operations of in Scotland”.99

97 The Smith Commission, Report of the Smith Commission for further devolution of powers to the Scottish Parliament, 27 November 2014, paras 43-56 98 Ibid., para. 55 99 ‘Smith Commission 'dropped welfare proposals'’, BBC News, 28 November 2014 43 Commons Library Briefing, 9 November 2020

7. Social security in Scotland, 2016 onwards

Box 5: Social Security powers devolved by the Scotland Act 2016 Following the implementation of the Scotland Act 2016, the following areas of social security are devolved:

• Disability, industrial injuries and carers’ benefits – which in the UK reserved system are Attendance Allowance, Carer’s Allowance, Disability Living Allowance, Personal Independence Payment, Industrial Injuries Benefit, and Severe Disablement Allowance; • Benefits for maternity, funeral and heating expenses – which in the UK are Cold Weather Payment, , Sure Start Maternity Grant, Winter Fuel Payment; • Discretionary Housing Payments • Discretionary payments and assistance • Power to top-up any benefit • Power to create other new social security benefits; • Power to legislate for welfare foods; and • Power to vary the housing cost element and to change payment arrangements for Universal Credit

For detailed information on the scope of the new powers see Part 3 of the Scotland Act 2016 and the accompanying Explanatory Notes.

7.1 The Scotland Act 2016 The Scotland Act 2016 gives the Scottish Parliament powers over benefits falling within the categories recommended by the Smith Commission, i.e. disability benefits, benefits comprising the regulated Social Fund, and Discretionary Housing Payments. The Scottish Parliament was given the power to determine the structure and value of these benefits, or replace these existing benefits with new benefits, in line with the legislative framework. Additionally, the Act also devolved the following powers: • An expanded power to provide discretionary payments and assistance (beyond the powers under which the Scottish Welfare Fund is currently delivered); • The power to top-up reserved benefits; • The power to create other new social security benefits (other than pensions) in areas not otherwise connected with reserved matters; • The power to legislate for welfare foods; • Powers to vary the housing cost element of Universal Credit for rented accommodation and change payment arrangements for Universal Credit; and • Powers over support for unemployed people through employment programmes. 44 Social security powers in the UK

7.2 Caseload of devolved benefits The table below sets out the caseloads (numbers of beneficiaries or payments made) for each of the main devolved benefits. Of the benefits subject to devolution in Scotland, Winter Fuel Payment (WFP) is received by the largest number of people: just over 980,000 Scottish residents in 2019/20. As WFP is a universal benefit for people above State Pension age, Scotland’s share of the total WFP recipient caseload in the UK (8.7%) matches Scotland’s share of the 65-and-over population in Great Britain (also 8.7% as of mid-2019). For the various disability benefits, Scotland’s caseload share is higher than its share of the overall Great Britain population (8.4% in mid- 2019). In the case of DLA, PIP and Industrial Injuries Disablement Benefit, Scotland accounts for more than 10% of the total caseload in Great Britain.

Recipients of benefits which are devolved in Scotland

of which: GB total (a) Scotland % of GB Date number number total

Disability and carers' benefits Attendance Allowance Feb 2020 1,588,509 147,725 9.3% Disability Living Allowance Feb 2020 1,454,321 157,830 10.9% Personal Independence Payment Jul 2020 2,557,311 273,901 10.7%

Carer's Allowance: entitled cases Feb 2020 1,309,764 122,667 9.4% of whom: cases in payment Feb 2020 896,966 78,870 8.8%

Industrial Injuries Disablement Benefit Dec 2019 267,290 27,370 10.2% Severe Disablement Allowance Feb 2020 17,607 1,673 9.5%

Other benefits Cold Weather Payments: 2015/16 to 1,225,000 275,000 22.4% number of payments 2019/20 average

Winter Fuel Payments Number of households 2019/20 8,212,600 706,710 8.6% Number of people 2019/20 11,351,680 983,030 8.7%

Discretionary Housing Payments 2019/20 379,010 128,650 33.9%

Note: (a) Great Britain caseloads for disability benefits include small numbers of overseas residents. Sources: DWP Stat-xplore; DWP Cold Weather Payment estimates; DWP Winter Fuel Payment statistics Discretionary Housing Payments statistics: DWP (England and Wales), Scottish Government (Scotland) 45 Commons Library Briefing, 9 November 2020

7.3 A new Scottish social security system The Scottish Government has stated that it intends to use the powers devolved by the Scotland Act 2016 to create a Scottish social security system based on “dignity, fairness and respect.”100 The Scottish Parliament has passed the Social Security (Scotland) Act 2018, which received Royal Assent on 1 June 2018. This sets out the framework for a new Scottish social security system and the principles underpinning it.

