The effectiveness and fair provision of social security spending is a central issue to the independence debate. Westminster policy on housing – through the bedroom tax – and on disability support has been extremely controversial. Westminster claim that spending on social services is wasteful and too high.
It’s useful to have the facts to differentiate myth from reality. Here are the key facts for understanding Scotland’s social security spending.
What does Scotland spend?
According to the IFS, Scotland’s total spending for 2011-12 was £17.2 billion. This was 14.4% of Scotland’s Gross Domestic Product – which was lower than the UK average spending of 15.9%.
In 2012-13, Scotland spent 15.5% of its GDP on social security which remained lower than the UK average of 16%.
What does Scotland spend it on?
The vast majority of social security spending goes on pensions and earnings support.
As of 2011-12, £6.3 billion was spend in contributions to the state pensions budget. Child and working tax credits were the 2nd highest category with £2.2 billion. Disability living allowance and attendance allowance was the 3rd highest spend with £1.9 billion. The 4th largest area was housing benefit, with £1.7 billion of spending.
Therefore over 70% of Scotland’s total budget was spent on pensions, support for families, the disabled and those on low wages.
The other £5.1 billion is split across a wide range of similar services including:
A) pension credit (£752 million), concessionary TV licences (£49 million) and winter fuel payments (£188 million) (elderly support of £989 million)
B) carer’s allowance (£153 million), employment and support allowance (£381 million), incapacity benefit (£564 million), industrial injuries benefit (£93 million) and severe disablement allowance (£97 million) (disability and vulnerability support of £1,288 million)
C) maternity allowance (£24 million) and statutory maternity pay (£197 million) (child support of £221 million)
D) income support (£670 million), jobseeker’s allowance (£461 million) and council tax benefit (£381 million) (low pay and unemployed of £1,512 million).
E) The administration of these services.
What about unemployment costs?
There is a myth that social security is largely spent on unemployment benefit.
The level of unemployment in Scotland is even lower than the UK average. The number of claimants was 142,547 in 2012. Those aged 15-24 receive £57.35 a week. Those older than 24 receive £72.40 a week.
The £461 million spent on job seekers in 2011/12 was only 2.7% of the Scottish total.
How is social security spending in Scotland different from the UK?
The key spending differences between Scotland and the rest of the UK are in terms of housing benefits and disability living allowance.
Housing benefit entitlements are 23% below the UK average. Lower housing benefit in Scotland is driven by lower private sector rents, lower social sector rents and a larger social rent sector. This makes Scotland’s housing stock more affordable than the UK housing sector as a whole.
Disability support is 22% higher than the UK average in Scotland due to a greater proportion of individuals registered as long-term sick or having a disability.
The case has also been made that the pensions system is inequitable across the UK due to difference in life expectancy. Proposals to increase the age of receipt for the state pension would hit Scotland the hardest.
What impact do these difference have?
The IFS report said current centralisation of certain social security spending is problematic.
This is especially the case in housing, where the money saved in Scotland through Scottish Government investment in the social housing stock reduces Westminster’s social security liabilities.
The report says “under the present devolution settlement, the Scottish government is bearing the cost of greater investment in social housing and lower rents, whilst some of the benefits of that spending accrue to the UK government in the form of lower housing benefit payments.” (page 27)
Similarly, the differences in terms of disability support require local solutions for support groups and back to work programs, if appropriate. A high proportion of those on disability support in Scotland were made unemployed during processes of deindustrialisation and then moved onto disability support to massage the unemployment figures.
The differences in average life expectancy means that people in Scotland receive a lower proportion of the state pension in their lifetime than the UK average.
Who controls social security spending?
Almost all social security spending is controlled at Westminster. The image below includes all social protection spending in Scotland. The green section is largely composed of social work services such as care for the elderly and housing support.
Direct social payments are all decided at Westminster. This has caused a series of social problems in recent years and looks set to continue if decision making remains at Westminster. While politicians in Scotland may wish to reform social security, they currently lack power over the resources to enact meaningful change.
Independence is an opportunity for Scotland to set its own course
This short explanation of social security spending identifies several crucial points:
1) Scotland’s social services are more affordable than the UK as a whole.
2) Most spending is on pensions, earnings, disability, vulnerability and family support.
3) Scotland spends less on housing benefit and more on disability living allowance than the UK average.
4) Westminster control the vast majority of social security spending.
Any balanced consideration of social security would start from this analysis. Beyond these facts, the argument is presented that Scotland can make better decisions on these areas than Westminster.
The IFS said,
“independence – or the devolution of benefits policy – would also provide Scotland with an opportunity to redesign its benefits system to reflect the priorities of the Scottish people, and to reassess some aspects of current UK policy that make little economic sense.”
That requires a consideration of the different policy reforms on offer. Westminster Labour and Conservatives support a ‘welfare cap’. Labour support universal credit and the devolution of housing benefit, which is potentially contradictory. In Scotland there is the foundation of a different approach to social security. A deeper analysis of that question is the subject of a future article.
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Category: Economics of Independence