Fiscal framework outturn report: 2025

7. Social Security

55. This section contains the latest outturn and forecasts available for expenditure and Block Grant Adjustments (BGAs) for all Social Security benefits that have a corresponding BGA from 2024-25 onwards and shows the net effect on the Scottish Budget. This report uses provisional 2024-25 outturn expenditure data for Scottish Social Security benefits expenditure. The final outturn data will be published as part of Social Security Scotland’s Annual Reports and Accounts which will be published in the Autumn.

56. The Block Grant Adjustments are based on provisional UK Government Social Security benefits expenditure for England and Wales. Final outturn data will be confirmed when the UK Government publishes its Local Authority, Parliamentary, and Country and Regional Tables 2024/25. This is expected in December 2025 following the conclusion of the UK Autumn Budget.

57. As the Outturn for Scottish revenue and the England and Wales outturn used for BGA calculations are both available after the Budget Process Review Group’s recommendation to publish the Outturn Report before 30 September 2025, all Social Security Outturn in this year’s report is provisional.

58. As outlined in the Fiscal Framework, Block Grant Adjustments (BGAs) are added to the Scottish Budget each year for social security benefits that were devolved under the Scotland Act 2016. When the Scottish Government introduces new social security benefits that are only available in Scotland, and which don’t have a UK Government equivalent, the Scottish Government fully funds those benefits without any corresponding funding transfers from the UK Government.

59. At the time of setting the 2025-26 Scottish Budget, forecast expenditure on Social Security benefits and payments with associated BGAs was £6,125 million against a BGA forecast of £5,596 million. Total Social Security expenditure on all benefits and payments, including benefits and payments only available in Scotland, was forecast at £6,930 million by the SFC at the time of the Scottish Budget 2025-26^[11]. This means that the additional investment made by the Scottish Government over and above the funding provided through the Social Security BGA was estimated to be £1,334 million when the Scottish Budget was set for 2025-26.

60. Additional Scottish Government investment in Social Security beyond the funding received through the BGA reflects Scottish Ministers’ use of devolved Social Security powers to introduce new benefits only available in Scotland, and to reform devolved benefits to deliver a Social Security system based on the principles of dignity, fairness and respect, ensuring people receive the benefits they are entitled to.

61. For Social Security payments, forecasts are of spending rather than revenues and Block Grant Adjustments are therefore additions rather than deductions. Otherwise, the process of reconciling forecasts to outturn data functions in the same way as for the fully devolved taxes.

62. Table 12 shows the latest expenditure forecasts for 2025-26 onwards for devolved Social Security benefits, as published in the SFC’s Scotland’s Economic and Fiscal Forecasts on 25 June 2025^[12]. Table 12 also details the Block Grant Adjustment estimates provided at the UK Spring Statement on 26 March 2025, except for the Winter Fuel Payment BGA, which includes an anticipated increase of funding of around £120 million per year from 2025-26, as estimated by HM Treasury, reflecting the UK Government policy change. However, until the OBR cost and forecast the policy change alongside the UK Government’s autumn fiscal event, at which point updated BGAs will be calculated, the potential impact on the BGAs cannot be confirmed. The 2024-25 Expenditure and BGAs are based on newly available provisional outturn data for 2024-25.

Note 1: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit.

Note 2: Forecast expenditure for Pension Age Winter Heating Payment does not reflect the SFC’s updated costing published in its August 2025 Fiscal Update.

Note 3: Winter Fuel Payment BGAs from 2025-26 onwards are based on the Spring Statement 2025 BGAs and include anticipated BGA funding of £120 million per annum from the UK Government’s Winter Fuel Payment policy change.

† Indicates outturn; BGAs are shown as positive as they represent additional funding.

63. In 2024-25, the provisional outturn for Social Security expenditure on all benefits and payments, including benefits and payments only available in Scotland, is £6,141 million. This means that the additional investment made by the Scottish Government over and above the funding provided through the Social Security Block Grant Adjustment is estimated to be £953 million for 2024-25.

64. Of this additional investment, the Scottish Government provided £609 million in payments unique to Scotland, including £456 million in the ‘game-changing’ Scottish Child Payment, and other devolved Social Security totalling £158 million.