Box 6: Devolved social security powers and benefits in Scotland Further information on the devolution of social security in Scotland can be found in the following Scottish Parliament Information Centre (SPICe) briefings: • SB 16-45, New Social Security Powers, 31 May 2016 • SB 17-57, Social Security (Scotland) Bill, 31 August 2017 • SB 18-25, Social Security (Scotland) Bill: Consideration prior to Stage 3, 9 April 2018 • Social Security (Scotland) Bill: summary of the proceedings and the main provisions, June 2018 • SB-19-27, Devolved Social Security Powers: Progress and Plans, 10 May 2019 • SB 19-68, Scottish Social Security Benefits, 31 October 2019

The Scottish Government’s Social Security Directorate is responsible for developing policy, establishing a social security agency to deliver the devolved benefits, and working with the UK Department for Work and Pensions to transfer social security powers to Scotland. A number of stakeholder groups have been set up to provide advice to Scottish Ministers on social security matters. The Scottish Government is also gathering evidence from claimants and others with “lived experience” of social security via a number of “experience panels.” Other bodies involved with the developing of social security policy include: • The Scottish Commission on Social Security – established as an independent statutory body to scrutinise regulations creating devolved benefits. • The Scottish Fiscal Commission – an independent statutory body charged with, among other things, forecasting devolved social security expenditure. • The Joint Ministerial Working Group on Welfare – established in February 2015 to provide a forum for UK and Scottish Ministers to discuss social security matters, to ensure the smooth transfer of the powers, and to resolve “contentious and challenging issues.” The Scottish Government has also set up an executive agency – Social Security Scotland – to deliver the devolved benefits (other than discretionary housing payments and the Scottish Welfare Fund, which are delivered by local authorities).

100 Scottish Government, Charter on Scottish Social Security, 15 January 2019 46 Social security powers in the UK

7.4 Social Security Scotland Social Security Scotland was established in September 2018. It is currently responsible for the various Best Start Grant payments, the Carer’s Allowance Supplement, Funeral Expense assistance, and the Young Carer Grant, and it will soon start delivery of Child Winter Heating Assistance and Scottish Child Payment. Estimates of the costs of setting up a Scottish social security agency and administering the devolved benefits were given in the Financial Memorandum for the Social Security (Scotland) Bill as introduced on 20 June 2017.101 The Scottish Government estimated that the cost of establishing the new agency at £308 million (comprising expenditure on IT of £190 million over the four years to 2020-21, £14 million for “estates-related implementation costs”, and £104 million for staff costs). This is substantially more than the £200 million one-off amount transferred to Scotland under the Fiscal Framework for implementation for all the powers newly devolved under the Scotland Act 2016.102 The Memorandum stated that the £308 million figure “will change materially as further decisions are taken and the programme of work to specify and procure the infrastructure required for Scotland‘s new social security system evolves.”103 The Financial Memorandum estimated the ‘steady state’ running costs for the agency – i.e. once it is fully up and running – at between £144 million and £156 million per annum. The cost range does not, however, include “optimism bias or contingency for expenditure on enabling systems.”104 This is substantially more than the baseline £66 million a year in the Fiscal Framework for administration costs associated with the newly devolved powers. Any shortfalls between the set-up costs and steady state running costs for Social Security Scotland and the amounts transferred under the Fiscal Framework will have to be met from the Scottish Government’s budget.105 Audit Scotland (which is the Scottish equivalent of the UK National Audit Office) has conducted work on the Scottish Government’s progress and published two reports. The latest of these – Social Security: Implementing the devolved powers – was published in May 2019 and found that important groundwork had been undertaken in developing benefits, but that the complexity of social security and the need for specialist skills meant that there were significant challenges in delivering the programme. The report acknowledged that the programme team “is aware of the challenges and is doing the right things” but that, overall, the Scottish Government had found delivery

101 SP Bill 18-FM, 21 June 2017 – see para 48 onward 102 Ibid., para. 51 103 Ibid., para. 57 104 Ibid., para. 61 105 See the response from James Wallace of the Social Security Directorate to questions from Adam Tomkins MSP in an evidence session help by the Scottish Parliament’s Finance and Constitution Committee on 13 September 2017 47 Commons Library Briefing, 9 November 2020

“harder than expected.”106 In response, the Scottish Government recognised that “there is much more to do” but noted that it could “meet the challenge ahead”.107 On 12 February 2020, the Scottish Government published the Social Security Programme Business Case, which showed that the development costs (from launch to ‘steady state’) in setting up Social Security Scotland, would cost twice as much as forecast in the Financial Memorandum (£651 million, rather than £308 million) and take seven rather than four years. The reasons given for this were the “significant amount” of policy and delivery development since 2017, the complexity of ‘partial devolution’ where new Scottish benefits are phased in to replace existing DWP benefits, and the difficulties in quantifying the cost of changes to the DWP legacy benefit systems.108 The Business Case also noted that the ‘steady state’ operating costs of Social Security Scotland were projected to be £253m in 2024/25, which is 33-45% higher than the estimate provided in the Financial Memorandum noted above. The reasons given for this were that as a new agency it would take time to achieve economies of scale; that part of the increase was owing to the introduction of new benefits, such as Scottish Child Payment (see below); in addition to inflationary and cost increases.109

