Independent Review of Adult Disability Payment: final report

Fiscal and Economic Context

Historical context

Previous reforms to disability social security, in particular the introduction of PIP by the UK Government in 2013 expressly aimed to reduce the costs of social security^[26]. However, the introduction of PIP had the effect of increasing the costs of social security[27]. Scottish Campaign on Rights to Social Security (SCoRSS) members believe that this approach is incompatible with the human-rights approach, and longer-term changes to disability assistance in Scotland should not be motivated by cost reduction.

The funding of social security in Scotland

One of the Scottish social security principles states that ‘the Scottish social security system is to be efficient and deliver value for money’.^[28] The policy intent is that this value for money will be achieved not just through an efficient system but also through the value it brings to society, by reducing poverty and by enabling people to live more independent lives. It will, however, be important in an increasingly pressurised economy to maintain a balance and ensure that value for money and/or cost is not disproportionately prioritised over other principles.

The 2025-26 Scottish Budget was approved by the Scottish Parliament in February 2025.^[29] The Budget invests £6.9 billion in social security, expected to support around two million people in 2025‑26.

The Scottish Government is now responsible for devolved social security payments in Scotland, such as Adult Disability Payment. Because the UK Government is no longer responsible for this spending, it gives the Scottish Government funding for this known as Block Grant Adjustments (BGAs). This reflects what the UK Government would have spent in Scotland had benefits not been devolved. The Scottish Government must fund from the Scottish budget, any extra costs over the BGA funding as a result of any policy choices or delivery changes it makes.

When the UK Government introduces a policy in England and Wales for a payment with an associated BGA, and that policy leads to a change in the level of spending, then there is a proportional effect on the level of BGA funding the Scottish Government receives.

Forecasts for Adult Disability Payment

Application rates

In December 2023, the Scottish Fiscal Commission noted that quarterly applications rates as a percentage of the working age population for PIP in England and Wales and for Adult Disability Payment in Scotland started to diverge at the beginning of the Adult Disability Payment pilot in March 2022, and widened further when Adult Disability Payment was launched nationally in August 2022.^[30]

Potential drivers in demand

The drivers for the increase in demand for disability payments are complex. The Scottish Fiscal Commission has revised its assumptions about potential drivers in demand for disability benefits over time. This has included a move away from including NHS waiting lists as a potential reason for the increase in the number of applications:

“In December 2022, we increased our forecasts for disability payments to reflect months of record high applications and inflows for disability benefits across the UK. We attributed the increase in demand to a combination of factors, including a long-term increase in mental health-related cases, NHS waiting lists, and the cost-of-living crisis, which together could exacerbate existing health conditions or increase the likelihood of people applying for disability payments.

The high volume of applications has continued, and we have revised our assumptions further increasing our Adult Disability Payment (ADP) forecast. Our assessment of the explanation for the increase has also developed and we now place more weight on the role of the cost-of-living crisis. Therefore, in the future, as the cost-of-living pressures ease and real household income levels return to pre-pandemic levels, some of the additional demand for disability payments is expected to ease.” – Scotland’s Economic and Fiscal Forecasts (December 2023), Scottish Fiscal Commission^[31]

The assessment of the number of applications for Adult Disability Payment was revised further by the Scottish Fiscal Commission in December 2024, noting that its assumption was that number would progressively decrease as the elevated cost-of-living pressures ease:

“We assume that the number of applications for ADP will progressively decrease from the current elevated level as cost-of-living pressures ease. We have adjusted our new application forecast to allow for a more progressive decrease in the application rate as the recent number of applications has remained at a slightly higher level than previously forecast” – Scotland’s Economic and Fiscal Forecasts (December 2024)^[32]

The Scottish Fiscal Commission also recognises the impact of changes made by the Scottish Government in its forecasts, including maximising take-up and the approach to reviews of entitlement.

