THE Scottish Government has raised a dispute with the UK Department of Work and Pensions amid spiralling costs for a new devolved welfare system.

Ministers have challenged the DWP over who pays for new investment in the digital delivery of benefits.

Buried in the fine print of its annual report, the DWP says it believes years of investment in digital activity are “essential to deliver devolution”, although the costs are as yet unknown.

But Scottish ministers have “raised a dispute over their liability to fund” it.

It comes as the Scottish Government faces rising bills for its devolved social security IT system, which was supposed to cost £212million but was recently priced at £251m.

The project, which started in January 2017 and involves migrating data from the DWP to new IT in Scotland, now has “tbc” as its official end date.

The “Contingent Liabilities” section of the DWP Annual Report and Accounts for 2021/22, published earlier this month, includes “Scottish Devolution Programme Disputed IT Costs”.

It states: “DWP are carrying out work at the request of the Scottish Government to implement welfare devolution. 

“The financial principles that underpin this work are set out in a Fiscal Framework agreement between the two Governments. 

“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. 

“Resolution of this dispute will be via the agreed escalation process that is part of the Fiscal Framework.”

The dispute was first reported by the Public Technology website.

It said that under the Fiscal framework, disputes that cannot be resolved between senior officials are escalated to senior managers and then, if necessary, to ministers.

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

At that point, the UK and Scottish Governments would 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. 

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”.

Phased in over eight years, a range of benefits managed by the DWP are being transferred to Scotland, including carers’ allowances, funeral payments, cold weather payments and winter fuel allowances, as well as personal independence benefits, disability benefits, severe incapacity benefits and work-related incapacity benefits. 

Universal Credit will continue to be overseen by the DWP, although Scottish recipients now have more flexibility about their payment arrangements.

Originally due to be completed by the end of this year, the initial transfer of programs will continue until the end of 2024, with the transfer of cases between the two governments’ respective systems expected to continue for several months after that.

Labour MSP Pam Duncan-Glancy said: “The last thing we need is more bickering between our two governments.

“Both governments need to stop playing the blame game and focus on cooperating to deliver a system that works for the people of Scotland.”

Tory MSP Liz Smith said: “The SNP Government has already run up a quarter of a billion pound bill on a system that shows no sign of being delivered. It’s been so incapable of doing the work that is Holyrood’s responsibility that it’s handed over much of it to the UK Government – and now it turns out that it can’t even agree on settling the bill.

“This is typical of the SNP’s abject failure to do the most basic tasks of government. Scotland deserves better than overblown promises, dismal delivery and nothing to show for it but an eye-watering bill.”

Liberal Democrat MSP Willie Rennie added: “This kind of blame game is just unhelpful and tone-deaf to the bigger issues affecting people up and down the country.

“In the midst of a huge cost of living crisis, we need governments who are willing to work together, not ones that squabble.

“The Scottish Government needs to step up to the plate and concentrate on delivering the help that people urgently need.”

A Scottish Government spokesperson 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 devolution of social security is a large and complex programme requiring both Governments to undertake IT system changes and development.”