7.5 Transitional arrangements for devolved social security Devolved social security in Scotland will eventually be delivered by Social Security Scotland and Scottish local authorities. As a transitional measure, however – to ensure a “safe and secure transfer” of powers – the Scottish Government is using agency agreements whereby the DWP continues to deliver existing benefits which have been devolved until they are replaced gradually by their new Scottish equivalent benefits. Carer’s Allowance, for example, was fully devolved in September 2018 and continues to be delivered by the DWP under an agency agreement; it will eventually be replaced by Carer’s Assistance (see below for further information).110 The Scottish Government is paying the DWP £82 million for agency agreements in 2020/21, which will increase to £84 million in 2021/22,

106 Audit Scotland, Social Security: Implementing the devolved powers, May 2019. Audit Scotland is conducting another audit which is examining the progress that the Scottish Government is making on managing the delivery of devolved social security powers: Audit Scotland, Audit Scope: Social Security, November 2019. 107 ‘Meeting the social security challenge’, Scottish Government press release, 2 May 2019. Further commentary on the Scottish Government’s progress up to March 2018 in establishing Social Security Scotland can be found in an Audit Scotland, Managing the implementation of the Scotland Acts, 28 March 2018 108 Scottish Government, Social Security Programme Business Case, 12 February 2020, pp14 and 74-76 109 Ibid., pp77 and 83. For a more comprehensive briefing on this, see SPICe briefing, Social Security Committee – Thursday 20 February 2020 SSC/S5/20/5/1, 13 February 2020 110 Commons Library briefing SN00846, Carer’s Allowance, 9 January 2020, section 8 48 Social security powers in the UK

although this is expected to decline as caseload is gradually transferred to Social Security Scotland.111 In April 2020, full financial and legal responsibility for the rest of the social security benefits devolved by the Scotland Act 2016 was transferred to Scottish Ministers.

7.6 Funding devolved social security The UK Government provides additional funding to the Scottish For a more Government for social security benefits where executive competence comprehensive has been transferred from the DWP, including where they continue to overview of the be delivered by the DWP under agency agreements. This funding is funding known as a Block Grant Adjustment (BGA), which is the amount by arrangements for which the UK block grant to the Scottish Government is increased to Scottish social reflect the devolution of these disability and carer benefits. The first security, see the year’s calculation for each benefit is based on the spend in Scotland in SPICe Spotlight the year prior to which that benefit was devolved. For the benefits briefing, Funding devolved as of April 2020 (which is most of them), this was the spend in Scottish Social Security: A different 2019/20 (for which, see section 1.3 of this briefing).112 This figure is scale, 27 February then adjusted in line with changes in spending per capita in England 2020. and Wales which then produces the figure for the BGA. In subsequent years, the calculation will be based on the previous year’s BGA, adjusted for any changes in spending per capita in England and Wales. This calculation method is set out in the Fiscal Framework, agreed by the UK and Scottish Governments in 2016.113 The Scottish Government’s Budget for 2020/21, published in February 2020, included £3.4 billion in planned spending on social security benefits. Of this, £3.2 billion came from an increase in the block grant from the UK Government via a provisional BGA.114 This was provisional because of the delay to the UK budget which had been expected in Autumn 2019, and this figure was subsequently revised downwards by £170 million following the UK Budget in March 2020.115 However, the Scottish Government has agreed that it can continue on the basis of provisional BGAs, which leaves a negative adjustment of £170 million over 2020/21.116 The BGA is based on Office for Budget Responsibility (OBR) forecasts and is later reconciled to outturn spending over the course of two years (with an interim reconciliation and a final reconciliation). This may result

111 Scottish Government, Social Security Programme Business Case, 12 February 2020, table 5.3 112 For Carer’s Allowance, which was fully devolved in September 2018, this was 2017/18 113 Scottish Government and HM Treasury, The agreement between the Scottish Government and the United Kingdom Government on the Scottish Government’s Fiscal Framework, February 2016 114 Scottish Government, Scottish Budget 2020-2021, 6 February 2020, chapter 14 (Social Security and Older People) and Annex G (Social Security Block Grant Adjustments) 115 As confirmed in a letter from Kate Forbes, Cabinet Secretary for Finance, to Bruce Crawford, the Finance and Constitution Committee, 18 March 2020 116 SPICe briefing, Social Security Committee – Thursday 1 October 2020, SSC/S5/2- /18/2, 28 September 2020 49 Commons Library Briefing, 9 November 2020

in the Scottish Government either returning money to the UK Government or gaining an additional grant. For the disability benefits devolved in April 2020, the first interim reconciliation was scheduled to be in winter 2020, with the final reconciliation scheduled for the Scottish Budget for 2022/23.117 However, as the Chancellor of the Exchequer has announced that there will be no UK Budget in Autumn 2020, there is some uncertainty around this.118

