Devolving welfare ‘won’t lead to benefits tourism’

Professor John Kay: devolving welfare will not necessarily lead to more money for its budget. Picture: Greg Macvean
Professor John Kay: devolving welfare will not necessarily lead to more money for its budget. Picture: Greg Macvean
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DEVOLVING control of welfare to Holyrood would not result in so-called benefits tourism because Scotland would not have the cash to make payments significantly superior to those available elsewhere, a leading academic claimed.

Professor John Kay, from London School of Economics, told MSPs there is a “widespread idea” that giving the Scottish Parliament more powers would mean more money for its budget, when that is not necessarily the case.

MSPs on Holyrood’s Finance Committee are considering the devolution of new powers to Scotland in the light of the vow made by Westminster leaders in the run-up to the referendum.

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David Cameron, Ed Miliband and Nick Clegg pledged to hand more responsibility to Holyrood, including over key areas such as tax and welfare.

Prof Kay insisted that if Holyrood did get powers over welfare, it is unlikely it would have the financial resources to increase benefit payments significantly above the rate paid in the UK.

He told the committee: “I can’t see a world in the foreseeable future in which Scotland has enough money to pay benefits sufficiently superior to the levels that are being paid for benefit tourism to be a problem.

“It’s back to this issue which is underlying all of this which is the tendency to think devolution of powers means more money to spend on these powers, which it doesn’t.”

He said there is also a “widespread idea” that further devolution of tax-raising powers “means Scotland has more money when it doesn’t”.

Prof Kay stated: “Bluntly at the moment there is a great deal of discussion of people wanting more powers in Scotland when what they really mean is they want more money for the powers that Scotland in large part already has. And bluntly that money isn’t coming either from a block grant or from taxes.”

That point was echoed by Professor David Heald, of Aberdeen University, and Professor Ronald MacDonald, from Glasgow University.

Prof Heald said: “Scotland has congratulated itself on the maturity of its referendum campaign - I actually found the debate incredibly depressing.

“It’s depressing because people seem to think getting tax powers would mean you could spend more. Within the context of the UK and Scottish fiscal position, governments are going to find it very difficult to maintain their tax base. If one wants to protect the tax base, one has to be careful.”

Prof MacDonald said there is a “fundamental misconception” about what fiscal autonomy meant for Scotland.

He told MSPs: “I think people think if you get more fiscal autonomy, if you get devo max, if you get more revenues devolved, it automatically means more spending. Of course it doesn’t, it means much more risk.

“I’m very keen for the Scottish Parliament to handle that risk in as optimal a way as possible while still recognising as part of the UK we have very clearly voted for a social protection mechanism which is about resource pooling and risk sharing.

“I believe the outcome of the referendum was that people want to be part of that risk sharing, revenue pooling mechanism.”

Prof Kay also warned it may not be possible to devolve part of the benefits system, as the Scottish Labour Party has suggested in its submission to the Smith Commission - the body set up by the UK Government to consider what new powers could be transferred north.

Labour has suggested some elements of welfare policy be devolved, including housing benefit and attendance allowance.

But Prof Kay questioned such a set-up, saying: “Can we unpick the benefits system, that is can we find parts of the benefits system we can devolve to Scotland in meaningful ways that would give Scotland the power and possibly the desire to change them, without devolving everything to do with the benefits system?

“To my mind the desirability of having an integrated benefits system, and a benefits system which is integrated not just with other parts of the benefits system but other parts of social policy, makes it quite difficult to satisfactorily unpick parts of that package.

“So I tend towards the view that one really is faced with all or nothing - either you want to devolve everything or you don’t actually want to devolve very much.”

SEE ALSO

Voluntary sector wants welfare system devolution

Devolving welfare ‘key to maintaining the Union’

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