Good morning and welcome to the Welfare Reform Committee’s 14th meeting in 2013. This is the first time a committee meeting has been held in the debating chamber since we moved to the Holyrood building. I have made the complaint to the Conveners Group and the parliamentary authorities, but I want to put on the record that I consider this venue to be completely unacceptable. The debating chamber is just not suitable for taking evidence from witnesses and does not provide a meeting format that is conducive to the type of discussion that our committee would normally have.
Thank you for the invitation to give evidence to the committee. I have been asked to make an opening statement of a few minutes to explain the first phase of the expert working group’s work, to outline the group’s findings and to give the remit of the second phase of the work. I chair that second phase, and was a member of the first phase, which was chaired by Darra Singh.
Jamie Hepburn wants to kick off the questions.
I welcome all the witnesses to this rather unusual setting for a committee meeting. Thank you for the work that you have done so far. It was interesting to read the report that you prepared for the Scottish Government.
I will ask our economist, Mike Brewer, to answer that question in slightly more detail. We looked at and tested the Government’s assumptions and tried to make it quite clear in our report which assumptions had been made in areas where detailed figures were not available, and the possibilities of variance as a result of those assumptions.
The bottom line is that we believe that the forecasts in the report represent a reasonable estimate of the costs, given the information that is currently available to the Scottish Government. I am used to thinking about welfare policy at GB or UK level and, in that work, talking to officials in London who have more data and models available than do officials in Edinburgh. If the officials here, or a future Scottish Government, were to have more data, the estimates could be refined but, as I said, we thought that the estimates were reasonable, given the available information.
In paragraph 3.2 of your report, you say that the forecasts
It is absolutely true. Given that the OBR’s UK forecasts reflect the UK Government’s current position, that is what we had to work with. It is entirely possible that in his 2014 budget next March the Chancellor of the Exchequer might announce further welfare policy changes that will affect the whole UK and, in turn, our forecasts. Similarly, we did not try to account for any options that an independent Scotland might take—we simply did not think that that would be right. The forecasts form the baseline and show what would happen if the UK Government did not announce any more policy changes and a future independent Scotland made no policy changes.
I also point out that 95 per cent of expenditure is demand led and therefore depends on the policies that are in place and the benefits claimants’ response to them. What Mike Brewer is saying is that our assumptions are based on the status quo, as we understand it, being continued until 2018.
I will eke that out. I presume that people’s response to whatever framework is in place will be the same in either context.
It will be: I will ask Mike Brewer about this point. We understand that the DWP has a reasonably sophisticated model that can be used to look at different ways benefits recipients might react to potential policies, but we did not have access to it. We wrote to the DWP on the matter and recommended that, whatever happens with independence, that kind of modelling be introduced to allow a Scottish Government to model future activity. Mike Brewer is much more familiar with the technical side of things than I am.
Just before Mr Brewer comes in, can you tell me whether you requested that model from the DWP, to inform your work?
If I remember correctly, we could not actually use the model ourselves, but we wrote to the DWP to ask whether it was available to the Scottish Government. To be frank, I cannot remember what response we received.
You did not request it for your own work.
I do not think that we requested it for our own modelling, because we simply did not have the resources to operate it.
I just wanted to clarify that point.
Did you want to come back in on that question, Mr Brewer?
I think that everything that I would have said has been said.
There has been some discussion about your suggestion, which the Scottish Government in its response has agreed is sensible, that in the event of a yes vote next year there be some form of transitional arrangement in which the delivery of benefits services would be shared.
Yes. On page 65 of the report, we set out the options appraisal process, the criteria we used and the seven options that we considered. We had a long discussion about the options; the issue was that although all are possible, the risk with some is higher and with others it is lower. I will ask Lynn Williams, who was strongly involved in the options appraisal, to comment, but our driving concern and the first issue that we had to address in the appraisal was that there would be certainty over whether benefits would be paid to individuals during the transition period. Given our awareness of vulnerability of income for claimants during a period of transition, we put quite a lot of emphasis in the beginning on that certainty.
When we looked at the transition period, we considered the range of options that are outlined in the report, including the transfer of powers to existing bodies, outsourcing to private providers and the use of the Northern Ireland social security agency. A number of things will be important in that transition period. First, as Martyn Evans has made clear, the clear priority is to ensure stability for the people who claim benefits. When people ask what will happen in the event of a yes vote, they are actually concerned about losing out financially, so the primary issue from our, and indeed from my, perspective was to ensure that that certainty exists and that people know what will happen and what they are entitled to during any transition period.
