How unsustainable cost of Scotland's extra £2 billion in benefits payments is making poverty worse

Arguing about whether the widening gap between Scotland and the rest of the UK is down to our national altruism gene or to incompetent government was not the duty of the Auditor General, Stephen Boyle. His role is to focus on outcomes rather than analyse motives.

One outcome, according to his report, is that eight per cent of Scotland’s working age population – 500,000 people – were in receipt of the adult disability payment (ADP) in 2023-24 while the equivalent figure in England and Wales for personal independence payments (PIPs) was 5.3 per cent with the gap growing.

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Good value for money?

Translated into money, this means that in 2023-24, £141 million was taken from elsewhere in the Scottish Government’s budget to support ADPs with that number projected to reach £770m in four years’ time, which is quite a spectacular rate of growth.

Overall, the Scottish Government is spending £2 billion a year more on welfare benefits than would have been the case if they had not been devolved. Questioning how much of that represents good value against other priorities is not only legitimate but obligatory.

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Payments to individuals are not higher in Scotland, under ADP. It is just that there are, proportionally, far more of them because “application and review processes are designed to be less onerous”. Unsurprisingly, the differential rate of recruitment grows while, due to reliance on self-reporting, far fewer claimants drop out as their circumstances improve.

To its own political disadvantage, the incoming Labour government identified a problem in the continuing growth of PIP claimants and set out to do something about it, by tightening eligibility rules and incentivising returns to work. By putting the former before the latter, they ran into a backbench revolt which killed the reforms for the time being.

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False battle lines

In Scotland, the ‘problem’ is proportionally greater but nobody in the Scottish Government has got round to recognising it in these terms. Neither do they have a clue, says the Auditor General, about the impacts. Performance data is “limited”. Understanding of how ADP helps improve people’s lives is “under-developed”.

No sooner is such a report issued than false battle lines are drawn. Anyone who suggests this cannot go on is charged with heartless intent towards disabled people. At Holyrood on Thursday, John Swinney promptly equated questioning from the Scottish Tory leader, Russell Findlay, to advocating “cuts to support for people with disabilities, who are some of the most vulnerable people in our society”.

That was trite and untrue. The “most vulnerable people in our society” deserve every support the system can offer and there is little political disagreement around that. But do eight per cent of Scotland’s working age population really qualify for that description, in relation to this one benefit alone?

If so, our problems go far wider and deeper than the benefits system and point to failings which desperately need resources to counter inequalities – education, the National Health Service, support for getting people who want to work into work, to mention but a few. To measure the “generosity” of a government solely by how much it dispenses in welfare benefits significantly misses the point.

An inescapable fact

It really would be something for Scotland to boast about if the benefits bill was coming down compared to the rest of the UK because we were gradually seeing signs of a better educated, more aspirational, healthier society in which we had improved housing and higher employment rates for the bottom quartile who struggle to escape from poverty traps.

On these fronts, we have seen little or no signs of improvement and that is why the Auditor General is right to call, in a non-political way, for the Scottish Government to apply itself to questioning “value for money”. The same demand should be made politically, from left-wing perspectives as well as right.

The inescapable fact is that an extra £2bn spent on benefits means it is not available for these other priorities. If there is to be an annual £770m shortfall in ADP alone in four years’ time, that is £770m that will not be spent on health and education. Using “the most vulnerable” as a shield against these realities is neither honest nor sustainable.

‘Ever more acute’

While Mr Swinney had no response to the questions raised by either Messrs Boyle or Findlay, his predecessor but one is liberated to be a little more candid. The rise in Scotland’s benefits bill is indeed “increasingly unsustainable”, Nicola Sturgeon concurred in one of her recent soirées, while suggesting that the answer lies in the “corresponding power to raise the revenue to support it”.

Doubtless guided by her own learning experience in personal tax burdens best avoided, Ms Sturgeon added: “Bluntly, we’ve gone probably as far as we sustainably can on income tax in Scotland. So without a greater basket of tax levers, that misalignment and unsustainability is going to become ever more acute.”

It would be interesting to hear from Mr Swinney whether he agrees with his old boss’s analysis and which new “tax levers” they have in mind. Fighting an election on the demand for new tax powers for the exclusive purpose of funding the unplanned, uncosted benefits system portrayed by the Auditor General would make an interesting appeal to Scotland’s generosity gene.

The reality, however, is different. There are going to be no new taxation powers, so must every public service which can contribute to closing poverty gaps continue to subsidise the “unsustainable” cost of benefits? That is a question for politicians as well as auditors to prosecute.