DWP and Scottish Government in dispute over IT costs of welfare devolution

The Department for Work and Pensions and the Scottish Government are working to resolve a dispute over who should pay for digital platforms needed to support the ongoing devolution of large parts of the welfare system.

The DWP recently published its annual report and accounts for the 2021/22 year. In the document’s section on contingent liabilities – which are costs that may be incurred in the future, depending on certain events or factors – the department revealed that work to devolve the administration of a wide range of benefits is subject to “disputed IT costs”.

“DWP are carrying out work at the request of the Scottish Government to implement welfare devolution,” the report says. “Scottish Government have raised a dispute over their liability to fund certain digital investment activity that DWP believes is essential to deliver devolution. The digital investment activity spans a number of years with detailed requirements and costs for future years yet to be defined therefore a reliable estimate of the contingent liability is not available.”

Legislation was passed in 2016 to support the process of transferring responsibility for delivering various support programmes from the DWP to a newly created entity: Social Security Scotland.

Introduced alongside the new laws was a Fiscal framework agreed between the UK and Scottish Governments that set out agreed terms to manage the transfer of responsibility for benefits and taxation.

Included in the framework were guidelines for managing any disputes – and the DWP’s accounts said that the disagreement over funding for IT systems is now going through the “the agreed escalation process that is part of the fiscal framework”.

The department declined to comment further when asked by PublicTechnology if it could provide any details of what platforms the dispute related to, the amount of money in question, and the current stage of resolution. 

In response to our enquiries, a spokesperson for the Scottish Government said “The Scottish Government is working closely with the DWP to resolve this issue under the provisions of the Fiscal Framework and will not provide commentary while discussions to seek a resolution are ongoing.”

The framework in question sets out that disputes that cannot be resolved between front-line officials will then be escalated to senior managers and then, if necessary, onto ministers. 

If ministers cannot reach an accord, “an automatic pause [will be] placed on the disputed finances”, and all programme decisions and activities related to the funding in dispute will also be put on hold.

At this point, the UK and Scottish Governments will each “draw up a statement of fact on the dispute”, including potential “technical input” from the UK Office for Budget Responsibility and the Scottish Fiscal Commission.

“The statement of fact and the technical input from the OBR and Scottish Fiscal Commission will be considered by both governments, who commit to using their best endeavours to resolve the dispute,” the framework says. 

However, in the event that “no agreement can be reached, then the dispute falls – [and] there would be no specific outcome from the dispute, and so no fiscal transfer between the governments”.

Progressing incrementally over a period of eight years, the welfare devolution programme will deliver the transferral of various DWP-administered benefits, including Carers Allowance, Funeral Expenses Payment, Cold Weather Payments and Winter Fuel Allowance, as well as a number of support programmes related to disability and ill health, such as Personal Independence Payments, Disability Living Allowance, Severe Disablement Allowance, and Industrial Injuries Disablement Benefit. Universal Credit will continue to be overseen by the DWP, although Scottish recipients now have greater flexibility over their payment schedule.

Originally slated to conclude by the end of this year, the initial handover of responsibility for all applicable benefit programmes will now be ongoing until late 2024, with the transferral of casework between the two government’s respective systems continuing for some months beyond that. 

IT implementation investment
The Scottish Government has budgeted total implementation costs of £645m, part of which will go toward enabling the deployment of a range of new digital platforms, and the IT infrastructure needed to support them.

A progress report recently released by Scotland’s Auditor General cited as one of its four key findings that “there is a lot still to be delivered” to support a devolved welfare system.

“Timescales are challenging, and substantial risks remain, including accessing data, putting in place longer‑term digital solutions and getting operational staffing in place,” it added.

Among the technology systems that Scotland needs to implement is a core platform to deliver payments, according to auditors.

“When Social Security Scotland was established in 2018, the Scottish Government agreed the short-term use of the DWP’s payment platform to allow it to make benefit payments, as no suitable system existed in Scotland,” the report said. “The initial agreement covered the period to spring 2023 and the Scottish Government has now negotiated an extension of this through to autumn 2024. This is a critical aspect of Social Security Scotland’s digital infrastructure, and a long-term solution will need to be put in place to provide suitable payments functionality for Social Security Scotland beyond this point.”

But report concluded that, overall, “the Scottish Government is preparing well for the next stages of delivery and is managing the complex programme of work effectively”.