You might talk about having a twin-track approach for however long the transition period might last, but it seems to be fairly clear from your report that you think that period would be quite short. For example, you suggest tying it to the term of the current welfare reform programme, which would be the end of 2017, or on the anniversary of a potential independence day, with 2018 as a possibility. Why do you think such dates might be sensible?
As I recollect, I do not think that we pinned down what the date would be.
No—but you point to those dates as possibilities.
Part of my role in the group was to bring in the experience of the people who are experiencing the changes to the current system, and our concern is to ensure that the transition period is as short as it can be. However, we have to be aware of practicalities and what is feasible in that period. I believe that in its response to our report the Government suggested that the period be limited to two years, but we have to be practical and consider what is feasible and what can be negotiated. Nevertheless, we have to ensure at all times that the people who are claiming are secure and safe.
I have other questions, convener, but I am aware that I have taken up a lot of time.
Alex Johnstone has a supplementary question on this point.
I would like to you to expand a little on the transition issue. If we consider the nature of the system, we see that benefits are closely tied together. Although it might make sense on first observation to suggest a gradual change, would many benefits have to be transferred together? Would it be difficult to make the change gradual in some cases?
Two things are going on during this period. One is that the benefits system itself is changing, with the introduction of universal credit. Secondly, control over benefits is potentially changing from UK control to control by an independent Scottish Government. In order to make sense of how best that could work, we did an options appraisal. I agree that there are risks. The evidence from Northern Ireland suggests that it would be possible to run what would continue to be a UK system of benefits but with amelioration for a short transition period while you geared up, if you wanted to implement a completely different system. We recognise that, to have a completely different welfare system, time is needed to build the systems, train the staff, find the software and then deliver those systems.
You essentially looked into working-age benefits, but is there an opportunity to identify areas of the broader benefits system structure, including pensions, that would have to be transferred together, and areas that could be left until a different point? For instance, could we do working-age benefits at one point and then do pensions at a different point?
In principle, there is no reason why not, if they are separate. It would be difficult to separate out individual working-age benefits because they now have to be assessed as one.
But there will be complexities in the timing of specific benefits if we are to avoid problems.
Undoubtedly. The twin-tracking of significant change up to 2018 according to the current plans under universal credit adds a series of complexities, which you could well do without. We do not know how the change will roll out. The expectation is that it will be fully rolled out by 2018, but there are some indications that it might not be fully rolled out by then, in which case there would be another set of negotiations about how to take over an incomplete transition to universal credit and about what an incoming Scottish Government would like to do with welfare.
You have emphasised at length how integrated the systems are. Am I right in thinking that no alternative Scottish system has been drawn up and that you are not able to look at an alternative plan to the current UK system?
One of the functions of the expert group is to draw out what a Scottish welfare or social protection system would be. There is no blueprint that I have been made aware of. If there is one, I hope that it will come in through our call for evidence so that we can examine it. We have three months to consider alternative systems. I am not aware of one, but I ask Mike Brewer to comment.
I am not aware of any such system.
There have been a couple of high-profile commitments, including the abolition of the bedroom tax. We are discussing a transitional period between the current UK system and a Scottish system. The UK system is moving towards universal credit and various other changes. How would we manage to negotiate out of particular aspects of the benefits system, such as the bedroom tax?
That is a good point. We would go about doing that with some difficulty.
Basically, the Northern Ireland opt-out system is agreed by the UK Government. Is that right?
Yes. As far as I understand it, Northern Ireland has its own powers to operate a system. It chooses to use the UK software system, but it can create its own additions to and subtractions from the UK system.
I want to check that we have got something right. I understand that there are negotiations on the bedroom tax between the Northern Ireland Assembly Government and the UK Government, but there is no agreement yet, so you are talking about a hypothetical.
A lot of this is hypothetical. We are saying that a discussion is going on about the possibility of making variations in the UK system where aspects are controlled by a different jurisdiction. I think that the question was about that. Whether Northern Ireland is successful and what the distinctions are is a matter for the two Governments.
