Fiscal framework outturn report: 2023

7. Social Security

64. This section contains the latest outturn and forecasts available for expenditure and BGAs for all Social Security benefits that have a corresponding BGA from 2022-23 onwards, and the net effect on the Scottish Budget. This report uses provisional 2022-23 outturn expenditure data for Scottish Social Security benefits expenditure. The final outturn data will be published as part of Social Security Scotland’s Annual Reports and Accounts which will be published by November 2023. The Block Grant Adjustments are based on provisional UK Government Social Security benefits expenditure. Final outturn data will be confirmed when the UK Government publishes its Local Authority, Parliamentary, and Country and Regional Tables 2022/23 later this year.

65. BGAs are only applied to the Budget when the Scottish Government has replaced a UK-wide benefit with a benefit administered in Scotland. When the Scottish Government introduces new benefits which are only available in Scotland, and which don’t have a UK Government equivalent, the Scottish Government fully funds those benefits without corresponding funding.

66. In the 2023-24 Scottish Budget, Scotland’s forecasted spend on Social Security benefits and payments with BGAs was £4,554 million against a BGA of £4,360 million, with a net effect of negative £194 million. Total Social Security spend on all benefits and payments, including new benefits and payments, was forecast at £5,244 million. This means that the additional investment made by the Scottish Government over and above the funding provided through the Social Security BGA was estimated to be £884 million.

67. Additional Scottish Government investment in social security beyond the funding received through the BGA reflects Scottish Ministers’ use of devolved social security powers to introduce new benefits only available in Scotland, and to reform devolved benefits to deliver a social security system based on the principles of dignity, fairness and respect, ensuring people receive the benefits they are entitled to.

68. 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.

69. Table 13 shows the latest expenditure forecasts for devolved Social Security benefits, as published in the SFC’s Scotland’s Economic and Fiscal Forecasts on 25 May 2023^[10], and the Block Grant Adjustment estimates provided at the UK Spring Statement on 15 March 2023.

Note 1: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit. † Indicates outturn; BGAs are shown as positive as they represent additional funding.

70. The England and Wales outturn used to calculate provisional 2022/23 outturn BGAs includes a minimal amount of overseas expenditure which will not be included in the final outturn expenditure and BGAs. The final outturn without overseas expenditure will be available later this year. Removing overseas expenditure from BGA calculations will reduce the BGAs by a minimal amount.

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

72. 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 was set).

73. Table 14 shows the provisional net Budget position for Social Security benefits expenditure for 2022-23.

Note 1: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit

Figures may not sum due to rounding.

74. Table 14 shows that the difference between the BGAs used to underpin the Scottish Budget 2022-23 and the provisional outturn BGAs for total Social Security benefits expenditure is positive £143.6 million. As shown in Table 15 below, £115.8 million was added to the Scottish Budget as an in-year reconciliation in 2022-23 and a further provisional final reconciliation of positive £27.8 million is required, which will be applied to the Scottish Budget 2024-25. The net effect of the in-year reconciliation and the final reconciliation equates to the £143.6 million referenced above.

Note 1: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit

Figures may not sum due to rounding.

75. The latest forecasts of the net effect on the Scottish Budget 2023-24 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 Spring Statement in March 2023 nor SFC forecasts since May 2023 and therefore the latest forecast net effect on the Scottish Budget is indicative.

76. The change in the forecasts for the BGA reflect the difference between the BGA used in the Budget Act 2023 and the forecast of the BGA provided at the UK Budget 2023. The actual in-year reconciliation will be based on updated BGA forecasts provided alongside the next set of OBR forecasts later this year.

Note 1: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit

Figures may not sum due to rounding.

Winter Fuel Payment

77. Responsibility for Winter Fuel Payment will be transferred to the Scottish Government in November 2023, with these payments funded from within the 2024-25 Scottish Budget. The Department for Work and Pensions had previously made these payments to people in Scotland with no impact on Scotland’s Budget. Devolution of the Winter Fuel Payment will mark the full transfer of social security powers as set out in the Social Security (Scotland) Act 2018. Once responsibility for Winter Fuel Payment has been transferred, the UK Government will provide a Block Grant Adjustment for the Pension Age Winter Heating Payment, which is the Scottish Government equivalent of the Winter Fuel Payment.