7.7 Delivery timetable In a statement to the Scottish Parliament on 28 February 2019, the Cabinet Secretary for Social Security and Older People, Shirley-Anne Somerville, set out the Scottish Government’s proposed timetable for the “safe and secure” introduction of the devolved benefits.119 She announced that the transfer of all existing DWP benefit claimants to devolved benefits was not expected to be completed until 2024. Previously, the expectation was that the Scottish Government would be delivering all the devolved benefits by the end of the current Scottish Parliament (i.e. by May 2021). Under this latest available timetable, existing claimants were to begin to transfer from DWP to the Scottish Government’s devolved benefits in 2020. The expectation was that full caseload transfer would be completed in 2025.120 The announcement of this schedule came before the outbreak of the coronavirus pandemic, however, which has delayed rollout of some of these new benefits. On 1 April 2020, Shirley-Anne Somerville announced that she was delaying the introduction of two of the new Scottish disability benefits (now known as Child Disability Payment and Adult Disability Payment) which are due to replace Disability Living Allowance for children and Personal Independence Payment for adults in Scotland. These had previously been scheduled for rollout in summer 2020 and early 2021 respectively. The Cabinet Secretary noted that she was unable to offer a new timescale, given the uncertainty created by the coronavirus pandemic.121 The DWP will continue to deliver benefits which are being devolved to claimants in Scotland, such as PIP, until the transfer is complete. The Scottish Government is therefore working with the DWP to administer these benefits until Social Security Scotland is delivering their replacements in full. The Scottish Government will not introduce any policy changes to these benefits while they are being administered and delivered by the DWP.122 The rollout of Scottish Child Payment and Job Start Payment has also been delayed (see below).

117 Scottish Government, Fiscal framework Technical Note, May 2019 118 SPICe briefing, Social Security Committee – Thursday 1 October 2020, SSC/S5/2- /18/2, 28 September 2020 119 Scottish Government, Devolution of benefits: Ministerial statement, 28 February 2019 120 Scottish Government, Devolved social security benefits: stakeholder engagement toolkit, 16 December 2019, p7 121 Scottish Government, Coronavirus (COVID-19) – update on devolved benefits: Cabinet Secretary speech, 1 April 2020 122 SPICe briefing, Social Security Committee – Thursday 20 February 2020 SSC/S5/20/5/1, 13 February 2020 50 Social security powers in the UK

Timetable for delivering new Scottish benefits123

2017 April: Discretionary Housing Payments devolved.

October: Universal Credit Scottish Choices (payment flexibilities) introduced.

2018 September: Social Security Scotland established.

September: Carer’s Allowance Supplement introduced.

December: Best Start Grant Pregnancy and Baby Payment replaced the UK Government's Sure Start Maternity Grant. .

2019 June: Best Start Grant school age payment – start.

Summer: Best Start Grant foods – start.

Summer: Funeral Support Payment – began to replace the UK Funeral Expenses Payment and providing eligible low income families with a contribution towards the cost of a funeral.

Autumn: Young Carer Grant – start.

2020 April: Scottish Ministers assumed full responsibility (i.e. both legislative and executive competence) for the remaining devolved benefits, including their funding, although initially Scottish benefits replacing UK benefits will take new claims only (existing claimants to transfer to Scottish benefits on a phased basis).

Summer: Child Disability Payment – was due to start replacing Disability Living Allowance for children, but is now delayed due to the coronavirus pandemic, with a revised timetable yet to be announced.

August: Job Start Payment – open for applications from 17 August (delayed from Spring owing to the coronavirus pandemic).

Winter: Child Winter Heating Assistance – new regulations in force from 9 November which set out new eligibility rules for this new form of assistance paid for children and young people in receipt of the highest rate care component of DLA.

123 Based on Scottish Government, Devolution of benefits: Ministerial statement, 28 February 2019, and various subsequent updates announced by the Scottish Government. See also Scottish Government, Devolved social security benefits: stakeholder engagement toolkit, December 2019 51 Commons Library Briefing, 9 November 2020

Winter: Scottish Child Payment – applications being accepted from 3 November for children under 6 and the first payments to be made to eligible families from the end of February 2021. (Delayed by two months due to the coronavirus pandemic).

2021 Early in the year: Adult Disability Payment – was due to start replacing PIP, but is now delayed due to the coronavirus pandemic, with a revised timetable yet to be announced.

‘2021’: Pension Age Disability Payment – due to start replacing Attendance Allowance.

Early in the year: Carer’s Allowance Supplement for carers looking after more than one disabled child – due to start

Winter: Winter Heating Assistance – due to start replacing Winter Fuel Payments, initially for those receiving another Scottish benefit.

Winter: Cold Spell Heating Assistance – due to start replacing on Cold Weather Payments.

2022 Spring: Care’s Assistance – due to start replacing Carer’s Allowance.

Autumn: Employment Injury Assistance – due to start replacing Industrial Injuries Disablement Benefit.

End: Scottish Child Payment to be extended to those under 16

2025 Expectation that the transfer of existing DWP claimants to Social Security Scotland will be complete by 2025. It is unclear if the coronavirus pandemic will impact on the completion date for this schedule.

