The Scottish Government should exercise restraint with its new welfare powers

March 02, 2016 11:35 AM

Yesterday the Scottish Government started debating whether it should use its new powers to increase the welfare bill. We think this would be a grave error. It may force Ministers to divert money away from other programmes and make it very difficult for them to live within their means.

Identifiable spending on “social protection” programmes in Scotland is currently 6 per cent higher per head than the rest of the UK and total spending is 15 per cent more. As Scotland becomes more financially independent it will need to be able account for all of this additional spending. Given the delicate state of the nation’s finances, further largesse would be well-intentioned foolishness.

Already, the reintroduction of the effective spare room subsidy has sent the Housing Benefit bill shooting upward and further such measures are, frankly, unaffordable.

It was very sensible of the Scottish Government to reject recent calls to raise the income tax rate by 1 pence. It would be easy for companies and people to move across the border to (relatively) low-tax England, this wouldn’t happen all at once but gradually and over time it could make a real difference. Any tax revenue lost from this would likely harm Scotland’s long-term financial security. So the danger of raising taxes to cover additional welfare spending would make Scotland an unattractive place to do business.

That trying to raise more tax revenue usually isn’t a good policy is quite fitting, as throwing more money at a problem is usually a bad solution.

Welfare policies that promise to end all of the world’s ills should make taxpayers uneasy as they rarely achieve their undoubtedly noble goals and come at great cost. This is why we should remain sceptical when the Scottish Government says it will base its welfare decisions on maintaining recipients ‘dignity’.

If this means, as a cynic might suspect, more generous welfare, then it risks further extending the traps that are all too common in our current system. There is no ‘dignity’ in the scenario where receiving benefits is more lucrative than working.  And wherever you increase welfare you must take from somewhere else – other programmes or from taxpayers, some of whom may not have very much money to begin with.

Instead the Scottish Government should take this golden opportunity to introduce some simplicity. This would cut large swathes of bureaucracy and free up taxpayers’ cash for frontline services.

And reducing the amount of tax Scots have to pay would be one of the best ways to help those on low incomes. Currently, UK households in the bottom 10 per cent by income give 45 per cent of everything they receive to the taxman. Finding ways to reduce the tax burden would be much more effective at alleviating poverty than any handout.

This point applies more generally as the Scottish Government should abandon schemes that increase the cost of living for Scots, such as minimum alcohol pricing, especially as these moves can hit the poorest hardest.

The TaxPayers’ Alliance supports giving local areas more control over what they spend (and this is true across the UK) but along with that they must be more financially responsible. So the Scottish Government should resist the temptation to top up benefits - it is not good policy on moral or practical grounds.

Balancing the books won’t be achieved by raising taxes and certainly not if the Scottish Government tops up welfare payments. Instead it should look to make the necessary savings. Spending money we don’t have only puts the burden on the taxpayers of the future which is an inherently unfair and indeed immoral proposition.

 

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