It is difficult to get to the heart of the matter. I think that Lynn Williams suggested that the priority must be stability and security of benefits payments to claimants. We want to guarantee that, but I am trying to work out how we could pick and choose which benefits can continue at an integrated UK level and which can be opted out of. It strikes me that, if it is a matter of negotiation, it is not simply a matter for Scotland, but one for both Governments, and there would be quite a deal of uncertainty.
We looked briefly at the Edinburgh agreement and the goodwill approach to which both sides have committed. We would say that the Edinburgh agreement kicks in in the event of a vote for independence. There would be a mutual agreement to be negotiated with good will. We are saying, “Look at who does what in the power play.”
I am glad that I am wearing my glasses today, otherwise I might have had some difficulties in seeing you guys.
I am not aware that we considered that. Nobody told us that there was a difficulty, but I cannot answer the question definitively.
I was at an event recently at which there were representatives from Northern Ireland. Agreements have been made about direct payments to tenants and bi-weekly and weekly payments. There has to be negotiation about how the bedroom tax works, and there would have to be what would be called an “admin fix” at the central level to deal with that. I understand that the Northern Ireland Assembly has taken the approach that it makes sense for it to find a way to ameliorate the bedroom tax because it would cost more to deal with its impact, but the negotiations are continuing.
Am I right to say that no one in Northern Ireland pays bedroom tax?
Yes.
That is my understanding, yes.
That situation is somewhat different in that welfare has been devolved to the Northern Ireland Assembly, but that is not the case here. I am sure that you will examine this, but it looks as if no difficulties about benefits payments to those in need in Northern Ireland sprang to your committee’s attention.
That is a fair point. We will examine how that has worked. Given that things have worked relatively well in Northern Ireland, it would make sense to see what can be learned from that experience if there is a transition period in Scotland.
I return to the point about the current situation, in which several UK-wide benefits are dealt with here in Scotland . You talked about good will, Mr Evans, and I imagine that it is fair to say that it would be in the interests of the UK Government to reach a deal on transition to ensure that benefits recipients south of the border continue to be paid as well, if their benefits are administered from Scotland.
Yes. I have worked in this area in Scotland for approximately 30 years and I was surprised by the degree of integration in the delivery of benefits to recipients outside Scotland from within Scotland. If I was surprised by that, others may well be surprised. The consequence is that there is a mutual interest—I agree with you—and good will between the two Governments to deal with any transition period in a sensible way because they both have an interest in protecting the interests of their vulnerable citizens in this matter.
Common sense, logic, gumption or whatever we want to call it should come into play to deal with the matter during the transition period.
I think that that would be our committee’s view. Given the Edinburgh agreement and the good will that is predicted in that agreement in the event of a vote for independence, common sense and good will should prevail.
Convener, I have some other questions, but I do not know whether you want me to move on to them now or for the committee to continue on this issue.
Annabelle Ewing has a supplementary question.
Thank you. I was going to raise several of the issues that my colleague Kevin Stewart has raised. I will not repeat them. However, one point on the political side of this debate has been missed. This is a matter of simple democracy. If Scotland votes yes, it will inter alia have voted for the Scottish Government to take control of the welfare system, and everything will flow from that vote. That includes the sensible points to the effect that it will be presumed that each Government, including the Westminster Government, will act in the interests of its respective citizens. Those two key issues would inform everything that would flow thereafter.
I do not think that that was a question.
You have talked a lot about good will and understanding during the transition process. I believe that those things would be there—there is not an issue with that—but I wonder how the practicalities would operate. To ensure continuity of payments, would there need to be some kind of arrangement involving the exchange of credit notes that would then be included in the higher-level negotiations about how the separation of the national finances would take place?
Lynn Williams will answer that. We did not look at the technical side of transition and payments at all, so if Lynn has a view, I will be interested to hear it.
We are doing a bit of crystal ball gazing. It is difficult to say. If my memory serves me correctly, the report begins to look at elements of a potential service level agreement and the areas that would need to be discussed in negotiations to get to the stage that Alex Johnstone mentioned. To talk about credit notes and so on is probably to look a bit too far into the future, but the report begins to outline what the negotiations might look like and what factors need to be considered—for example, how information technology systems operate, who would do what, what would continue to be integrated and, a factor that Ken Macintosh mentioned, what flexibility could be negotiated. We begin to pad that out to a certain extent in chapter 4.