7.8 Devolved benefits in Scotland This section briefly describes the devolved benefits in Scotland. Further information about them can be found in SPICe briefing SB 19-68, Scottish social security benefits, 31 October 2019. Benefits available before 2020 The following benefits are currently being delivered by Social Security Scotland to claimants in Scotland. 52 Social security powers in the UK

Carer’s Allowance Supplement This was introduced in September 2018 and is an automatic additional payment made twice a year to people who receive Carer’s Allowance on certain qualifying dates. Eligible people are identified by Social Security Scotland using DWP lists of those receiving Carer’s Allowance on the qualifying dates. It is meant as a temporary benefit which will be superseded by Scottish ‘Carer’s Assistance’ via a transition which is expected to be complete in 2025. In 2020/21, a single payment of CAS was £230.10.124 Young Carer Grant This is a form of carer’s assistance which started on 21 October 2019. According to the Scottish Government, it is “to provide support during a transition period in young carer’s lives”125. It is available to 16, 17, and 18-year olds who do not get Carer’s Allowance but who care for a person in receipt of certain disability benefits. The young carer must have provided an average of 16 hours of care per week over a 2-month period. It is a yearly payment currently with £305.10. Those who could no apply before their 19th birthday due to disruption caused by coronavirus may be able to have their application viewed as being made on time.126 Best Start Grant This provides three lump-sum payments to help with the costs of babies and young children. For qualifying parents, it provides £600 for the first child around birth (and an additional £300 for multiple births), £250 for each child around nursery age, and £250 for each child around school age. In order to qualify, a parent or guardian who is 18 or older must also be in receipt of a qualifying benefits, i.e. Universal Credit, one of the legacy benefits being replaced by UC (such as income-based JSA), or Pension Credit.127 Best Start Foods This scheme provides a pre-paid card to spend on health food for people under 18 who are either pregnant or have a child under one, and people of any age on certain benefits who are either pregnant or have a child under three. It provides £17 every 4 weeks for pregnant women and those with children between the ages of one and three, and £34 every 4 weeks for those with a new child from their birth until their first birthday. Claimants who are not under 18 must be in receipt of a qualifying benefit (as defined above).128

124 MyGov.Scot, Carer’s Allowance Supplement, 3 November 2020 125 ‘New benefit for young carers’, Scottish Government, 15 October 2019 126 MyGov.Scot, Young Carer Grant, 21 October 2020 127 MyGov.Scot, Best Start Grant and Best Start Foods, 14 October, 2020; SPICe briefing SB 19-68, Scottish social security benefits, 31 October 2019, pp17-22. There are other rules if the person is under 18, or if they are under 20 and their parent or carer receives a benefit such as Child Benefit for them, or their carer is their approved kinship carer. 128 MyGov.Scot, Best Start Grant and Best Start Foods, 14 October, 2020; SPICe briefing SB 19-68, Scottish social security benefits, 31 October 2019, pp23-29 53 Commons Library Briefing, 9 November 2020

Funeral Support Payment This replaces Funeral Expenses Payment (paid from the Social Fund) in the reserved system and has been available since 11 October 2019.129 It provides a contribution towards the cost of a funeral, including burial or cremation costs, as well as transport costs, with £1,000 provided initially as a flat-rate for additional costs (subject to uprating with inflation). Social Security Scotland estimates that the average award will be £1,500. The claimant or their partner must have accepted responsibility for the funeral (and it must be “reasonable” for them to do so), and be in receipt of a qualifying benefit.130 Benefits to be delivered between 2020 and 2025 The following benefits are scheduled to be introduced from 2020 onwards.

Box 7: Severe Disablement Allowance While Severe Disablement Allowance (SDA) has been devolved to the Scottish Parliament by the Scotland Act 2016, the Scottish Government will not be transferring it to Social Security Scotland. SDA has not been available for new claims since April 2001 and has a small and declining number of claimants. The Scottish Government does not propose to make any changes to it and has argued that transferring it would create disruption for existing recipients. SDA will continue, therefore, to be provided by the DWP.131 The Smith Commission’s reasons for recommending that SDA be devolved to Scotland are unclear.

Child Disability Payment This will replace Disability Living Allowance for children and young people aged between three months and 18 years.132 Aside from the extension of the maximum age of eligibility from 16 to 18 years, it is anticipated that other eligibility criteria will otherwise remain similar to DLA for children.133 As noted above, this was due to be introduced over the summer of 2020, but this has been delayed due to the coronavirus outbreak. Adult Disability Payment This will replace PIP for people from the age of 16 to those of State Pension Age. The intention is that the eligibility rules will remain largely the same as for PIP. This was due to become available for new claims in “early” 2021, but its introduction has been delayed, with a revised date yet to be announced (as explained above).134 Pension Age Disability Payment This will replace Attendance Allowance for people who are of State Pension Age and over who have a disability and who therefore require

