SCOTLAND could not afford to make major benefits changes but should use welfare changes to boost child credit and pensions to cut poverty, according to a think tank.

New research by the Common Weal claims the potential of the limited welfare powers set to be transferred to Holyrood under the Scotland Bill must not be overstated and that “prohibitive” costs are attached to even modest changes to Universal Credit, such as the timing of payments.

The work by Professor Paul Spicker, emeritus professor and former chairman of public policy at Robert Gordon University in Aberdeen, highlights two areas where progress to alleviate poverty could be made.

One is by introducing a top-up child benefit payment related to Scottish income tax and targeted at the lowest earners. The other is the creation of a “Citizens Pension” to sweep away pension credit and ensure all older Scots receive full state funding.

Spicker wrote: “The reforms have been represented as giving Scotland ‘one of the most powerful devolved parliaments in the world'. That is debatable. In any federal system, powers lie by default with the states, not with central government. It is open to the states (and sometimes to local governments) to experiment and to innovate.

“Scotland will not be able to do this. Everything the Scottish Parliament does will have to be done with an eye to what is happening elsewhere in benefits and they will be subject to continued direction, and control of resources, from central government."

Under the proposals, non-means-tested child benefit which is also unlinked to other payments, making alteration easier, would be increased with a 50 per cent boost linked to income tax. A percentage of the payment would be repaid by higher earners, with those earning the least receiving the full increase.

Underlying child benefit payments would also be unaffected, meaning none would lose through the system, costing an estimated £325 million.

The pensions change would end confusion over pension credit, which is unclaimed by many of those eligible. Under the “no detriment” principles underpinning the transfer of further powers, the cost of pension credit in Scotland would also be handed over, allowing Holyrood to redistribute that money to older Scots and reduce inequality and promote “dignity”.

Estimates suggest up to one-quarter of the value of the credit, aimed at those whose work history leaves them unable to receive the full state pension, is unclaimed and the scheme is expected to cost Holyrood £150m.

The report comes as First Minister Nicola Sturgeon revealed only £50m has been offered to all cover transition costs associated with the fiscal framework, including welfare, tax and other spending.

Ben Wray, head of policy and research at Common Weal, said: “There’s a danger that the people of Scotland could be under the misapprehension that the Scotland Bill, if passed, will give the Scottish Government the power to entirely redesign the welfare system to make it fair and just.

“This report details exactly why that isn’t the case: first off, it doesn’t actually give the Scottish Parliament power over the existing benefits system,

“Secondly, for benefits like Universal Credit and systems like the Work Programme, change will have to be negotiated with the UK Government, who will set huge administration costs upon any attempt to fundamentally alter these benefits.

“Where the Scottish Government can use these powers for good, it should do so.

“The report focuses on areas for improvement which, if implemented, would be serious anti-poverty measures.”