As things stand, Scottish civil servants provide services to the rest of the UK that exceed the services that are provided by the rest of the UK to Scotland. In paragraph 4.74, we concede that it is possible that there could be financial payments for those services. The rest of the UK might pay the Scottish Government to continue administering pensions for English pensioners, and it is conceivable that the rest of the UK could charge the Scottish Government for administering some benefits for Scottish benefits recipients in the short run, while the untangling takes place. That is definitely an option.
We all hope that such things will never happen but, if we look at what is happening in the United States today, we see that Government can shut down. My concern is to ensure that we are never in a position where there is a question over who will pay the benefits and that, should we ever be in that position, a system is in place to allow the Treasury to go on paying, even in the event of doubt, knowing that the matter will be taken into account and dealt with at a higher level.
We believe that the arrangements would require negotiation, and there would have to be an agreement. We hope that both Governments would negotiate responsibly and sensibly with the interests of their citizens at heart, following the principles that Annabelle Ewing set out. If people have voted for a separate Government, there would still be a mutual need for all benefits recipients in the UK to receive their benefits, so we hope that both parties would negotiate sensibly.
We set out in paragraph 4.74 the principles and main provisions of any intergovernmental agreement. We have not set out the details and the transactions—the transitional payments, swapping payments and contracting that were covered in your question—but the principles are set out in several bullet points under that paragraph.
Perhaps we have more faith in politicians than you have in yourselves, but we hope that those discussions would be professional and would keep at their heart the fact that the people at the end of the system are vulnerable and rely on benefits to live from day to day. From our perspective, that is common sense.
Self-doubt is an important quality in every politician.
We identify in our report a weakness in the strategic grip on the issue. The strategic leadership is based in the DWP and we do not have that expertise in Scotland. We want to emphasise that. We have to build that capacity. Only a small number of people would be required, but if we are going to move to an independent welfare system, we will need to have in the civil service or an agency the understanding and breadth of policy that the system brigades into the headquarters in London. Another issue to be borne in mind in relation to the transition is the need to find those people and place them within Scotland.
I was just thinking, “You hold on to that thought, Lynn.”
As I said, I had never looked at the delivery of benefits, so that was a surprise to me. It makes things a lot more straightforward from the point of view of the interests that we are trying to apply in the context of transition of delivery, which we were asked to have a look at.
That is absolutely right. We must not forget about the HMRC benefits either, on which we had less information because HMRC was less able to break down how its UK operations are split between Scotland and the rest of the UK. However, in relation to the DWP benefits, you are absolutely right that Scotland does not rely on the rest of the UK for processing Scottish benefits claims.
That leads me neatly on to my next point—thank you, Mike.
Yes, as part of the remit of the second phase of the working group, which, as you rightly say, I am chairing, we have to look at costs. If we make a suggestion for more expenditure, we have to look at whether that might come from savings in the system or from the taxpayer. It is very early days, but we are acutely aware that it is a question of balance. We have not been told to create the perfect system, regardless of cost. We have been asked to say, within the current cost constraints—within the cost extrapolated through the first Parliament of an independent Scotland—what a welfare system would look like. We have been asked to think about where we would make savings if we were to make changes that would increase the costs, and what kind of taxation we would have.
We are not going to do a review of the personal tax system in the second phase although, if issues are raised about the tax system and how it relates to welfare delivery, we will discuss them. My opinion is that, when universal credit is finally implemented, the tax system will have much less of a role in delivering welfare than it used to. In effect, everything will be run by the DWP and there will not be much role for the tax system. The fact that the personal allowance keeps on rising is taking more and more welfare recipients out of the taxation rate, so the two systems are becoming more separate. However, the group will definitely look at the integration, or lack of it, between the welfare system and things such as social care, which you mentioned, or housing and other local government functions. There are definitely opportunities to discuss how to do things differently in an independent Scotland, and I am quite excited about those discussions.
I presume that that came across strongly to Lynn Williams, as a practitioner.
Absolutely. To go back to your original question, one thing that we probably need to look at is the balance of cash benefits versus types of services. Other models in Scandinavia and elsewhere have more of a balance towards services rather than cash benefits. We might begin to delve into that kind of area. From my practical perspective as a carer, and generally from the position of those who are at the receiving end of services, the issue is how we cut through the complexity not just of reserved benefits but devolved services. In the discussions that we have over the next year of the debate, we will begin to cut through to considering how we make people’s experience better so that they do not have to deal with masses of bureaucracy to get to the one service that holds a family together.