129 ‘Funeral Support Payment now open for applications’, Scottish Government press release, 11 October 2019 130 MyScot.Gov, Funeral Support Payment, 3 November 2020 131 Scottish Government, Severe Disablement Allowance: policy position paper, 28 February 2019 132 MyGov.Scot, Disability Living Allowance for children in Scotland, 26 August 2020 133 ‘Social Security: Disability Assistance’, Scottish Government website [accessed 6 November 2020]; Scottish Government, Child Disability Payment: position paper, 7 February 2020 134 ‘Social Security: Disability Assistance’, Scottish Government website [accessed 6 November 2020] 54 Social security powers in the UK

care. It is anticipated that the eligibility rules will remain similar to AA, and it will have a lower rate and a higher rate.135 Job Start Payment This is a new benefit amounting to a cash payment (£250, or £400 for those with children) for young people between the ages of 16 and 24 who have been out of paid work and receiving a low-income benefit for six months prior to finding employment.136 It is now available for those who were offered a job on or after 17 August 2020.137 Scottish Child Payment For low-income households with children under six who are in receipt of a qualifying means-tested benefit. It involves a payment level of £10 per week, per eligible child. It will be open for applications from 9 November with the first payments made “from the end of February 2021”.138 Winter Heating Assistance The design for this benefit is based on, and will replace, the existing Winter Fuel Payment. It will, however, be extended to families with severely disabled children who are in receipt of the higher rate component of DLA for children, and subsequently Child Disability Payment, and is available as Child Winter Heating Assistance as a £200 payment from November 2020.139 It will replace UK Winter Fuel Payment for older people from the winter of 2021, but initially only for those who receive another type of payment from Social Security Scotland.140 Cold Spell Heating Assistance This is designed based on Cold Weather Payment, which it will replace, and the Scottish Government does not plan to change the eligibility criteria or to change the amount of benefit paid.141 Carer’s Assistance From winter 2021, new claims for Carer’s Assistance (replacing Carer’s Allowance and the Carer’s Allowance Supplements) will begin, and under current plans existing Carer’s Allowance claimants in Scotland will transfer to Carer’s Assistance between spring 2022 and 2025. This will initially mirror Carer’s Allowance (plus the supplements), but the

135 Ibid. 136 ‘Social Security: Job Start Payment’, Scottish Government website [accessed 6 November 2020] 137 MyGov.Scot, Job Start Payment, 3 November 2020 138 ‘Social Security: Scottish Child Payment’, Scottish Government website [accessed 6 November 2020] 139 Scottish Government, Cold Spell and Winter Heating Assistance: policy position paper, 28 February 2019; MyGov.Scot, Child Winter Heating Assistance, 16 October 2020; ‘Child Winter Heating Assistance payments to start’, Scottish Government news, 27 October 2020 140 Scottish Government, Social Security questions and answers: Delivery Timetable, 9 February 2019, p3 141 Scottish Government, Cold Spell and Winter Heating Assistance: policy position paper, 28 February 2019 55 Commons Library Briefing, 9 November 2020

Scottish Government intends to consult on longer term changes to the benefit in 2021.142 Employment Injury Assistance This will replace industrial injuries benefits and the Scottish Government has committed to maintaining the current benefit levels and raising them annually, at least by the rate of inflation. It will be available from the autumn of 2022.143 Scottish Government plans for devolved disability benefits The Scottish Government is still developing its plans for the devolved disability benefits (Child, Adult, and Pension Age Disability Payments, listed above), but has already given a number of commitments as to how they will differ from the existing reserved benefits.144 On 23 October 2020, the Scottish Government introduced a series of policy position papers which provide an overview of its approach to these benefits. This includes: • Ensuring that the application process for these disability benefits is “inclusive” and “as straightforward as possible” by giving claimants a choice of applying by post, online, by phone, and through face-to-face contact with staff. • Providing further support during the application process to those who need it, such as a local delivery service offering face-to-face support, as well as the services of an independent advocacy worker. • Not using private sector contractors in the decision-making process. • Taking a new approach to decision-making – where decision- makers consider “information provided by clients and those who know them”. This will include “formal” (such from a health professional) and “informal” (such as from family, friends, or unpaid carers) supporting information. There “will be no assessments as the functional examinations like those carried out under the DWP, as we will no longer conduct physical examinations of a client”. For Adult Disability Payment, “consultations will only take place where it is the only practicable way to gather accurate information” and will be based on “a conversation between a healthcare professional employed by the Scottish Government and the client”. • Clear and accessible guidance for the application process “which will be developed in conjunction with stakeholders”. • Consultations to be audio recorded “as standard”. • All awards to be rolling, with no set end date – and reviews to be “light touch and as non-intrusive as possible”.

142 Scottish Government, Support for carers: policy position paper, 28 February 2019 143 Scottish Government, Disability and employment injury assistance: position paper, 27 October 2017 144 Scottish Government, Disability assistance in Scotland: response to consultation, 28 October 2019 56 Social security powers in the UK

• A “simple and straightforward” two-stage process for challenging decisions, with an initial “re-determination” followed by an appeal to the First-tier Tribunal for Scotland if the individual wishes to continue the challenge. There will also be ‘Short Term Assistance’ where there has been a decision to reduce or stop a benefit payment and where the claimant starts a challenge. This will mean they continue to receive payments at the amount they were getting before the decision to lower or stop their payment was made.145 In June 2020, the Scottish Government launched an advocacy service to help disabled people to access social security benefits in Scotland. This is a Social Security Scotland service which is available to anyone who, because of their disability, needs support applying for and managing their benefits. In August 2020, the Scottish Campaign on Rights to Social Security – a group comprising Citizens Advice Scotland, Inclusion Scotland, the Child Poverty Action Group in Scotland, and the National Association of Welfare Rights Advisers – called on the Scottish Government to aim for a “world-leading” system of support for disabled people. This recommended “long-term reforms”, including the provision of support for disabled people “which supports their right to independent living”, and which takes “into account the extra costs associated with an impairment if a person is to fully enjoy their right to equal participation”.146

