Poverty and devolution: The role of devolved governments in a strong national social security system

Headline levels of poverty across all four nations of the UK fell significantly until the economic downturn, but since then there has been a more mixed picture, with rising levels in Northern Ireland and Wales in particular. The latest set of figures, however, appears to show that among all UK nations, poverty has either stopped rising, or is again beginning to fall.

This report argues for maintaining a strong central welfare state. The redistributive functions of government require pooling risk across the largest possible area, to mitigate the asymmetrical impact of different changes in economic conditions. However, we also believe that some benefits could be devolved in a safe and effective fashion, to improve the devolved governments' ability to respond to local circumstances.

Where devolving benefits or related welfare programmes could help boost growth and economic performance, in line with the social investment approach, the case for devolution is particularly strong. We have devised the following criteria to guide decisions about specific benefits or programmes.

• Whether the benefit is cyclical – those which are cyclical are less suitable for devolution, given the financial strains they can impose on devolved budgets. In particular, benefits which function as countercyclical stabilisers are unsuitable for devolution.
• Whether the benefit relates to, or overlaps with, devolved functions – those which have a connection with other devolved functions are more suitable for devolution, as existing systems will mean they are easier to administrate.
• Whether the factors that affect the benefit are place-related – those which show strong connections to particular locations, such as housing markets, are more suitable for devolution than those which more place-neutral.
• Whether major benefits are redistributive or contributory – those which are contributory, and so funded through the national insurance fund, are largely unsuitable for devolution.

On this basis, we recommend further investigation of devolution options in two key areas of the social security system:

• housing benefit, which is significantly influenced by local factors, and is neither cyclical nor contributory
• employment support and the Work Programme, which could be improved by responsive, innovative local approaches to the very different economic conditions seen in different parts of the UK.