Scottish Government: Social Security Benefits

My Lords, on behalf of my noble friend Lord Bruce of Bennachie, and at his request, I beg leave to ask the Question standing in his name on the Order Paper.

My Lords, following the devolution of social security powers, the Scottish Government are responsible for funding and administering social security benefits, with funding transferred from the UK Government. Funding for devolved social security is provided through welfare block grant adjustments that transfer funding from the UK Government to the Scottish Government. In the most recent financial year, this amounted to £5.8 billion for the Scottish Government. Decisions on how funding is used are for the Scottish Government.

I thank the Minister for that Answer. In 2025-26, the total social security spend in Scotland was £6.9 billion, which amounts to £1.3 billion more than that which is transferred by the Treasury. It is far from clear how the SNP Government will manage to sustain this level of funding. Does the Minister agree that, to the extent that the Scottish Government have added top-ups, it is important to make it clear that the looming deficit from this and other unbudgeted expenditure is entirely the Scottish Government’s responsibility and they should not blame it on the UK Government—although they will undoubtedly try?

I agree; I am strong supporter of not blaming the UK Government. As the noble Baroness knows, funding is assessed through the fiscal framework, which links welfare block grant adjustments directly to UK Government spending on equivalent benefits. These adjustments are calculated on a forecast basis and reconciled on outturn, ensuring that funding reflects actual spending over time. The Scottish Government are then responsible for spending decisions, including on benefit levels and eligibility. Any additional spending on benefits is a choice for the Scottish Government and must come from within their own budget.

My Lords, the noble Lord, Lord Shinkwin, is taking part remotely. I invite him to speak.

My Lords, in the event of our being at war, which some experts suggest is increasingly likely by 2030, the massive and urgent recalibration of resources to defence will inevitably mean that those who need most support due to their disability will be hit the hardest. What advice are His Majesty’s Government giving to the Scottish Government on the careful management of their social security budget so that they can mitigate the worst effects of such an eventuality on those whose disability makes them most dependent?

I am grateful to the noble Lord for his question but I do not agree with the assumption underlying it. Of course we must spend more on defence, but we must also continue to support those who need that support the most. As I said in answer to the first Question, spending on benefits is a choice for the Scottish Government and must come from within their own budget.

My Lords, does the noble Lord the Financial Secretary agree that fiscal responsibility should lie at the heart of the devolutionary settlement? Does he agree that maintaining fiscal credibility would be a particular challenge in the event of Scotland becoming independent? Is he aware that the Irish Free State had to cut the state pension by 10% in 1924 to maintain parity with sterling? Might he draw that to the attention of those who advocate Scottish independence?

I did not know the specific example that the noble Lord sets out and I am grateful to him for educating me, as he has done many times in the past. I agree that Scotland, in my view, is better off as part of the union and that independence would be disadvantageous to the people of Scotland and to the Scottish economy. I agree very much with what he says about continuing fiscal responsibility, both in Scotland and in the whole of the UK.

My Lords, unlike Scotland, which has taken on significant social security powers and used them directly to address child poverty in Scotland, Wales has limited control over the welfare system. Does the Minister agree with the principle of Gordon Brown’s report that nothing that is devolved to Scotland could not be devolved to Wales if the Senedd wants it?

I worked for Gordon Brown for quite some years. I did not always agree with him and I am not sure I do on this occasion. The noble Baroness knows that the fiscal framework sets a funding floor to ensure that the Welsh Government receive a fair level of relative funding. A review of the framework is triggered when relative funding falls to 115%. The Government remain committed to working with the Welsh Government to ensure the smooth delivery of their funding settlement, and there are ongoing discussions about funding flexibilities and their fiscal framework as part of this.

My Lords, the Scottish Fiscal Commission has forecast that over a million Scottish adults will be in receipt of disability payments by 2031 under the new Scottish social security system—that is over a fifth of the projected population. The divergence from Barnett consequentials in just this area is forecasted to be £1.2 billion, which will come, as the Minister says, either from spending cuts or rises in taxation—taxation rates already being the highest in the UK, reaching 48%. To help the Scottish Government balance the books and to give some relief to the Scottish taxpayer, I ask the Minister: what, if any, analysis has been done to assess the varying disability rates across the different parts of the UK, and what health interventions have proven successful in lowering those rates?

As the noble Baroness knows far better than I do, the fiscal framework is designed to ensure that funding is fair and fiscally neutral at the point of devolution. It provides the Scottish Government with funding that reflects UK Government spending, while also giving them full responsibility for policy decisions in devolved areas. So, as I have said, any additional spending on benefits is a choice for the Scottish Government and must come from within their own budget. The noble Baroness alludes to wider welfare reform. She will be well aware that spending on welfare increased by £88 billion in the last five years of the previous Government. I do not think anyone believes that the system that we inherited is working. It abandoned too many people to a life on benefits, it wrote off too many people as too sick to work, and it condemned too many children to be too poor to eat, which is exactly why we are reforming the system. She will know that we have launched the Milburn review, focusing on the causes of youth unemployment in particular, and he will come back with specific recommendations later this year.

My Lords, the noble Lord, Lord Bruce, tabled this Question in part because he is appalled that so many people he speaks to in Scotland think that the whole of their benefit comes from Scottish-only taxes, not just the top-up. Ahead of the Brexit referendum, many people whose areas had received millions in EU support declared that their area had never received a penny because the EU contribution was unacknowledged or obscured. Is it time to improve communication and strengthen the union by making it clear that the whole of the UK contributes to benefit funding in Scotland, as well as in the other nations?

There is a lot in what the noble Baroness says. I obviously agree with her, as I often do, on the matter of the European Union. I agree with what she says; it is very much worth looking at.

My Lords, the Minister may be aware that it has cost the taxpayer more than £650 million to set up Social Security Scotland, yet there are countless examples of claimants who are on benefits administered by both Social Security Scotland and the Department for Work and Pensions who have had money deducted because of a lack of communication between the two agencies. What action can the UK Government take to improve communication between both departments to make sure that those in genuine need of support are not penalised?

I did not know about what the noble Lord says. I am more than happy to take that back to my DWP colleagues and to discuss it with them.

My Lords, the Scottish Government are using this social security spending to deliver a more humane system that treats people with dignity. We have recently had the family finances project from the University of Glasgow and the University of Manchester, which shows that the Scottish child payment has reduced levels of food insecurity and material deprivation for children by about eight percentage points compared with comparable populations in England. Will the English Government follow suit?

I think the noble Baroness means the UK Government. I know that the Scottish Greens are in coalition with the SNP in Scotland, so presumably she supports what they are doing. As I have said already, it is a matter for the Scottish Government. They have full responsibility for policy decisions in devolved areas and any spending they choose to undertake must come from within their own budgets.