The UK Government has offered to transfer the power to set the cap on Discretionary Housing Payments (DHP) in Scotland to Holyrood - a move that will give councils the power to mitigate the effect of ending the spare room subsidy.
The announcement, made by the Scotland Office minister David Mundell, follows a request from the Scottish Government for the cap on DHP to be lifted.
Lifting the cap on the payment, which is used by councils to support tenants affected by the spare room subsidy, would full cover the impact of the controversial UK Government reform. Current rules constrain what can legally be spent on discretionary housing payments (DHPs).
A UK Government statement said the announcement demonstrated its commitment to taking a pragmatic approach to devolution.
It added that Scottish ministers would have the flexibility to pass on more funding from its existing block grant to local authorities.
It is up to the Scottish Government and local authorities how they choose to allocate their money.
In a letter to the Deputy First Minister Nicola Sturgeon, Mr Mundell offered to transfer the power to the Scottish Government through a Section 63 Order which will require the agreement of the UK and Scottish Governments before being approved by both the UK and Scottish Parliaments.
Scrapping the spare room subsidy, which applies to working-age tenants in social housing who are claiming housing benefit, was introduced to ensure that people do not live in bigger homes than they need at the taxpayer’s expense.
The policy has been hugely controversial with the SNP using it to illustrate its argument that Westminster produces policies that are not suited to Scotland.
DHPs can be used by local authorities across Britain to provide additional funding for people in receipt of housing benefit who need extra support. At present each local authority must operate within a formula-based spending cap set by the Department for Work and Pensions. The proposal from the UK Government would mean that the Scottish Government would have the power to set the DHP cap for Scottish local authorities in future.
Mr Mundell said: “I have completed a programme of visits to all Scottish local authorities and believe that transferring this power to the Scottish Government is the correct thing to do. The UK Government believes in taking a pragmatic approach to devolution and we believe in a United Kingdom that gives Scotland the best of both worlds. I hope that officials from both governments will now be able to take this forward.”
Scottish Labour’s Jackie Baillie MSP, said: “The Scottish and UK Governments have so far been more interested in taking each other on, rather than come to a solution which works.
“Now that we finally have an agreed means of effectively ending the impact of the bedroom tax in Scotland, the Scottish Government must now act and give councils and housing associations clear and unequivocal assurances over DHP payments.
“We’ve had enough dithering. For more than a month, Scottish councils have had no idea about what was happening to support our poorest and most vulnerable. Now clarity has been provided, let’s get on and put the money in place.
“But we need to go one step further. This iniquitous tax should never have been introduced. The bedroom tax needs axed. Labour is committed to scrap the tax if we win the General Election next year. The best way of ending the bedroom tax forever is to elect Ed Miliband in 2015.”