Fiscal framework outturn report: 2021

7. Social Security

7.1 This section contains the latest outturn and forecasts available on expenditure and BGAs for Social Security benefits from 2018-19 onwards, and the net effect on the Scottish Budget. This report uses provisional 2020-21 outturn expenditure data for Scottish Social Security expenditure. The final Scottish expenditure data will be published as part of Social Security Scotland's Annual Reports and Accounts later in the year. The Block Grant Adjustments are based on provisional UK Government Social Security expenditure; final outturn data will be confirmed when the UK Government publishes its Local Authority, Parliamentary, and Country and Regional Tables 2020/21 later this year.

7.2 For social security payments, forecasts are of spending rather than revenues and Block Grant Adjustments are therefore additions rather than deductions. Otherwise, the process of reconciling forecasts to outturn data functions in the same way as for the fully devolved taxes.

7.3 Executive competence for Attendance Allowance, Disability Living Allowance, Industrial Injuries Disablement Scheme, Personal Independent Payment and Severe Disablement Allowance transferred to Social Security Scotland on 1 April 2020 and therefore outturn BGAs for these benefits have been calculated for the first time and this is the first year they will undergo a BGA reconciliation.

7.4 Table 13 shows the SFC's latest expenditure forecasts for the Social Security benefits that have been devolved so far, as published in the SFC's Scotland's Economic and Fiscal Forecasts on 26 August 2021^[10], and the Block Grant Adjustment estimates provided at the UK Budget in March 2021. Due to the timing differences between the forecasts noted in paragraphs 1.3 and 1.4, comparisons of the latest available forecasts and BGAs and the resultant net effect should be interpreted with caution.

Note 1: SFC Forecasts for Personal Independence Payment Expenditure from 2022-23 to 2025-26 includes forecast expenditure for the Scottish replacement benefit, Adult Disability Payment

Note 2: SFC Forecasts for Disability Living Allowance Expenditure from 2021-22 to 2025-26 includes forecast expenditure for the Scottish replacement benefit, Child Disability Payment

Note 3: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit

Note 4: There are minor differences in the methodology used to calculate the SFC's spending forecasts and the BGA forecasts, which are based on expenditure outturn and OBR forecasts, so comparisons should be interpreted with caution. † Indicates outturn; BGAs are shown as positive as they represent additional funding

7.5 There are no reconciliations required for Scottish Social Security expenditure, as the Scottish Government manages any variance between forecast and actual expenditure in year.

7.6 However, as with the fully devolved taxes, the BGAs for benefits do undergo reconciliations and are reconciled in two stages. An in-year reconciliation is made within the financial year at the UK autumn fiscal event on the basis of the most recent OBR forecasts, and, once outturn data is available in the following financial year, a final reconciliation is applied to the Block Grant for the financial year thereafter (i.e two years after the Budget year).

7.7 Table 14 shows the provisional net Budget position for Social Security expenditure for 2020-21.

Note 1: Outturn and SFC Forecasts for Disability Living Allowance Expenditure includes forecast expenditure for Child Winter Heating Assistance

Note 2: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit

Note 3: There are minor differences in the methodology used to calculate the SFC's spending forecasts and the BGA forecasts, which are based on expenditure outturn and OBR forecasts, so comparisons should be interpreted with caution.

Figures may not sum due to rounding.

7.8 Table 14 shows that the difference between the BGAs used to underpin the Scottish Budget 2020-21 and the provisional outturn BGAs for total Social Security expenditure is £4.4 million, which equates to the net of the in-year reconciliations and the final reconciliations. As shown in Table 15, £17.2 million was deducted from the Scottish Budget as an in-year reconciliation in 2020-21. A provisional final reconciliation of positive £21.6 million is required, to be applied in 2022-23.

* BGAs set at Scottish Budget 2020 rather than UK Budget due to later than anticipated UK Budget **BGAs set alongside the UK Government Spending Review in November 2020 due to late UK Budget Note 1: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit Figures may not sum due to rounding.

7.9 The latest forecasts of the net effect on the 2021-22 Budget for Social Security benefits are shown in Table 16 below. These figures are indicative only. There have been no updated OBR forecasts since the UK Budget in March 2021.

7.10 As noted in paragraph 1.5, the Scottish Budget used provisional BGAs as it took place in January, before the UK Budget in March. Therefore, the change in the forecasts for the BGA reflect the difference between the provisional BGA used in the Budget Act 2021 and the forecast of the BGA provided at the UK Budget in March 2021. The actual in-year reconciliation will be based on updated BGA forecasts provided alongside the next set of OBR forecasts in October 2021.

Note 1: SFC Forecasts for Disability Living Allowance Expenditure includes forecast expenditure for the Scottish replacement benefit, Child Disability Payment Note 2: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit Note 3: There are minor differences in the methodology used to calculate the SFC's spending forecasts and the BGA forecasts, which are based on expenditure outturn and OBR forecasts, so comparisons should be interpreted with caution.

Figures may not sum due to rounding.

Benefits Yet to Commence

7.11 Responsibility for Cold Weather Payments and Winter Fuel Payments has yet to be transferred to the Scottish Government and therefore these payments are not funded from within the Scottish Budget. The Department for Work and Pensions will continue to make these payments to people in Scotland for winter 2021-22. An update will be provided in due course.