Disability benefit reforms - implications for the Scottish Budget

27th March 2025

Rachel Reeves provided more detail on the forecast savings from the changes to Personal Independence Payment (PIP) eligibility announced on 18 March. This blog updates last week's SPICe blog on the potential impact in Scotland.

If PIP spending in England and Wales falls, then the funding from the UK Government to the Scottish Government also falls by a similar proportion through a lower ‘Block Grant Adjustment' (BGA) for PIP. The Scottish Government's equivalent to PIP is known as Adult Disability Payment (ADP).

We've now got some more detail on the expected reductions in PIP.

The Office for Budget Responsibility (OBR) has forecast that PIP spend in England and Wales will be £4.1 billion lower in 2029-30. (OBR table 3.4).

Last week, the Fraser of Allander Institute said that, as a rough rule of thumb, for every £1 billion reduction in UK government spending on PIP, there would be a £115 million reduction in the PIP BGA. This would suggest a reduction in the PIP BGA of £470 million in 2029-30.

Even before these reforms, the Scottish Government was forecast to spend £381 million more on ADP in 2029-30 than it received through the PIP BGA due mainly to differences in the approach to assessment. Assuming no changes to the current Scottish Government policy for ADP, the UK Government's PIP reforms could increase that additional spending requirement over time, increasing by £470 million in 2029-30 to a gap of around £850 million.

There will also be an impact on the BGA for Carer’s Allowance. The OBR forecast that the PIP reforms will result in around 400,000 fewer people receiving PIP (OBR, table 3.3). The carers of those losing PIP will also lose entitlement to Carer’s Allowance. The OBR does not give details, and the impact is difficult to predict as not everyone on PIP has someone caring for them who gets Carer’s Allowance. However, it is likely to result in some reduction to the BGA for Carer’s Allowance. Again, if the Scottish Government continues with its current plans, this will mean the Scottish Government has to make up any shortfall in the spending forecast for the Scottish ‘version’ of Carer’s Allowance, the Carer Support Payment.

These figures are just a rough estimate based on a spending forecast that the OBR describes as ‘highly uncertain’. However, they do give an indication that there will be significant additional pressure on the Scottish Budget from the PIP reforms, if the Scottish Government sticks with current plans for the equivalent benefits. And that’s before anybody suggests mitigating the cuts to Universal Credit which will apply across the UK, including in Scotland.

Other pressures on the Scottish social security budget

This is not the only pressure on the Scottish social security budget. According to the Scottish Fiscal Commission, the Scottish Government is already forecast to be investing £1.5 billion above the total social security BGAs by 2029-30. That’s mostly on ADP and the Scottish Child Payment.

And finally, the child poverty figures are due out tomorrow. Meeting the 2030 child poverty targets is likely to require significant additional investment. IPPR Scotland have said that:

"the inescapable conclusion of our analysis is that hitting the 2030 target will be nigh on impossible without additional fiscal commitments."

The Fraser of Allander Institute came to a similar conclusion, setting out a package of, mostly social security, measures that would meet the targets, but at a cumulative cost around £4.6 to £4.9 billion.

The Scottish Government will publish its Medium Term Financial Strategy on 29 May, alongside updated Scottish Fiscal Commission forecasts. These will provide the first official estimates of social security BGAs to take account of the proposed UK welfare reforms.

It is clear that there are very significant budget pressures on the Scottish Government as it tries to meet its ambitions on social security and child poverty.

Camilla Kidner, SPICe, 26 March 2025.

readthe article with links to more information HERE

https://spice-spotlight.scot/