I was interested to see how strongly some ideas about how to assist employees came through from businesspeople in your business forum. I found that very hopeful.
When Linda Fabiani asked her question, I thought that she was going to raise the issue of tax credits, and when she did not, I thought that I had better do so. Have you looked at the role of tax credits in the system of support for those on working-age benefits? Have you considered how the impact of a transitional phase of tax credits might impact on the transfer of benefits?
Earlier, Martyn Evans noted that, under the current plans, universal credit should be fully implemented by 2018, and we used that assumption. In other words, we were looking ahead to a world where there are no tax credits. The transitional period that we were talking about will be the one in which universal credit will finally be rolled out, so a future independent Scotland would not have to worry about tax credits. Martyn Evans also said that, if universal credit roll-out is delayed, that will make the transition much more complicated.
It is a long timescale and it seems to be slipping a bit.
Absolutely. The Government announced an ambitious timescale for bringing in such a dramatic change. It is behind at the moment, but it continues to state that it is committed to having the system fully operational by 2017.
Before bringing other members back in, I have a couple of questions that are based on what you said earlier. You said that your report is scheduled to be completed by spring next year. Will it be a fully costed report?
I will find the correct form of words in the paper rather than try to remember offhand what we are tasked to do. [Interruption.] It says:
You have just specified working-age benefits, but there has been an announcement from the Scottish Government in relation to pensions. Do the commitments to the triple lock and a minimum pension have any implications? Have those considerations been factored in, given that you said that you were working on the OBR and DWP figures for the present time and that the projections were based on the status quo? Have those statements had any impact on your costings?
I will ask Mike Brewer to say something about the demographics, because we discussed that. However, we are quite clearly limited in our remit—rightly, in my view—to working-age benefits. That is what we addressed. We addressed some of the point about demographics, which came up in the Institute for Fiscal Studies paper over our period.
Frankly, I think that the long-run demographic position is not particularly relevant for the timescale that we were looking at. Even if we extended it into the early years of an independent Scottish Government, it still would not be relevant. Long-term demographic issues are challenging most European countries, and Scotland will be no different. The remit for the second group is to look at working-age welfare, so that is what we will do.
I think that we will pick up issues in the call for evidence. Particular transition periods are relevant, for example for young people transitioning from school to beyond and, from a carer’s perspective, for people transitioning towards pension age. I think that the group will have to look at such transitions. However, we have not yet got into the kind of detail that you are talking about, convener, in terms of the impact of the commitment that the Government has made. The second expert group has met only once and is in its very early stages. However, we will have to look at how the issues that have been referred to interlock and work together.
You also indicated that you have taken into account the fact that Scotland could administer its own welfare system because it currently administers its own, plus a bit for England. That being the case, have you factored in the fact that, if the welfare system in Scotland was administered only in Scotland, it would require a smaller workforce?
First, the workforce delivering benefits has been declining throughout the UK; it has declined by about 20 per cent in the past few years. That has been the trend. I will ask Mike Brewer to say a quick word about this issue but, when we looked at this, we found that the vast majority of the 11,000 staff who are involved in delivery are customer-facing staff. We imagine that they will carry on doing that work on benefits in Scotland. An independent Scottish Government would take on more responsibilities, so I do not envisage it needing fewer staff; in my view, it would need more. However, Mike Brewer is more expert on this area than I am.
I am not sure about that. However, I think that the convener is right that because Scotland is self-sufficient plus more in administering benefits, there would therefore be more staff than would be needed to administer Scottish benefits. First, though, the vast majority of DWP staff are in customer-facing roles, so we are talking about around 1,000 who are doing benefits processing. A small fraction of 1,000 could therefore be thought of as not being needed.
Have you taken into account economies of scale?
Yes, or, rather, the opposite—the fact that it might be less efficient to run a benefits system in a smaller country. We noted the possibility somewhere, and our estimate of the cost of welfare includes the cost of delivering benefits. However, that is a very small fraction of the total cost, and small changes will not affect our broad conclusions on the £18 billion to £19 billion of spending per year. I concede that it is an area that we know little about. The DWP is not used to thinking about how its functions are split between Scotland and the rest of the UK, so we have little evidence to go on.