7.9 Universal Credit Scottish Choices Universal Credit remains a reserved benefit, but under Universal Credit Scottish Choices the Scottish Government has used the powers conferred by the Scotland Act 2016 to change payment arrangements in Scotland for Universal Credit and to vary the housing cost element for rented accommodation. It became available to people making new claims in Full Service Universal Credit areas in Scotland from 4 October 2017, and for all UC claimants in Scotland from 31 January 2018. It is delivered by the DWP on behalf of the Scottish Government and provides the following options for UC claimants in Scotland: • Being paid Universal Credit twice a month rather than monthly • Having their Universal Credit housing element being paid directly to their landlords147 Scottish Choices are very similar to the DWP’s Alternative Payment Arrangements (APAs), which are available throughout Great Britain. APAs allow the housing cost element to be paid directly to the landlord, instead of to the claimant, and also allow UC awards to be made in two

145 Scottish Government, Disability Benefits Policy Position Papers: Papers 1-5, 23 October 2020 146 Scottish Campaign on Rights to Social Security, Beyond a Safe and Secure Transition – A long term vision for disability assistance in Scotland, 17 August 2020 147 ‘Social security: Universal Credit (Scottish Choices)’, Scottish Government website [accessed 6 November 2020] 57 Commons Library Briefing, 9 November 2020

payments a month instead of one. Claimants in Scotland can choose either or both of these options.148 The main difference between Scottish Choices and APAs is that the latter are only available where claimants cannot manage single monthly UC payments, or have difficulty paying their rent, and are at risk of ‘financial harm’. By contrast, claimants in Scotland can request a ‘Scottish Choice’ at any time by putting a note in their online journal. However, APAs are available from the start of a claim, whereas Scottish Choices are offered from a claimant’s second monthly assessment period. In practice, as the DWP delivers both, the same administrative arrangements are used for each of these flexibilities.149 Take-up of Scottish Choices or DWP APAs in Scotland In May 2020, of the 363,627 Scottish households on Universal Credit, 68,831 (18.9%) had a Scottish Choices More Frequent Payment in place, and a further 1,735 (0.5%) had a DWP More Frequent Payment. Of the 210,164 Scottish households on Universal Credit with a housing cost entitlement as part of their claim, 32,601 (15.5%) had a Scottish Choices Direct Payment to Landlord, and a further 55,284 (26.3%) had a DWP Managed Payment to Landlord. In total, just over two- fifths of tenant households on UC in Scotland (41.8%) have either of these two arrangements in place. Notwithstanding the introduction of Scottish Choices Direct Payments to Landlord in October 2017, the number of Scottish UC households receiving a DWP Managed Payment to Landlord has risen over sixfold since then (from 8,666 to 55,284), only slightly slower than the expansion of the UC caseload among tenant households in Scotland as a whole. The table below shows the different permutations of payment arrangements in place for Scottish households on Universal Credit in May 2020. 204 households with a Scottish Choices Direct Payment to Landlord also have a DWP More Frequent Payment. Conversely, 18,480 households with a Scottish Choices More Frequent Payment also have a DWP Managed Payment to Landlord.

148 Department for Work and Pensions, Alternative Payment Arrangements, 30 December 2019 149 SPICe briefing SB 19-68, Scottish social security benefits, 31 October 2019, p7 58 Social security powers in the UK

Universal Credit: Households in Scotland on UC, by Scottish Choices/DWP alternative payment arrangement status May 2020

Of which: more frequent payment (MFP) arrangement Scottish DWP No Total Choices MFP MFP MFP

All households in Scotland on UC 363,627 68,831 1,735 293,065

of which: Claiming housing cost support in UC 210,164 44,637 1,322 164,210

of which: landlord arrangement Scottish Choices Direct Payment to Landlord 32,601 13,546 204 18,852 DWP Managed Payment to Landlord 55,284 18,480 942 35,864 No landlord arrangement 122,273 12,603 176 109,494

Not claiming housing cost support in UC 153,464 24,197 408 128,858

Note: Statistical disclosure control was applied to these figures at source to avoid the release of confidential data. Components may not sum to totals due to the disclosure control applied. Source: DWP Stat-xplore Households on Universal Credit dataset

Cost and implementation of Scottish Choices The Scottish Government made a one-off administrative payment of around £0.5 million to the DWP to establish Scottish Choices. This provided for changes to the UC IT system and for updates to DWP staff guidance and training.150 Ongoing operational costs have been estimated at £1.6 million for 2018/19.151 In May 2019, Shirley-Anne Somerville noted that the Scottish Government would later that year be initiating a review into the approach taken with Scottish Choices “to ensure that it is working correctly”. The Cabinet Secretary said that this would consider the way in which Scottish Choices is offered, the timing of the offer, and general awareness of the choices.152 The results from this review were expected to be ready in the autumn of 2020, although they have yet to be published as of the end of October 2020.153 In a report on Social Security Support for Housing, published in June 2019, the Scottish Parliament’s Social Security Committee

