Fiscal framework outturn report: 2024

7. Social Security

57. This section contains the latest outturn and forecasts available for expenditure and Block Grant Adjustments (BGAs) for all Social Security benefits that have a corresponding BGA from 2023-24 onwards and shows the net effect on the Scottish Budget. This report uses provisional 2023-24 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 2024. 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 2023/24 later this year.

58. 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 from the UK Government.

59. In the 2024-25 Scottish Budget, Scotland’s forecast expenditure on Social Security benefits and payments with associated BGAs was £5,559 million against a BGA forecast of £5,191 million. Total Social Security expenditure on all benefits and payments, including benefits and payments only available in Scotland, was forecast at £6,283 million by the SFC at the time of the Scottish Budget 2024-25^[8]. 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 £1,092 million when the Scottish Budget was set for 2024-25.

60. 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.

61. 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.

62. Table 11 shows the latest expenditure forecasts for 2024-25 onwards for devolved Social Security benefits, as published in the SFC’s Scotland’s Economic and Fiscal Forecasts on 19 December 2023^[9], and the Block Grant Adjustment estimates provided at the UK Spring Statement on 6 March 2024. The 2023-24 Expenditure and BGAs are based on newly available outturn data for 2023-24.

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

* The SFC will update its expenditure forecasts for Pension Age Winter Heating Payment following the Chancellor's announcement on introducing means testing for Winter Fuel Payment for 2024-25 and the Scottish Government's subsequent decision to replicate this approach.

† Indicates outturn; BGAs are shown as positive as they represent additional funding.

63. In 2023-24, the provisional outturn for Social Security expenditure on all benefits and payments, including benefits and payments only available in Scotland, is £5,300.5 million. This means that the additional investment made by the Scottish Government over and above the funding provided through the Social Security Block Grant Adjustment is estimated to be £870.5 million for 2023-24.

64. Of this additional investment, the Scottish Government provided £532 million in new payments unique to Scotland, including £429 million in the ‘game-changing’ Scottish Child Payment, and other devolved Social Security totalling £139 million.

65. The remainder of the additional investment, £199 million, relates to benefits where there is an equivalent UK benefit for which a corresponding Social Security Block Grant Adjustment is received from the UK Government (as shown in table 11). The majority of this, £168 million, was invested in disability benefits, where the Scottish Government have taken a compassionate and human-rights based approach, for example, helping to provide long-term financial security through the introduction of indefinite awards for severely disabled clients whose needs are highly unlikely to change.

66. The Scottish Government has also implemented operational changes to improve the experience of people applying for benefits with the aim of maximising benefit take-up and introduced policy changes, such as an extension of terminal illness rules and the introduction of light touch award reviews for disability payments.

67. Table 12 shows the net effect of forecast total social security expenditure and social security BGAs compared to outturn for 2023-24.

68. The England and Wales outturn used to calculate provisional 2023-24 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.

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

70. 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).

71. Table 13 shows the provisional net Budget position for Social Security benefits with a BGA for 2023-24.

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

Figures may not sum due to rounding.

72. Table 13 shows that the difference between the BGAs used to underpin the Scottish Budget 2023-24 and the outturn BGAs for total Social Security benefits expenditure is positive £69.6 million. As shown in Table 14 below, £44.5 million was added to the Scottish Budget as an in-year reconciliation in 2023-24 and a further provisional outturn reconciliation of positive £25.0 million is required, which will be applied to the Scottish Budget 2025-26. The net effect of the in-year reconciliation and the provisional outturn reconciliation equates to the £69.6 million referenced above.

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

Figures may not sum due to rounding.

73. The latest forecasts of the net effect on the Scottish Budget 2024-25 for Social Security benefits are shown in Table 15 below. These figures are indicative only. There have been no updated OBR forecasts since the UK Spring Budget in March 2024 nor SFC forecasts since December 2023 and therefore the latest forecast net effect on the Scottish Budget is indicative and comparisons of the latest available forecasts and BGAs should be interpreted with a degree of caution.

74. The change in the forecasts for the BGA reflect the difference between the BGA used in the Budget Act 2024 and the forecast of the BGA provided at the UK Spring Budget 2024. The actual in-year reconciliation will be based on updated BGA forecasts provided alongside the October 2024 OBR forecasts.

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

Note 2: The latest forecasts for Pension Age Winter Heating Payment expenditure and the Winter Fuel Payment BGA are from before the Chancellor’s announcement on means-testing Winter Fuel Payment and the Scottish Government’s subsequent decision to replicate this approach. Upcoming forecasts will factor in these policy decisions.

Winter Fuel Payment

75. Responsibility for Winter Fuel Payment is due to transfer to the Scottish Government in November 2024, with these payments to be 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. Following the UK Government’s recent decision to means-test Winter Fuel Payments from this Winter the Scottish Budget will be reduced by between £140-£160 million from 2024-25 onwards. The Scottish Government and HM Treasury are determining the technical arrangements required for the reconciliation of the Block Grant Adjustment. The Scottish Government is in discussion with the UK Government, which has committed to make payments this Winter to eligible pensioners in Scotland on terms equivalent to Winter Fuel Payments in England and Wales.