In table 3.5, we set out in real terms the cost of delivering welfare benefits in Scotland over the period, and it will reduce marginally over the five-year period from £0.7 billion to £0.6 billion. Even over the period that we are looking at, there will be a reduction in expenditure on delivery.
I want to focus on the next stage. Linda Fabiani has asked some of the questions that I was thinking of asking, but there are still some useful questions to be asked.
We are planning to step up the engagement with people who are involved in the discussion. We have issued a call for evidence and we are about to approve our process of engagement, which will offer third party organisations some support to bring their members together and will involve structured focus groups in various parties that might be hard to reach. We will go out and, with the civil service, engage with a series of structured focus groups. As the chair of the working group, I will also invite a number of people to speak to me privately in groups about the matter. We are broadly challenging people such as academics and the policy community to engage in this process and tell us, within the structured call for evidence, what they would say.
We will get the broad outline of the work that you are planning.
As soon as we have approved it, we will send it to you.
We look forward to that.
I welcome what Mr Evans has said. I hope that the working group will also consider the evidence that the committee has gathered during our work to get an insight into the difficulties. Your remit says that you will look at
Absolutely. I have been impressed and moved by the testimony that has been given to your committee and we will definitely take it into account. We are taking steps to get our own testimony, as I said, and to challenge people not just to describe what is wrong with the system but to positively say how it could be improved, which is a far more difficult task.
We use the word “co-production” a lot. From my perspective as someone who is on the group to represent the views of people who are part of the system and who sometimes feel isolated, this could be the one opportunity that we have to bring people’s experience to creating what a future welfare state might look like or, in the event of a no vote, considering what else could be changed. We have to consider all the possibilities.
Yes.
In the Poverty Alliance evidence session, it was clear from those who are going through work capability assessments that they are struggling with the current system because of issues such as culture and communication. In policy terms, we struggle with the way in which systems operate and maybe marginalise people, and with the sanction issues.
Thank you. That is all very welcome.
To pick up on that point, one of our difficulties is in trying to separate out what might be described as a relatively well-shared agenda for welfare reform and the idea of using independence as a vehicle to implement that change, on which there is clearly a lot of disagreement.
We certainly did not work out the costs of the bedroom tax going in or out, although I do not think that it would be so difficult to work that out. In terms of principle—
Are you working out the cost in 2016 or 2018? What are you doing?
I will ask Mike Brewer to supplement my answer but, as far as I understand it, we looked at the benefits as they are applied under the current system using forecasts up to 2018, and at the Scottish proportion of those. We looked at benefits in the round. Although we looked at housing benefit, we did not look at specific parts of it up and down. Is that right, Mike?
Absolutely—that is right. We have not come up with an estimate of what it would cost the Scottish Government to reverse the bedroom tax. We produced a forecast for the cost of welfare in Scotland from now until 2016, and we will extend that to 2018. That will be done on the basis of stated UK Government policy, because that is the sensible baseline from which to start.
I would be interested to know whether you will look at that specifically in your future work. On a practical point, are you working on the assumption that the bedroom tax will be unpicked? Mr Brewer said that you are working on the assumption that universal credit will be in place by 2018. I assume that you are assuming that the bedroom tax will be in place by 2016. At this point, are you assuming that payments will be reintroduced for people who no longer get paid for spare rooms, or for people who have moved properties? Is that a practical—or theoretical—possibility? What will happen?
The first time round, we produced a forecast for the cost of welfare, which assumed that universal credit would be fully implemented and that the bedroom tax would be introduced throughout the UK. When we come to revise those forecasts, we will look at the stated policy positions of the UK Government and the Scottish Government. The Scottish Government’s stated position has changed since the group first started its work early in 2013 so, when we come to finalise our report in spring 2014, we will want to look at the Scottish Government’s stated policy at that point.
I appreciate what you are saying; it is difficult to get clarity from the Scottish Government on what its specific policies are.
I do not think that it is.
No, it is not.
If nobody else wants to interrupt, Ken Macintosh can ask his question.
I am just trying to work out what the practical assumptions are. The point is that the bedroom tax is being introduced right now, and one could argue that we could do something about it now. The difficulty is that I am not sure what we can do about it in 2016, never mind in 2018 following the two-year interim period. What can we do about it in 2016? Are you working on the assumption that all the changes that will have been made by 2016 will be reversed and unpicked, or on the assumption that the bedroom tax will be in place? Do you understand what I am saying?