65. The remainder of the additional investment, £186 million, relates to benefits where there is an equivalent UK benefit for which a corresponding Social Security Block Grant Adjustment is received from the UK Government (as shown in table 12). The majority of this was invested in disability benefits, where the Scottish Government has taken a compassionate and human-rights based approach, for example, helping to provide long-term financial security through the introduction of indefinite awards for disabled clients whose needs are highly unlikely to change.

66. The Scottish Government has also implemented operational changes to improve the experience of people applying for benefits with the aim of maximising benefit take-up and introduced policy changes, such as an extension of terminal illness rules and the introduction of light touch award reviews for disability payments.

67. Table 13 shows the net effect of forecast social security expenditure and social security BGAs compared to outturn for 2024-25. Expenditure is the total spend on social security benefits which have associated BGAs, not overall social security expenditure.

68. The England and Wales outturn used to calculate provisional 2024-25 outturn BGAs includes a minimal amount of overseas expenditure which will not be included in the final outturn BGAs. The final outturn without overseas expenditure will be available later this year. Removing overseas expenditure from BGA calculations will reduce the BGAs by a minimal amount.

69. There are no reconciliations required for the Scottish Government’s expenditure on Social Security benefits, as the Scottish Government manages any variance between forecast and actual expenditure in-year.

70. However, as with the fully devolved taxes, the BGAs for benefits do undergo reconciliations and are reconciled in two stages. An in-year reconciliation is made within the budget year at the UK autumn fiscal event on the basis of the most recent OBR forecasts, and, once outturn data is available in the following financial year, a final reconciliation is applied to the Block Grant for the financial year thereafter (i.e. two years after the Budget was set).

71. Table 14 shows the provisional net Budget position for Social Security benefits with a BGA for 2024-25.

Note 1: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit

Figures may not sum due to rounding.

72. Table 14 shows that the difference between the BGAs used to underpin the Scottish Budget 2024-25 and the provisional outturn BGAs for total Social Security benefits expenditure is negative £3.9 million. As shown in Table 15 below, £9.2 million was deducted from the Scottish Budget as an in-year reconciliation in 2024-25 and a further provisional outturn reconciliation of positive £5.3 million is required, which will be applied to the Scottish Budget 2026-27. The net effect of the in-year reconciliation and the provisional outturn reconciliation equates to the negative £3.9 million referenced above.

Note 1: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit

Figures may not sum due to rounding.

73. The latest forecasts of the net effect on the Scottish Budget 2025-26 for Social Security benefits are shown in Table 16 below. These figures are indicative only. There have been no updated OBR forecasts since the UK Spring Statement in March 2025 nor SFC forecasts since June 2025, aside from an updated PAWHP costing as part of its Fiscal Update in August. Therefore, the latest forecast net effect on the Scottish Budget is indicative and comparisons of the latest available forecasts and should be interpreted with a degree of caution.

74. The change in the forecasts for the BGA reflect the difference between the BGA used in the Budget Act 2025 and the forecast of the BGA provided at the UK Spring Statement 2025. The actual in-year reconciliation will be based on updated BGA forecasts provided alongside the Autumn 2025 OBR forecasts.

Note 1: BGAs for Industrial Injuries Disablement Scheme includes Industrial Death Benefit

Note 2: Forecast expenditure for Pension Age Winter Heating Payment does not reflect the SFC’s updated costing published in its August 2025 Fiscal Update.

Note 3: 2025-26 Latest Forecast Winter Fuel Payment BGA is based on the Spring Statement 2025 BGAs and includes anticipated BGA funding of £120 million from the UK Government’s Winter Fuel Payment policy change.

Figures may not sum due to rounding

Winter Fuel Payment

75. On 9 June 2025, the UK Government announced that from this winter onwards, the Winter Fuel Payment (WFP) eligibility will be expanded to pensioners with an income of £35,000 or less a year. The mechanism to issue WFP to qualifying pensioners involves paying the WFP allowance to all pensioners but recovering it from those with a taxable income above £35,000 through HMRC via PAYE or Self-Assessment (SA).

76. On 30 July 2025, the Cabinet Secretary for Social Justice confirmed acceptance of the UK Government’s offer to apply the WFP income tax charge in Scotland, aligned to the £35,000 income threshold used in England and Wales. The reconciliation process for applying this charge is yet to be agreed between both governments.