A correction to my article about whether we can afford welfare devolution

The Scottish people have spoken yet again on welfare devolution and have yet again chosen to back welfare devolution by a staggering 80-20 margin. The views of the Scottish people are irrefutable: they want welfare powers to be controlled by Holyrood rather than Westminster. It is the duty of the Secretary of State for Scotland to honour the will of the Scottish people and deliver welfare devolution.

The Scotland Act of 1998 currently sets out what powers are devolved and which aren't. Schedule 5 Part II sets out a list of powers which are reserved to Westminster, with these powers being categorised into “heads”. Head F is about social security and it is the inclusion of Head F in this Act which is keeping welfare a reserved issue.

The Scottish Welfare Devolution (Referendum) Act is clear on how welfare devolution should be delivered: the entirety of Head F should be struck from the Scotland Act, meaning that 100% of welfare powers should be devolved. No ifs, no buts: the Scottish people voted for full welfare devolution by an overwhelming majority and Westminster must respect this by striking the entirety of Head F.

During the referendum campaign, I wrote an article where I disproved the claims of the First Minister and the No campaign that welfare devolution is unaffordable. However, when writing this article I made an error which inadvertently means that the numbers contained in the article aren't an accurate representation of the cost of welfare devolution: I had incorrectly assumed that welfare devolution would follow the same model as the way welfare was devolved to Wales in the Wales Act of 2022, where welfare was devolved but the power to implement a system of Negative Income Taxes or a similar system, including Basic Income, would remain reserved to Westminster, as well as some more minor welfare powers such as military pensions. This would mean that only 19.3% of welfare spending would be devolved to Scotland rather than the 100% as called for by the Scottish Welfare Devolution (Referendum) Act, which I only realised last Sunday. This error is fully my fault and I do apologise for unintentionally spreading an inaccurate message about the costs of welfare devolution.

I have therefore decided to rerun my calculations to see what the real cost of welfare devolution under the terms of the Scottish Welfare Devolution (Referendum) Act is.

The first step is to calculate how much Scotland's block grant would change due to welfare devolution.

In the 2022-23 financial year, Scotland's block grant is £19.681 bn. Under the terms of the Bill, this would increase to £64.236 bn, which is an increase of £44.555 bn.

The next step is to calculate how much the Scottish Government's budget would need to increase to fund the welfare system. The way I chose to estimate this in my original article is to estimate what proportion of welfare spending in the Second Rose budget was spent on Scottish welfare. I have been unable to find any information saying how much of the UK's irl welfare budget is spent in Scotland, nor do I know exactly how much of the Second Rose Government's welfare budget was spent in Scotland. I decided that the best solution to this issue is to assume that welfare payments are distributed evenly across the UK, thus allowing me to assume that the proportion of welfare spent on Scotland is equal to the proportion of the UK's population which resides in Scotland. This assumption does introduce significant uncertainty into my estimate but, in the absence of a better method, I have decided to continue with this assumption.

The Second Rose budget spent £439.209 bn on welfare. Roughly 10% of the UK population lives in Scotland, meaning that I estimate that the implementation of welfare devolution will cost roughly £43.9209 bn, or £43.9 to 3 significant figures.

Meanwhile, Scotland's block grant would increase by £44.555 bn (or £44.6 bn to 3sf), which is greater than the cost of welfare devolution by £634.1 mn. Therefore, welfare devolution could actually provide the Scottish government with an extra £634 mn of spending!

Therefore, the conclusion of these calculations is the same as that of my previous calculations: Scotland absolutely can afford welfare devolution, and the First Minister and his government colleagues are wrong to claim we can't.

Earlier in this article I said that my estimate for how much welfare devolution would cost does have significant uncertainty so I have decided to discuss this in the next part of the article.

It is possible that the true cost of welfare devolution may be lower. One possible reason for this is that my calculation assumes that the Scottish Government won't deviate from Rose 2 welfare policies, meaning for example that they would fund a system of Basic Income. However, the parties making up the current Scottish Government are opposed to Basic Income at Westminster so it is entirely possible that they may choose to not fund Basic Income, meaning that Scotland's welfare budget would be significantly less than £40 bn, which would make welfare devolution even more affordable.

On the other hand, it's possible that I have underestimated the cost of welfare devolution. For example, it's possible a future Scottish Government may choose to fund a more generous welfare system than that in the Rose 2 budget, meaning that Scotland's welfare budget would be higher than I estimated. In addition, due to the assumption I made when estimating the cost of welfare devolution, it’s possible the true cost of welfare devolution is higher than I estimated. However, this still doesn’t mean that welfare devolution is unaffordable. For example, the increase in the block grant gives £634 mn of breathing room; and as I touched upon in my original article, there exist multiple ways of reforming the income tax and the land tax regimes to increase government revenue to fund welfare devolution.

I would like to reiterate the conclusion of this article that welfare devolution is absolutely affordable no matter what the Scottish Government may claim. The Scottish people made their voice clear: they want welfare powers to be devolved and Westminster must deliver on the people’s will by devolving all welfare and social security powers to Scotland.