Thank you, convener. I would like to think that this is an improvement on the last time that I was before a committee, when I could barely speak at all.
It is a pleasure to be here to discuss the pre-budget scrutiny. The social security and older people budget allocation for 2020-21 will continue to support this Government’s commitment to creating a fairer Scotland. It will allow work on the transfer of social security powers under the Scotland Act 2016 to continue at pace and support the delivery of many more benefits.
By the end of 2019, Social Security Scotland will have introduced seven payments, which will put more money into the pockets of low-income families. From April 2020, we will take on full responsibility for the more complex of the devolved benefits. Those benefits present us with the greatest opportunity to do things differently, meet the needs of people who are being failed by the current system and ensure that we have a service that treats everyone who needs it with dignity, fairness and respect.
09:45
We will also introduce our transformative new Scottish child payments, with the first payments being made to families with children under six by Christmas next year, well ahead of our original schedule. Up to 170,000 children will be eligible for targeted direct financial support to low-income parents. That brand new benefit to tackle child poverty will be delivered by Social Security Scotland, which will pay, on a four-weekly basis, £10 a week per child to families in receipt of qualifying benefits. The payment will be fully rolled out to eligible children under 16 by the end of 2022. Once fully rolled out, the payment will benefit up to 410,000 children and will reduce child poverty by 3 percentage points, lifting 30,000 children out of poverty—a significant investment in our children and families, and continuing our commitment to give children the best start in life. We will need to make space in our timetable of delivery to accommodate the Scottish child payment. As a result, delivery of carers allowance, disability assistance for older people and the completion of case transfer has been slightly revised. That timetable was confirmed in my 4 October letter to the committee.
While the introduction of the payment is good news for parents and shows how we can use our new powers, it is a different scenario for those in receipt of reserved benefits. The UK Government continues to refuse to listen to the overwhelming evidence that its roll-out of universal credit is causing significant hardship. It refuses to pause the roll-out and fix both policy and delivery. We had previously estimated that UK Government welfare cuts since 2010 could reduce social security spending in Scotland by £3.7 billion a year by 2021. Subsequent changes by the UK Government have done little to reduce the scale of those cuts. The United Nations special rapporteur on poverty and human rights, Professor Philip Alston, recently described the changes as window dressing to prevent political fallout. The changes do not address the benefits freeze, the two-child cap or the extended wait for a first payment under universal credit.
In 2018-19, the Scottish Government invested £1.4 billion to support low-income households. This year, we will spend at least £100 million to mitigate the worst effects of the UK Government’s welfare cuts. That is money that we should have been investing elsewhere to help pull people out of poverty; instead, we will use it to protect people from the impacts of another Government’s welfare policies—a position that the UN rapporteur has described as outrageous.
Social Security Scotland has established its head office in Dundee and has an operational hub in Glasgow. When fully operational, it will employ at least 1,900 people, with at least 750 in each site and a further 400 people spread across the country to provide local service delivery. It will administer close to £4.2 billion in payments per annum, yet the powers that we have been given cover only 16 per cent of total social security spending. We will receive funding from the UK Government under the terms of the fiscal framework for the benefits being devolved to Scotland, which in essence forecasts what the UK Government would have spent under its policies on the benefits that we are responsible for. However, managing demand-led spend on that scale within a balanced budget presents significant new challenges for financial management. My officials are working closely with others across the Scottish Government and Her Majesty’s Treasury to manage those risks. I must stress that the cost of any policy changes or an increase in benefit take-up in Scotland must be met from the Scottish block grant. The budget will also make clear next year the difference between the Office for Budget Responsibility forecast used to determine the block grant adjustment and the Scottish Fiscal Commission forecast used to determine expenditure in Scotland. That will include, for example, the Scottish child payment.
On implementation costs, we have always been clear that the cost estimate set out in the financial memorandum was an initial estimate based on the best information available at the time and that those estimates would change materially as policy decisions moved on. In her evidence to the Public Audit and Post-legislative Scrutiny Committee, the Auditor General for Scotland said:
“It is inevitable that the initial estimate will change, particularly in an area that is as complex and fluid as social security.”—[Official Report, Public Audit and Post-legislative Scrutiny Committee, 16 May 2019; c 13.]
Audit Scotland’s May 2019 report recommended finalising revisions to the programme-level business case, which we are doing. The refreshed business case will serve as the overarching strategy document and a baseline for the requirements of the programme, defining a list of key strategic assumptions and how dependencies will be managed between all programme stakeholders. That will be published around the time of the Scottish budget, and I will be happy to update the committee then on the revised implementation costs.
The Social Security (Scotland) Act 2018 and our charter recognise that social security is a human right and a public service. That informs all the work that we do. People should be able to access what they are entitled to without any fear or stigma. Making sure that everyone gets financial support is a basic step in putting dignity, fairness and respect at the heart of social security in Scotland. That is why we will continue to ensure our systems and processes are simple and inclusive, seek to remove barriers, and continue to promote the take-up of our benefits.
In conclusion, the social security and older people portfolio budget for 2020-21 reaffirms this Government’s commitment to creating a fairer Scotland and tackling poverty and inequality, which is a central aim of our programme for government. I am happy to take questions.