Benefit claimants could end up 'worse off' after devolution

The Scottish Parliament is expected to gain control over carer's allowance, industrial injuries benefit and severe disablement allowance under the powers negotiated in the Smith Commission on Scottish devolution.

This will allow MSPs to raise or cut these benefits in line with the specific needs of the Scottish people, and "top up" payments from the new universal credit (UC) which will remain the purview of the UK Government.

However, some benefits will be treated as income when deciding how much UC should be awarded.

If the Scottish Parliament increases its devolved benefits then claimants will get a pound-for-pound reduction in their UC, the Scottish Parliament Information Centre (SPICE) has warned.

Holyrood could then top up claimants' depleted UC from its own budget - but the SNP said this goes against Smith's principle that additional income for the recipient should not result in money being offset from somewhere else.

UC will replace jobseeker's allowance, housing benefit, working tax credit, child tax credit, employment and support allowance and income support across the UK.

Scottish Secretary Alistair Carmichael pledged to investigate the research at Holyrood's Devolution (Further Powers) Committee yesterday, insisting "it does not make sense" and could be an "unintended consequence" of the Smith proposals.

SPICE said: "If a UC claimant is receiving any of the reserved benefits, and they have been increased by the Scottish Parliament, then they will get a reduction in their UC award pound-for-pound. This could mean a UC recipient is worse off.

"However, this eventually could be offset if the Scottish Parliament decided to increase the UC award as well."

Committee convener Bruce Crawford, an SNP MSP, said: "The Smith Commission report actually says: 'Any new benefits or discretionary payments introduced by the Scottish Parliament must provide additional income for the recipient and not result in automatic offsettings.'

"So it doesn't actually talk about the top-up process or the devolved powers, so I think we need a bit of clarity around that area because otherwise what would be the point of having the powers to do that."

Deputy First Minister John Swinney, who also gave evidence to the committee, said it would be "a travesty" if the fears were borne out.

He added: "To me it's pretty clear that anything that we do within the Scottish Parliament should not see the benefit of that undermined or negated in any way as it affects the individual."

A spokesman for the Scottish Government said: "Paragraph 55 of the Smith Commission outlines that any new benefits or discretionary payments introduced by the Scottish Parliament must provide additional income for a recipient, and not result in an automatic offsetting reduction in their entitlement to other benefits.

"We will work with the UK Government in the spirit of paragraph 55 to ensure this is not the case. The concerns outlined by stakeholders reflects why we called for full devolution over social security so these situations would not occur.??