Leaders: Devolution is about more than a benefits auction

RIVALS bidding to outdo each other over boosting welfare must remember wider issues, not least how they plan to fund spending

Scottish Labour leader Kezia Dugdale is today set to announce plans to use the new powers to increase benefits for carers, poor new mothers and students brought up in care. Picture: TSPL

Leading figures in the SNP and Scottish Labour have lost no time in setting out their lines of attack for the Holyrood election this May. The battleground – all too predictably – is welfare.

The SNP is poised to announce an overhaul of Scottish social security this week, keen to set out a more generous benefits system than elsewhere in the UK.

For the first time Holyrood will have control over 15 per cent of welfare benefit spending in Scotland – and both parties are intent on presenting themselves as the most reforming and generous. Disability living allowance, carer’s allowance, maternity grants and funeral payments are among the benefits being devolved to Edinburgh along with the power to create new benefits.

Voters will need to keep a calculator and scorecard handy to work out which package of reforms is more likely to leave them better off. Tomorrow’s statement from the SNP administration is set to include raising carer’s allowance to the same rate as jobseeker’s allowance and scrapping the rule that prevents families with a seriously ill or disabled child from receiving disability allowance and carer’s allowance payments during lengthy hospital stays.

But even before social justice secretary Alex Neil unveils his plans, Scottish Labour leader Kezia Dugdale is today set to announce plans to use the new powers to increase benefits for carers, poor new mothers and students brought up in care. Scotland, she will argue, “can and must do things differently to the Conservative government at Westminster”. Her proposals include ensuring that children leaving care and going into higher education receive a full grant, the abolition of the so-called bedroom tax using new powers over universal credit, raising the carer’s allowance to the same level as jobseeker’s allowance, and doubling the sure start maternity grant, increasing its value to £1,030.

Few would dispute the desirability of a fair and dignified benefits system for all, but also one which encourages people into work. But a battle between Scotland’s two major parties that focuses predominantly on welfare carries responsibilities. Chief among these is the need for both parties to show clearly how their proposals are to be funded and what the tax implications would be. Reliance on funding such changes through increases in the higher rate of income tax runs the risk that voters will seek to minimise their liabilities, with the result that tax revenue, far from increasing, is diminished.

There is also an attendant danger that a battle over welfare spending numbers could spark a benefits stampede: hardly an aspirational outcome for an economy that has just reported further falls in unemployment and record numbers in work.

Getting welfare right is important. But so, too, is improving the efficiency of Scotland’s public services and ensuring money is prudently spent. Devolution politics has to be about more than a clamourous auction of competing benefits and should not be blind to wider issues and concerns in Scotland.

Financial world still vulnerable

Given the recent jitters across global markets, the warning from former Bank of England governor Mervyn King that the world economy will soon face another crash as regulators have failed to reform banking cannot fail to have resonance.

We only need to look at continuing chronic levels of private and public sector debt and the reliance – eight years from the global financial meltdown – on emergency monetary stimulus and ultra-low levels of interest rates to remind ourselves of how vulnerable the financial world remains. While many banks have strengthened their balance sheets and improved their prudential ratios, there are some – not least our own Royal Bank of Scotland – that are still in a chronically weak state and heavily dependent on taxpayer support.

King’s broad thesis, set out in his new book, is that the 2008 crisis was the fault of the financial system and not greedy bankers. This is true – up to a point. There were glaring errors made by “group think” at the top and a culture based on ephemeral short-term gains that has proved perilously slow to change.

Unwinding chronic over-reliance on debt is proving all too slow. Policymakers still fear that pushing further ahead with “austerity” and debt finance unwinding could yet tip the world’s biggest economies into a major recession. And there are precious few tools left in the central bank armoury to stave off a renewed slump.

However, the worst predictions of 2008 were avoided. The US, the UK and to a lesser extent other economies have recovered. But financial market volatility testifies to continuing apprehension that that full recovery – if ever one can be reached – is dependent on sustained global growth and serious doubts persist.