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Should welfare be devolved?

June 24th 2019

The devolution of some social security benefits is on the agenda. After giving evidence to the Assembly’s Equality, Local Government and Communities Committee last week, Victoria Winckler looks at the risks and benefits.

The devolution of some social security benefits has suddenly appeared on the Welsh agenda. Having been ruled out by the Silk Commission in 2014 and firmly rejected by the former First Minister, Carwyn Jones, it was something of a surprise when the new First Minister announced his plans to ‘explore’ the concept barely 4 weeks after his inauguration.

We welcome this ‘exploration’, not least because circumstances have changed very considerably since the Silk  Commission.  The Assembly now has legislative and tax-raising raising powers, and of course the Scottish Government now has powers over a considerable number of benefits.

What are the benefits?

The benefits of devolving some aspects of social security are potentially significant.

Many UK benefits have a very important link with devolved policies, and being able to align the two is vital. The most obvious example is housing. Help with housing costs is worth around £1 billion a year, yet its impact on housing supply, rents and housing quality is almost completely overlooked. Having some control over that major investment could be a key tool for the Welsh Government to use in delivering its housing policies.

It’s not just about discrete policy areas. As the Welsh Government’s ambitions have grown – and crucially it is no longer limited by prescribed powers – it can, and indeed should, think big. As we know from the Well-being of Future Generations Act, no part of the Welsh economy, society or environment is off-limits. So, the Welsh Government has as legitimate an interest in Universal Credit as it does in, say, disability benefits.

We don’t see that introducing a more benign regime is necessarily an advantage. While the Welsh Government may want to reduce some of the more stringent requirements of the current system, governments can and do change. Devolution does not necessarily mean less draconian.

What are the risks?

Going along with the advantages, we can also see big risks.

The first risk is fiscal.  Benefits involve big bucks, and even the smaller benefits that are less prone to cyclical changes have the potential to bust the budget.  Both our analysis in 2016 and the more recent analysis by the Wales Governance Centre found that if the Scottish settlement had applied to some benefits, Wales would have gained financially. The reason for this is that expenditure on Welsh benefits has declined faster or increased more slowly than in England.

But both these analyses look backwards. To assess if devolution would really stack up fiscally, we need to look forward and take into account demographic change, changes in employment and in housing costs. That has yet to be done, and major risks remain.

The second risk is administrative. No change to social security has ever, as far as I am aware, been delivered smoothly, on time and to budget. Already the Scottish Government’s programme is running behind as the true scale of the challenge emerges. And admin on this scale has costs too – £200 million was transferred to the Scottish Government but already costs are estimated at £308 million.

So should welfare be devolved?

Our view is that this is the wrong question. The starting point should be what system of financial and other support do people on low (or no) incomes need to sustain themselves, and what is the best way of delivering it. And if the answer is that some forms of support – for example help with housing costs or help with the costs of living with a disability – are best delivered alongside other devolved responsibilities, then those benefits should be on the Welsh Government’s wish list. Equally, if the answer is that some benefits are part of the UK-wide social contract e.g. state pensions or child benefit, then those should remain at UK level.

The First Minister’s and the Assembly Committee’s exploration of possible welfare devolution is about right. The settlement in Scotland did not come out of the blue, but built on years of debate and argument about different models of devolution and what would work best for claimants.

There needs to be a similar debate in Wales, with claimants, politicians, and professionals engaged in constructive dialogue. Only that way will the benefits be maximised and risks mitigated and managed.

Victoria Winckler is Director of the Bevan Foundation.

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