Holyrood ministers urged to create single tax and benefits agency

6 Jun 16

Scotland should use the devolution of powers over tax and social security as an opportunity to create a single government department to run both systems, an independent think-tank has proposed.

In its report, One Department – Let’s Do Things Differently, the right-of centre Reform Scotland says that the division of responsibility in Whitehall between HM Customs & Revenue and the Department of Work & Pensions makes for less open and accountable administration and forced claimants to deal with two different departments to receive the benefits to which they are entitled.

“Scotland has an opportunity to lead Westminster by example and create a more user-friendly and efficient system,” the report stated.

The 2016 Scotland Act will put the Scottish government in charge of around half the tax raised in Scotland – including full control of income tax – and some 15% of the social security budget. Revenue Scotland is already in existence to administer the tax powers, and a new Scottish Social Security Agency is planned.  Each will report to different Cabinet Secretaries.

Reform Scotland, which argues for more fiscal devolution, warned this would increase complexity. “At Westminster, welfare and tax are split between two departments, though there are overlaps, such as child benefit and tax credits, which are welfare benefits but the responsibility of HMRC,” the report says. “This split in responsibilities damages transparency, openness and accountability, and means that recipients have to deal with two different departments to receive their entitlement.

“By ensuring [that] one department, and one Cabinet Secretary, is responsible for both tax and welfare powers, the Scottish government can create the potential for a system which is more transparent, user-friendly and [which] can easily adapt to more responsibilities.”

The think-tank adds that further complexity would arise because of the entanglement of devolved powers with those that remain reserved to Westminster. Receipt of some devolved benefits will affect eligibility for reserved benefits, while some of the tax administration will continued to be delivered on behalf of the Scottish government by HMRC.

“Having two separate departments in Scotland could lead to some individuals, particularly in the longer term, having to deal with up to four separate departments for welfare, as well as their council for any issues relating to council tax rebates or discounts,” it says.

Streamlining the Scottish end of the operation would also simplify matters for people in receipt of taxable benefits - such as Carers’ Allowance, which is being devolved – by enabling their payments to be taxed at source.

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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