Exclusive:SNP government faces £36m black hole over refusal to copy Westminster benefits crackdown

MPs are currently considering new legislation that would claw back debts incurred by fraud or overpaid welfare claims.

However, social justice cabinet secretary Shirley-Anne Somerville has refused to back the move by UK Labour as it is not in line with the ethos of the more “dignified” Social Security Scotland (SSS).

As the Scottish Government has insisted on diverging from the Westminster plans, the SNP administration will need to transfer the debts to SSS and rapidly develop a debt recovery scheme or write off the £36m owed.

This has caused consternation among MSPs concerned about the strain on Scottish finances when the government is still operating under emergency spending controls introduced last year.

Under plans outlined in the proposed new Public Authorities (Fraud, Debt and Recovery) Bill, the DWP would have powers to retrieve owed money directly from a person’s bank account.

If they were without sufficient funds, the DWP could then impose sanctions such as applying to the court for the temporary suspension of their driving licence.

The dispute is detailed in letters acquired by The Scotsman from the DWP under freedom of information legislation.

Identical requests for information were lodged with both the Scottish Government and the UK Government.

However, while the DWP handed over letters from Mr Weston to Ms Somerville, the Scottish Government chose to entirely redact the contents of all correspondence from the SNP cabinet secretary to her Westminster counterpart.

The Scottish Government did not respond to a question about the refusal to provide the requested information.

In the letters provided to The Scotsman by the DWP, it is made clear that Ms Somerville does not approve of introducing these debt recovery powers in Scotland.

In correspondence from Andrew Weston, the UK minister for the DWP, from May and June this year it is explained to Ms Somerville that the DWP will no longer be able to recover debts on behalf of Social Security Scotland when a current arrangement comes to an end in spring 2026.

Another letter details that 4000 current debts could be pursued using the new legislative powers and then around 1500 debts each year in the coming years.

When the plans were first announced in January this year, they were described by Labour as “the biggest fraud crackdown in a generation” targeted at “benefits cheats”.

Mr Weston writes: “This flow of new cases will decline as the Scottish Government continues to roll out its own benefit system and DWP does not administer benefits on your behalf.”

He goes on to say that the “continued recovery of debt under a separate system is not cost effective, even if this was limited to the recovery of debts already in repayment.”

The MP adds that the DWP will not be able to continue to recover debts under any new long-term agreement or extensions to the current agreement between governments.

The debt recovery situation is also expected to have a knock-on effect on benefits claimants.

Those who currently have stable repayment arrangements with the DWP are now in limbo waiting for news of the SNP’s plans.

Scottish Conservative shadow cabinet secretary for social security Alexander Stewart MSP criticised the Scottish Government’s “secrecy” and said its debt recovery position “defies belief”.

“No wonder Scotland has a ballooning and unaffordable benefits bill when the SNP Government won’t even try to recoup money fraudulently claimed or overpaid,” he said.

“This is taxpayers’ cash that has been handed out in error. It defies belief that Shirley Anne Sommerville has no desire to get any of this money back. It’s an insult to hard-working, over-taxed Scots.

“It’s clear the SNP has no plan or even desire to rein in Scotland’s soaring welfare bill.

“The abject lack of transparency from the social justice secretary over her correspondence with her Westminster counterpart is also depressingly predictable from an SNP government addicted to secrecy.”

In one letter from May, Mr Weston thanks Ms Somerville for an in-person meeting and says there are “several complex challenges” involved in her requests for separate legislation - or “carve outs” - for Scotland.

The MP attempts to reassure the cabinet secretary that measures in the legislation would be used only as a “last resort”.

With other devolved benefits, the DWP transfers information about claimants to SSS.

In order for SSS to take on debt recovery, it would require the cases to be transferred between agencies as well as resource debt enforcement.

The Scottish Government pays the DWP for the exchange of information under the partially-devolved system.

In December last year, flawed information sharing between the two organisations led to nearly 40,000 Scots missing out on the newly devolved winter heating payment.

The oversight came to light as a result of “urgent number crunching” by the Scottish Government after the introduction of emergency spending controls across government departments.

A Scottish Government spokeswoman said Scottish Ministers can seek debt recovery through the civil court process “where an individual does not voluntarily repay and is no longer in receipt of benefit”.

However, the most recent update from Social Security Scotland says the organisation does not yet have the provisions in place to be able to recover debt through the sheriff courts.

Its debt management strategy from 2023 lays out that the agency tries, where possible, to make voluntary arrangements to recover debt.

Speaking to Holyrood’s finance committee in January this year, SSS chief executive David Wallace said money that was overpaid would not be reclaimed where the benefit recipient could not have reasonably known they were being paid too much.

He added: “We have the powers to enforce deduction from on-going benefits, but we have not yet used them.”

“The Scottish social security system is focused on treating people with fairness, dignity and respect,” the government spokeswoman added.

“Scottish Ministers have been clear they cannot support UK Government proposals to take powers to recover directly from an individual’s bank accounts without requiring a court order, or to potentially suspend driving licences.”

The spokeswoman said there is “no hole in the Scottish Budget” but did not elaborate on where the money would be found to write off the £36m in fraud and overpayments.

She added: “Given both governments could not find an agreement on this issue, the Scottish Government is looking at what steps now need to be taken in the devolved social security system. There is therefore no impact on the Scottish Budget.”

Labour was approached for comment.