I do—my colleagues will help me out on this one. Our assumption is that, in the event of a vote for independence, a Scottish Government would, from 2016, have the powers to do as it wished with the welfare system, so it could therefore change the system from that date.
Yes, absolutely.
Yes.
Perhaps I am being a bit pernickety here, but Mr Brewer specifically said that you are assuming that universal credit will be in place by 2018. Are you also assuming that the bedroom tax will be fully in place by 2016 or 2018?
Yes.
In terms of our costs, absolutely.
You are going to make an estimate of a new-look welfare system in Scotland. We know the Scottish Government’s view of the current bedroom tax—of course, we do not know what its view will be in 2016—but do you know its view of any of the other changes that are being introduced by the Tory Government? In other words, do you have any guidance on any specific policy changes that you will follow or, as it were, implement in your recommendations for a new welfare system?
We have no special insight into what the Scottish Government might or might not do. We have been asked as an independent group to make an independent assessment, consider evidence from third parties out there and come to our own view on the matter. If the Scottish Government wants to give us its view, we will take that into account. However, we have received no special view from the Scottish Government, and we will make our own assessment about what an independent welfare system for Scotland will look like on the basis of the evidence that is given to us.
I appreciate that honest response, but I hope that you can imagine our frustration on the matter. The difficulty is that you might be doing a lot of work, but it is principled and is not based on what is happening or what the Government is saying right now.
Picking up the points that you and Martyn Evans have made, I should say that some of the forecasts are based on what we know just now and the evidence that we will receive will almost certainly pick up on some of the issues that you have raised. We will have to look at responses in Scotland about how the discretionary housing payment system is operating at local authority level and I have no doubt that one key issue that will arise will be the bedroom tax. We have to understand how that benefits change, as part of a wider suite of benefits changes, is impacting on Scotland as we begin to look forward and seek our starting point for a new welfare system in Scotland. It is, of course, only one element. I would expect the evidence to begin to tell us how things are working and the impact of the bedroom tax in Scotland. The question is how we respond to that with regard to wider policy objectives. We have to take what is happening as a starting point; after all, it might mean that the starting point is worse than it might have been because of the impact of the welfare reform in Scotland and elsewhere.
Under our remit, we will attempt to identify the costs of any interim or more permanent change that might be made. If the change costs more, we will identify where that income might come from and, if it costs less, where that saving might be apportioned. There are estimates—I cannot remember what they are—for what the bedroom tax would cost. In the context of our forecast of a £17.6 billion spend on welfare in 2016, we will consider what proportion of that would be required to mitigate or ameliorate the bedroom tax. We will put that into the forecast and see what difference it would make. It will not make a huge percentage difference to the £17.6 billion spend, but it will make a difference, and an independent Scottish Government would have to find the revenue to pay for it.
But, using Lynn Williams’s words, your starting point is not opposition to the Tory welfare reforms now but 2016 or 2018 after most of those reforms have been implemented. That is the fundamental difference that I can see here.
Our starting point is reality—in other words, the current benefits system. Our work in the group’s first phase was to predict expenditure on the current benefits system. Having done so, we are taking the baseline of the reality of what people are currently receiving or what they expect to receive and seeing how things might be changed. That is not an unreasonable proposition; after all, we have only started our work on what the changes should be. The first phase of our work was to examine the systems under the current UK Government, which is responsible for welfare benefits, and to extrapolate that to 2017 or 2018. The next phase is to examine how we might change things and, if the evidence says to change them this or that way, what those changes would cost. We would then adjust the costs of welfare to claimants and the cost of delivery. I hope that by early 2014 you will have that work and we will then come back and be quizzed on it.
I have one more question, convener, but I am conscious that I have hogged the questioning again.
Carry on.
When you work out the cost of potential changes, will you look at affordability? In other words, will you not only consider the overall costs as a proportion of the UK Government’s budget but compare them with the working age population, income and so on in Scotland?
I will ask our economist Mike Brewer to deal with the issue of affordability.
Affordability is a broader political question that can be answered only by examining all the spending that a Government makes and all the tax revenues that it wants to collect. We were asked to be mindful of the costs and the economic and fiscal constraints. In other words, we are not going to say that a welfare system for Scotland will involve doubling expenditure on all welfare benefits, because that is simply unrealistic.
