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Welfare - to devolve or not to devolve

This is an article for the Institute of Welsh Affairs Click on Wales blog

The devolution of welfare provision to the Welsh Government does not have an auspicious history. One of the more successful attempts in 2003 was the creation of the Supporting People Grant and Supporting People Revenue Grant to accredited support providers


These two funds were an amalgamation of seven distinct housing funding streams, the larger of which was supplementary housing benefit paid to providers to deliver additional support to vulnerable people.

The total sum paid out by the UK Government was transferred into the Assembly’s block grant on the basis of the payments to Welsh providers at a particular cut off point but no provision was made for growth in need. Equally, the uneven distribution of support was not addressed.

As a result the Welsh Government has had to spend considerable time restructuring the way the grants are paid and have had to either to find additional money from its own resources to meet growing demand or drive through efficiencies in the way that it is delivered. That has meant cuts in the total budget over the last few years at the expense of many vulnerable people.

The issues around the creation of Supporting People Revenue Grant offer two useful lessons in the pitfalls of devolving welfare to the Welsh Government.

Specifically, the question arises of how a government dependent on another for its income, in the form of a fixed grant, and which even after further devolution will only have limited borrowing powers, can cope with an often disproportionate growth in demand for these resources.

The second and quite separate question is around the capacity of the Welsh Government itself to manage these funds efficiently and effectively so as to ensure that the maximum amount is used for the greater good.

This brings me to other examples of devolved benefits, namely the Council Tax Reduction Scheme and the Discretionary Assistance Fund. Neither of these responsibilities were sought by the Welsh Government but were foisted upon them.

In the former case the responsibility came with a cut in funding of ten per cent, which meant that the Welsh Government and local councils started off the regime on the back foot. The Welsh Government has met that difference and has guaranteed to do so until the 2016 Welsh Assembly Election but they have not been able to cover any growth in demand. Their own projections also show that it is unsustainable to continue covering the shortfall in this way for the medium to long term.

The upshot is that a significant proportion of every council tax increase imposed by a local council must now meet the increase in payments to those who cannot afford to pay that tax rather than be spent on services.

The restructuring of the council tax reduction scheme after 2016 is inevitable if it is to remain targeted at the most disadvantaged. That will mean that those on the margins will miss out once more.

In the case of the Discretionary Assistance Fund the tale so far is one of poor administration rather than unmet demand. Three quarters of the way through its first year of providing emergency grants to help those in need, it had paid out only £4.8m, despite having a total budget of £10.2m and despite government claims of Welsh families being pushed into poverty by welfare reform. The final underspend was about £3m.

The cost of administering the fund was disproportionate to its total budget.  Northgate Public Services were paid £1.38 million in 2013/14 and £1.29 million in 2014/15 for this job, over 13% of the total amount available.

This is just a snapshot of course of some of the issues that arise in any attempt to devolve responsibility for welfare payments of any kind to the Welsh Government. Issues of scale and limited budgets dominate.

Because the Welsh Government has a fixed budget it does not have the flexibility to make adjustments in times of high demand, our size mean that administration is costly and cannot easily take advantage of efficiencies of scale and we are often left taking responsibility for cost-cutting measures at a UK level camouflaged as part of a supposedly progressive devolution agenda.

There are wider issues to consider as well, not least the assumption that just because a welfare function has been devolved it means that we will act more favourably for its beneficiaries than UK Ministers.

The cost of welfare and the need to keep that expenditure under control applies in Wales just as it does for the UK as a whole. Nobody has a bottomless pit of money and hard decisions have to be taken at every level. Let us not assume therefore that devolution of responsibility is a realistic alternative to cuts in provision.

Welsh Ministers may take a different view than their UK counterparts on many of these issues, even when they are in the same party, but they have to face realities as well. Devolution is a desirable outcome in many policy areas but it is not a panacea and nor should it be promoted as one.

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