THERE is a “significant risk” that the Scottish Government will fail to deliver billions of pounds of devolved benefits on time, the country’s spending watchdog has warned.

Auditor General Caroline Gardner said Scotland’s new welfare agency had only managed to deliver its first, relatively easy payments by working “flat out” and relying on costly agency staff.

However it now faces a struggle to introduce a second wave of far more complex benefits which account for 98 per cent of the £3.5bn due to be paid to 1.4m claimants each year by 2021.

These include payments for disability assistance involving eligibility tests which are due to start late next year.

Opposition parties said the problems with devolved benefits, which have been repeatedly delayed and will not be fully devolved until 2024, made a mockery of the SNP’s claim it could deliver independence in 18 months.

In a bruising report on the handling of 11 benefits devolved to Holyrood in 2016, Ms Gardner said SNP ministers still did not have a “clear picture” of how much the new system would cost or how many staff were require to deliver it.

She said the Social Security Scotland agency underestimated the complexity of its work, and was on course to exceed its £308m budget after spending £9.1m on just 107 contract staff, compared to £10.3m on 356 of its own staff.

Despite good progress to date, and an ethos of “dignity, fairness and respect”, there was a “vast amount of work required, by way of policies, processes and systems” to meet its commitments.

She warned the growing pressure meant “a high risk of a decline in staff morale and staff leaving, resulting in the loss of existing skills and experience”.

She said: “The government has done well to date but has had to work flat out to reach this point, leaving little time to draw breath and plan for challenges ahead.

“The social security team is doing the right things to address that issue, but it hasn’t yet got a clear understanding of what’s needed to deliver the more complex benefits to come, or how much it will cost.

“Many decisions about future benefits are still to be made and it’s critical that detailed plans are now put in place.”

The report said Social Security Scotland realised just weeks before its launch that it needed 60% more staff than first thought, and had been forced to revise its business plans, but it has yet to publish its new budget forecast.

Since becoming operational in September, staff vacancies had been “routinely” as high as 30%, forcing it to rely on expensive outside help, especially in IT and cyber-security. It also had “very limited capacity” in finance.

Ministers had “done well” to establish the agency and pay carer’s allowance supplement and best start grants.

However “manual workarounds” were required for some of these payments because agency computers could not check claimants with the UK Department of Work and Pensions database.

Ms Gardner said the constant demands of delivering the initial wave of benefits, plus the added demands of the second wave, meant there was “a significant risk that the programme doesn’t have the time and capacity to learn from experience to date and make the changes necessary to successfully deliver on wave two timescales”.

She added: “Given the real likelihood that the pace and pressure within the programme will increase, there is a high risk of a decline in staff morale and staff leaving, resulting in the loss of existing skills and experience.”

She recommended more transparency about costs, a revised business case, and “realistic and sustainable timelines”.

Despite the SNP condemning the DWP as heartless, she said the Scottish agency would rely on it “for a significant time period” because it lacked the ability to deliver benefits on its own.

Tory MSP Michelle Ballantyne said: “The SNP has spent years complaining about the UK Government’s approach to benefits. But now the nationalists have the power, they’re finding out just how difficult it is to create a fair and sustainable welfare system.

“This report shows that 98 per cent of the annual expenditure on devolved benefits have yet to be delivered. They have spent a fortune just to get to this point, and the costs appear to be rising still.

“We have a situation now where almost as much is being spent on agency and contractor staff than permanent workers, and that will only make delivery of these powers harder.

“Like everything else, the SNP jumped up and down in advance of getting these controls, yet is found to be completely incompetent when they arrive.

“If the Nationalists can’t even sort out how to administer some benefits, how on earth do they propose to run an independent country?”

Labour’s Mark Griffin said: “This damning report means that vulnerable people in Scotland will continue to suffer at the hands of the Tories while they wait for a devolved system that was meant to bring dignity and respect.

“The SNP still don’t have a clear understanding of what will be needed to deliver the next set of benefits – or what it will cost. Surely this makes a mockery of their 2014 referendum promises that a new separate state could be set up within 18 months when they still can’t say how they will deliver new benefits in 2020 for vulnerable people.

“The SNP must come clean on this shambles as a matter of urgency.”

Scottish LibDem MSP Alex Cole-Hamilton said: “On paper the SNP’s slow and steady approach to benefits makes a degree of sense.

“However it is starting to feel like a party who promised to set up the entire welfare state of an independent nation in 18 months is trapped in a holding pattern.”

Ministers can now expect a grilling from Holyrood’s public audit committee on the report.

Convener Jenny Marra said: “The Committee will take evidence from the Auditor General on the major themes outlined in the report. We will no doubt want to explore the need to estimate the overall costs to implement the social security system and the Scottish Government’s plans to recruit staff to deliver the programme.”

Green MSP Alison Johnstone said: “The report highlights significant challenges around staffing, payment error and a lack of clarity over the financial resources needed for full, successful implementation.

“It’s vital both for those who need to access support and those charged with delivering the system that these are addressed. This is especially important ahead of the roll-out of disability benefits which are the most complicated to assess or administer.

“It is vital there is transparency on this, so we can ensure the new system gets all the investment it needs to deliver a fairer Scotland”

Social Security Secretary Shirley-Anne Somerville said the agency had put dignity and respect at the heart of the devolved benefits system, but admitted there was more to do.

She said: “We don’t underestimate the challenges and complexities ahead, but we have always recognised the opportunity we have to change social security for the better for Scotland.

“We have delivered everything we promised. We have established a new public service with Social Security Scotland up and running with 400 staff working to deliver payments and using the infrastructure which is the foundation for our delivery of future benefits. We also have a Social Security Charter and Commission.

“By the end of this year we will have delivered three of the 11 devolved benefits and four brand new payments to Scottish people most in need - from families with young children, carers helping in our communities and those mourning their bereaved.

“While we recognise there is much more to do - our track record shows we can meet the challenge ahead.”