Welfare spending in Scotland

The Institute for Fiscal Studies has today published a report entitled “More spending on disability benefits and less on housing benefit per person on Scotland than in the rest of GB”.

The report finds that higher spending on old-age benefits and disability is offset by lower spending on housing benefit. It states that the ageing population of Scotland will mean that spending will grow more quickly than in the United Kingdom as a whole. Independence for Scotland would provide the Scottish Government with the opportunity to make reforms to its benefit system. However, an independent Scotland would have to spend more on benefits than is spent at the current moment in time or it may risk creating a group of “losers”.

The main findings of the report are as follows:

• Benefit spending (including spending on tax credits and the state pension) in Scotland amounted to £17.2 billion in 2011–12, the last year for which full figures are available. This is around 30% of all government spending in Scotland and 11.4% of Scottish national income (including a geographical share of North Sea output).

• Benefit spending per person in Scotland in 2011–12 is estimated to have been £3,238, 2% higher than the average for Great Britain as a whole (£3,176). This was lower than in Wales (£3,540), and the North and Midlands of England (£3,320), but higher than in London (£3,082) and the rest of the South of England (£2,962).

• There are substantial differences in spending on different types of benefits. Expenditure on disability benefits per person in the population was 22% higher in Scotland (£593) than in Great Britain as a whole (£485). This, at least partly, reflects the fact that a higher proportion of Scots report having a disability or health problem that limits their activities than is the case in Great Britain as a whole.

• Spending per person on housing benefit was around 12% lower in Scotland than in Great Britain as a whole. This reflects both lower private and social sector rents, and a larger fraction of people on housing benefit living in social housing.

• Spending per person on old-age benefits was 4% higher than for Great Britain as a whole, while spending on child benefits and tax credits was 9% lower. But this reflects the different age profile of Scotland. The amounts spent on child benefits and tax credits per child and old age benefits per person aged 60 or over were essentially the same in Scotland as in Great Britain as a whole in 2011–12.

This report supports the financial case for keeping welfare generally at UK level as we have argued in Red Paper publications. The exception is Housing Benefit, which should be devolved because it is a key element of the already devolved housing policy. There would also be a proportionate financial gain because Scotland spends less than our population share of the the UK budget.

Given the UK Government’s damaging welfare cuts, it has been an important part of the Yes campaign’s case that independence would enable Scotland to take a different path. While that is clearly the case, what this paper shows is that such a path comes at a price and the SNP have to demonstrate that they are prepared to commit to paying that price. The evidence so far is that Scandamerica is their policy and that simply is not credible.