“The effect of delivery and operational changes introduced with Adult Disability Payment is now evident in the published statistics. There are now a higher number of applications, reflecting the Scottish Government’s policy to maximise take-up, and a decrease in the number of people exiting the caseload at award review because of the light-touch review policy implemented” – Scotland’s Economic and Fiscal Forecasts (December 2024)^[33]

Approval rates

In its December 2023 forecast, the Scottish Fiscal Commission noted that the available data had indicated that the success rate for new applications for PIP in England and Wales was lower than the comparable success rate for Adult Disability Payment in Scotland. However, its December 2024 forecast noted that the reverse was true:

“One of the reasons for the decrease in the ADP success rate could be because applications for more severe conditions, or for which more detailed supporting information was provided, were processed more quickly when ADP was introduced, skewing the initial success rate. In 2024, the ADP success rate in Scotland has been lower than the comparable success rate for PIP in England and Wales.” – Scotland’s Economic and Fiscal Forecasts (December 2024)^[34]

Average payments

In contrast to the increase in applications, a decrease in the average payment award received by new applications to Adult Disability Payment has been noted in comparison to PIP in England and Wales.^[35] This is attributed to a shift in the distribution with an increase in the percentage of applications receiving a higher-value award, and the percentage of applications receiving a lower-value award.

Budget implications

The Fraser of Allander Institute published its Economic Commentary Q1 2025.^[36] In the report it acknowledges that while the caseload for disability benefits is growing across the UK, it is rising more rapidly in Scotland. The reasons behind this trend are complex, and there is no single explanation. Some possible contributing factors are that while eligibility criteria remain broadly similar to the UK system, Scotland’s system is seen as more accessible, with a simpler application and review process. In Scotland, the three disability benefits are driving most of the recent growth including Adult Disability Payment.

Overall social security spending in Scotland is forecast to increase from £6.9 billion in 2025-26 to £9.4 billion in 2030-31. By 2029-30, the Scottish Fiscal Commission forecasts that the Scottish Government will spend £2.1 billion more on social security than block grant funding received from the UK Government.^[37] In the Scottish Fiscal Commission’s assessment, the largest contributor to this difference is Scottish Government policy changes. For example, Scottish Child Payment spending (on itself) accounts for 25% of the funding gap.

The Scottish Fiscal Commission forecasted in May 2025 that, by 2029-30, the Scottish Government would be spending around £770 million more on Adult Disability Payment than it receives in funding through the BGA for PIP. Although that shortfall is significant it is only 9% of the total spend.^[38] The £770 million figure factors the proposed changes to PIP, as outlined in the UK Government’s 2025 Spending Review.[39] However, it does not reflect the potential impact of the removal of Work Capability Assessments for Universal Credit and the linking of the Universal Credit health element to the PIP assessment.

If as a result of changes to PIP, spending is forecast to fall in real terms, and if Adult Disability Payment spend in Scotland stays the same, then the gap between the Block Grant and actual spend gets bigger. Quite how much bigger will become clearer once the scale of forecast savings from the UK welfare reforms are set out in more detail.

The Institute for Fiscal Studies (IFS) view is that the Scottish Government’s overall short-term funding position (beyond social security) has improved substantially compared to what was expected a year ago. However, the IFS’s view is also that the longer-term outlook presented is less positive, stating ‘it seems likely that a range of services and capital investment will face cuts from 2026–27 onwards in order to meet NHS and social care spending pressures.’^[40]

Whilst this is the IFS view of the Scottish Fiscal Commission’s forecasts and budget, that only covers the funding position. The Scottish Fiscal Commission’s Chair, Professor Graeme Roy said:

“The Scottish Government has benefited from significant extra funding from Rachel Reeves’ Autumn Budget. However, the consequences of much stronger income tax revenues elsewhere in the UK affecting the net tax position, combined with ongoing pressures from a rising pay bill and increased commitments on social security, continue to act as a binding constraint on the Scottish Government’s broader spending decisions.” – Scottish Fiscal Commission, December 2024^[41]

The IFS also notes that the Scottish Government’s intention to mitigate the impact of the Universal Credit two-child limit, noting that it is particularly well-targeted to reduce child poverty, but the forecast cost (averages around £180 million per year between 2026-27 and 2030-31) may have a significant impact upon funding available elsewhere.

The IFS notes in its report the widening gap between BGA and spending on disability benefits in Scotland:

“In 2025–26, lower-than-previously-expected inflation in September 2024 (the inflation rate typically used to index most social security benefits) will also reduce benefit spending (in cash terms) in the rest of the UK and hence the social security BGA, further offsetting the impact of higher caseloads for disability benefits.” – IFS