The commitment to devolution has been watered down still further

The Scotland Office has released a command paper, Scotland in the United Kingdom: an enduring settlement.  It contains the draft clauses for legislation to enact the commitments made in the Smith Commission’s report.  It was being reported last November that the Cabinet had vetoed a range of proposals made by the Smith Commission:

 The Scottish Parliament will have the power to vary the personal allowance, the carer element, the child element, including the disabled child addition, the childcare costs element, the limited capability for work and work-related element and work allowance of UC [universal credit], child benefit & guardian’s allowance, maternity allowance, and the operations of Jobcentre Plus in Scotland, including the responsibility for designing and implementing the policies it applies.

The Command Paper whittles the list down further, in two ways.  The first is that it hedges in some of the measures with conditions, intended to ensure that the Scottish Government acts in conformity with the UK government.  Here are two examples.

Benefits paid net of income tax  – some benefits are paid net of income tax, so if the Scottish Government changes income tax in Scotland, this will have a direct impact on the level of benefits that the UK Government will be liable to pay. Under
this ‘no detriment’ principle, the Scottish Government would receive any savings from lower UK Government benefit spending or meet any costs of higher UK Government benefit spending.

This is gobbledegook.  If benefits are paid without being subject to tax, changes in the tax rate have no effect on what is paid.  If they are paid gross and then subject to tax, like public service pensions, the liability to pay falls ultimately on the individual and the requirement on the UK government to pay the pension remains the same (which is true of any occupational pensions scheme).  It seems to mean – I am grateful to Gareth Morgan for explaining it –  not “benefits paid net of income tax”, but “benefits where entitlement is calculated on the basis of income net of tax”.   Universal Credit goes up when net income goes down, so if the Scottish Government raises tax, part will be refunded for people on low incomes receiving UC.  The calculation will be complex, the amounts of money involved uncertain; the central point is that the Treasury is looking for ways to hold back the Scottish Government from introducing tax differentials.

In relation to employment programmes, the paper states:

These programmes influence how quickly unemployed people get back to work, and therefore have an impact on the UK benefit bill. This is reflected in current funding arrangements whereby the Work Programme is funded by savings made in benefits spending …  While future negotiations with Scotland need to be conducted, we must ensure that this aligns with the no detriment principle. Any funding arrangement must ensure that Scotland receives funding on an equivalent basis to the rest of the UK.

The Work Programme has done nothing to speed the process by which people return to work.  In its relations with Northern Ireland, however, the Treasury has sought to impose fines on the Assembly for the presumed cost of non-compliance with Westminster rules.  They are preparing the way here to do the same to Scotland.

The second strike in the Command Paper’s approach is done through the specific rules it proposes to introduce.  The way that the clauses have been put together is through making specific exceptions to the existing Scotland Act, but Schedule V says that the Scottish Government doesn’t have a general power to offer financial assistance, and that remains the case. Smith said that there would be “Powers to create new benefits and top-up reserved benefits”.  Chapter 4 of the Command Paper says that ” The clauses put forward in this chapter will provide powers to create new benefits or other payments in devolved areas of welfare responsibility.”  They don’t.

I made the case for a general power to develop new benefits in my submission to Smith.   I gave the example of a funeral grant, but it might just as easily have been about fuel for rural areas, early retirement for people with disabling conditions, educational maintenance or a wide range of other benefits.  The key question is not whether any or all of these should be done, but whether the Scottish Parliament should have the power to decide; as things stand, it doesn’t have the authority to do so.  Smith implied that Scotland would get that power; the command paper doesn’t include it.

What happens instead is explained in para 4.3.10:

Paragraph 54 of the Smith Commission Agreement sets out that the Scottish Parliament will have “powers to create new benefits in areas of devolved responsibility”. These powers are conferred by clauses 16 (disability and carer’s benefits), 17 (Regulated Social Fund) and 19 (discretionary housing payments).

Even if we accept this much narrower understanding of what the commitment to new powers might mean, there are no powers to create new benefits in these areas. The draft legislation exempts provision for specific categories of beneficiary, meeting a specified set of conditions; it doesn’t give the Scottish Parliament the power to decide.  Let me give an example.  Clause 16 is concerned with disability benefits, which Smith had recommended should be devolved.  The rules for carer’s benefits, however, are confined specifically to circumstances where the carer is over 16, not in full time education and not gainfully employed.  In other words, Scotland gets to have a carer’s allowance only if it fits the same terms as the current carer’s allowance in the UK.  That will undermine attempts to integrate the system with self-directed support and individual budgeting where those conditions do not apply.

This is symptomatic of a wider failure.  The central reservation of Schedule V is that  the Scottish Parliament does not have the power to offer financial assistance to its citizens, and that principle remains intact.  If you want to devolve benefits – and it looks increasingly as though the government doesn’t want to, not really – you have to grasp the nettle and create the powers, not dole out exceptions clause by clause.  It all falls some way short of even the rather restricted settlement in Smith.  This is not what was promised.

PS: This post was written shortly before the reports of a speech by Nicola Sturgeon, who made some of the same objections in similar terms.    The post was not written to reflect the position of the Scottish National Party.


    • Paul Spicker

      During the referendum campaign, all three main party leaders pledged substantially powers for Scotland, widely represented as a ‘vow’. David Cameron, for example, said that “If we get a No vote, that will trigger a major, unprecedented programme of devolution, with additional powers for the Scottish Parliament – major new powers over tax, spending and welfare services.” The Smith Commission was set up to “deliver more financial, welfare and taxation powers, strengthening the Scottish Parliament within the United Kingdom”, and they recommended a range of powers including devolution of benefits relating to disability, powers to create new benefits and top-up reserved benefits. Those powers are qualified and limited in this document.

  1. Gareth Morgan

    “Benefits paid net of income tax”. Is this not a clumsily phrased description of those means-tested benefits assessed on the basis of net income after tax? In that case the tax bill would have direct effect on the amount of UK benefits paid.

    • Paul Spicker

      I see it, and think you must be right. They mean “benefits where entitlement is calculated on the basis of income net of tax”. This might well for some Universal Credit calculations mean that where tax increases, UC also increases to make up for part of the cost. However, as the entitlements fluctuate month by month, this will be murder to calculate.

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