150 Scottish Parliament Social Security Committee, Official Report, May 2019, c8 151 SP Written PQ S5W-18721, 26 September 2018 152 Scottish Parliament Social Security Committee, Official Report, May 2019, c8 153 According to figure 4 in Scottish Government, Evaluating the Policy Impact of Devolved Benefits, November 2019, p7; Commons Library communication with SPICe, 22 October 2020. 59 Commons Library Briefing, 9 November 2020

recommended that the Scottish Government and DWP enable Scottish Choices to be paid from the start of a UC claim, and that a direct payment to a landlord should be the default arrangement, with the claimant able to opt out.154 In response, the Scottish Government noted that the development of Scottish Choices had been informed by working with UC claimants in Scotland. This, it said, included feedback that it “made most sense” for the Choices to be offered after the first assessment period when they knew how much their award would be. The Scottish Government also argued that this allowed the DWP to consider and put in place an APA for those who were identified as having complex needs.155 Additional UC flexibilities The Scotland Act 2016 devolves to Scottish Ministers the power to split UC payments between members of a couple, instead of making one payment per household. It also devolves the power to vary the amount of housing costs paid to people in receipt of UC. The Scottish Government intends to use these powers to provide split payments for couples in a single household, as well as to abolish the so- called ‘bedroom tax’, which it currently mitigates using DHPs. Further detail on the implementation of these policies are still being developed, however. In September 2019, the Scottish Government told the House of Commons Scottish Affairs Committee that, with regard to split payments, it was “entirely dependent on what is technically feasible within the DWP’s IT systems, its operational capacity, and its willingness to deliver these changes timeously”. It noted that it is working with the DWP to agree a delivery date which it hopes will be “before the end of this Scottish Parliamentary session in 2021”.156 In early 2019, the Scottish Government presented the DWP with two proposed options for implementing this policy, although no progress on this had been announced by date of publication of this paper.157 The Scottish Government further told the Scottish Affairs Committee that, with regard to its policy to abolish the so-called ‘bedroom tax’, it was “reliant on the DWP to deliver the technical fix through their Universal Credit system”, and claimed that the DWP had “delayed the necessary changes to the Universal Credit system to implement the agreed delivery solution until May 2020 at the earliest”. It noted that it had previously assumed an implementation date of April 2019.158

154 Scottish Parliament Social Security Committee, Social Security Support for Housing, SP Paper 550, 12 June 2019, paras 57-58 155 Correspondence from Shirley-Anne Somerville, Cabinet Secretary for Social Security and Older People and Kevin Stewart, Minister for Local Government, Housing and Planning to Bob Doris MSP, Convener, Social Security Committee, 8 August 2018 156 Written evidence (WIS0020) Shirley-Anne Somerville to Pete Wishart MP. 4 September 2019 157 Commons Library correspondence with SPICe, 22 October 2020. The proposals can be found in annex of Letter from Shirley-Anne Somerville, MSP, Cabinet Secretary for Social Security and Older People to Bob Doris, MSP, Convener Social Security Committee. 158 Written evidence (WIS0020) Shirley-Anne Somerville to Pete Wishart MP. 4 September 2019 60 Social security powers in the UK

Scottish Affairs Committee inquiry 2020-21 In October 2020, the Scottish Affairs Committee in the House of Commons launched an inquiry on welfare policy in Scotland. In particular, this is expected to consider Universal Credit in Scotland, including the effectiveness of Scottish Choices, as well as cooperation between the UK and Scottish governments in the broader devolution of social security powers to Scotland. It will be collecting evidence until 2 December 2020.159

159 ‘MPs to probe welfare in Scotland’, Scottish Affairs Committee, 14 October 2020

About the Library The House of Commons Library research service provides MPs and their staff with the impartial briefing and evidence base they need to do their work in scrutinising Government, proposing legislation, and supporting constituents. As well as providing MPs with a confidential service we publish open briefing papers, which are available on the Parliament website. Every effort is made to ensure that the information contained in these publicly available research briefings is correct at the time of publication. Readers should be aware however that briefings are not necessarily updated or otherwise amended to reflect subsequent changes. If you have any comments on our briefings please email [email protected]. Authors are available to discuss the content of this briefing only with Members and their staff. If you have any general questions about the work of the House of Commons you can email [email protected]. Disclaimer This information is provided to Members of Parliament in support of their parliamentary duties. It is a general briefing only and should not be relied on as a substitute for specific advice. The House of Commons or the author(s) shall not be liable for any errors or omissions, or for any loss or damage of any kind arising from its use, and may remove, vary or amend any information at any time without prior notice. The House of Commons accepts no responsibility for any references or links to, BRIEFING PAPER or the content of, information maintained by third parties. This information is Number 9048 provided subject to the conditions of the Open Parliament Licence. 9 November 2020