I must emphasise that we are not trying to duck the question. Instead, we are trying to say that our working group will attempt to present to the public sphere what an aspiration for an independent Scotland’s welfare system might look like and what it might cost. The question whether that is affordable is for the political parties and those who stand for election to answer in the run-up to an election. We are not trying to duck the question; we are simply saying that we are committed to costing these things properly.
To come back to the transitional phase that we discussed earlier, I think that in view of the responses to my earlier questions and the questions that Ken Macintosh asked a moment ago the transition period will run parallel to the run-through and completion of the welfare reform programme. Are you suggesting that the bulk of the welfare reform programme will have been completed before there is any chance of Scotland’s taking direct control of the welfare system?
We said in our first report that such an approach seemed sensible. In other words, it seemed advantageous to line up the transition period with the welfare reforms. After all, if that does not happen, an independent Scotland will inherit a situation in which universal credit is only partly implemented, with some recipients on it and others still on the legacy benefits. It seemed only sensible and cleaner to line both up but, as we have said, all options are on the table. For example, if it wanted to, an independent Scotland could stop the welfare reform process immediately the day it took office but, of course, there are risks attached to that option.
The premise on which we are all engaged today is that the Scottish Government and the Scottish Parliament do not have power over the welfare system under the Scotland Act 1998. That is the essence of our discussion, and to suggest otherwise is entirely misleading.
I will say just a few words, as Lynn Williams has led our work on that and will continue to do so in the future.
A paragraph in the white paper “Scotland’s Future: from the Referendum to Independence and a Written Constitution”, which came out in February, talks about some of the principles that could underpin a welfare state—the ideas of dignity and respect. As Martyn Evans said, it has come across strongly that people’s experiences in the current system are sometimes very negative. Some of the changes that people have asked for are not necessarily about additional money but about the language that is used.
I thank Martyn Evans and Lynn Williams for their responses. I note how refreshing our debate in Scotland is in comparison with the debate that is going on at Westminster, which—sadly—does not meet the aspirations of the key principles that we have discussed.
I will ask a couple of questions to tidy things up. Have you done any work on or has any of the evidence that you have taken raised the possibility that to have a different benefits system, even in transition, would require benefits recipients to go through a new assessment?
That came up in the initial call for evidence. There were strong views, particularly from disability charities, that that should not happen. We have to be mindful that people are assessed to death. If there is an independent system, perhaps there will be an opportunity to cut through some of the bureaucracy. People have assessments for the independent living fund, self-directed support and benefits, and there are work capability assessments. As integration moves in, there is an opportunity to cut through some of that and make the system easier for people. To have another assessment on top of those would defeat the purpose of what we are doing.
Martyn Evans mentioned—and we were already aware—that some members of the first expert group are on the phase 2 group, if that is what it is called. Have you looked back at the phase 1 report and do you stand by all its contents, or have you had to revisit with hindsight some of the conclusions that you arrived at in it?
In our homework for appearing before the committee, we were all careful to reread our report, and we read nothing that we would want to change. We might want to improve some of the language, but we would not say that we got any of our conclusions wrong or that we have more evidence now.
The timescales that we are working to are that the Scottish Government’s white paper is due in the autumn—that is a long period in which it could arrive—and your report could arrive in the spring, which is also a lengthy period. The one thing that we know is that they will not come at the same time. If the independence prospectus that the Scottish Government says that we will get in the autumn of this year does not contain all your costed analysis for the welfare element, will there not be a welfare-shaped hole in the middle of the white paper?
You are leading us on to difficult ground. As far as we are concerned, we have had a commitment from the Scottish Government, which has said that our first phase report will be fully integrated into its white paper, because that is about the costings for the current system and for the foreseeable future of our welfare system up to 2018. That is the envelope in which the Government is discussing the cost of welfare.
I agree with all that. Before I moved to the University of Essex, I worked at the Institute for Fiscal Studies, where I ran the team that is responsible for estimating the cost and impact of tax and benefits changes. I notice that that form of rigorous scrutiny from an outside body has not yet moved to Edinburgh so, when the Scottish National Party and other political parties say what they want to do for welfare in Scotland, it is not yet the case that a group comes out and says what the costs, benefits and impacts would be. I sense that that is missing and I hope that the IFS or a body like it will move into that area fairly soon, so that, even if the Government were not to publish full costs and benefits in a white paper, an outside body might do so.
You have essentially answered my question, so thank you for that.
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