Discretionary Housing Payments (Limit on Total Expenditure) Revocation (Scotland) Order 2014 (SSI 2014/298)
Good morning, everyone, and welcome to the 17th meeting of the Welfare Reform Committee in 2014. I ask everyone to please ensure that mobile phones and other electronic devices are on silent or switched to aeroplane mode. Linda Fabiani has sent her apologies, as she is busy with work related to the Smith commission.
We have a slightly unusual meeting today, to take account of the fact that it is remembrance day and we are marking 100 years since the start of world war one. The Presiding Officer has invited everyone to the garden lobby to take part in a special wreath-laying ceremony and to observe two minutes’ silence. To allow the committee to participate, I will call a break at 10.40. After the ceremony, we will reconvene and move straight to our final agenda item.
Our first agenda item is to allow members to ask the Scottish Government questions on the Discretionary Housing Payments (Limit on Total Expenditure) Revocation (Scotland) Order 2014. I welcome the Deputy First Minister and Cabinet Secretary for Infrastructure, Investment and Cities, Nicola Sturgeon, who is accompanied by her official Owen Griffiths.
On 12 August, the committee considered the Scotland Act 1998 (Transfer of Functions to the Scottish Ministers etc) Order 2014 (SI 2014/2918), which enabled the Scottish ministers to determine the limit of local authority discretionary housing payment expenditure and which will apply from 2014-15 onwards. The order came into force on 5 November 2014, after approval by the Privy Council. Now that the power has been devolved, the Scottish Government has laid a second order, which is subject to the negative procedure and which revokes the enactments that imposed the cap on DHPs.
The Scottish Government gave the committee advance notice of the order before it was formally laid, to facilitate its quick progress through Parliament. That is the version of the order that was included in the papers in advance of today. The committee thanks the Deputy First Minister for extending us that consideration. We will report formally on the order in a couple of weeks, once we have the report from the Delegated Powers and Law Reform Committee. However, we thought that we had better take the opportunity to hear from the Deputy First Minister while we still can—so, over to you.
Thank you. You have ably covered the reason for our being here today and the background to the issue. I am grateful to the committee for giving me the opportunity to come along, and I will be happy to answer any questions that members have.
I thank the committee for its scrutiny of the section 63 order on 12 August, and I thank you, convener, and the committee for the part that you played in helping to secure the smooth passage of that order through its parliamentary stages. It is also appropriate for me to put on record my thanks to David Mundell at the Scotland Office and to our respective officials, who worked to a very challenging timescale to get that order through its parliamentary stages so that we could lay the policy order that we are here to talk about.
To recap briefly, the section 63 order was made by Her Majesty in Council on 5 November, and it came into effect on 6 November. It transferred the power in section 70(3)(a) of the Child Support, Pensions and Social Security Act 2000 to set the cap on the amount that local authorities may spend on discretionary housing payments in a financial year. On 6 November, under the powers newly transferred to the Scottish ministers, I made the Discretionary Housing Payments (Limit on Total Expenditure) Revocation (Scotland) Order 2014, which will come into effect on 9 December.
As the committee can see, it is a simple order. It will revoke two provisions that set the cap on local authority discretionary housing payment expenditure at two and a half times the total that the Department for Work and Pensions allocates to local authorities to spend on DHPs in any financial year. Those provisions are being revoked so that, in the future, there will be no limit on the amount that local authorities in Scotland can spend on DHPs. The committee will note that that is in line with the intention that I set out on 12 August, when I stated that the DHP cap would be removed in its entirety rather than simply being set at a higher level.
Local authorities have already acted to spend funds that are distributed by the Scottish Government to mitigate the bedroom tax. They have done so on the basis of assurances that the DWP, the Scottish Government and the Scotland Office offered back in June this year. I understand that DHPs are being made to those who need them, and I await the publication of the latest statistics on 25 November, which I anticipate will confirm that.
Given that local authorities have been mitigating in that way, individuals who are affected by the bedroom tax should not notice any difference after the order comes into effect. However, the order meets the commitment that was made to local authorities so that they can continue making payments up to the end of this financial year and in future years with confidence that they can spend what is needed.
As the committee will be aware, funding has been provided in the draft budget for next year—I understand that the committee will consider the draft budget next week—that will allow the bedroom tax to be mitigated next year. The order will simplify the distribution of funds to local authorities and ensure that payments to individuals need not be interrupted.
That is the background to and the effect of the order that we are discussing. I would welcome any views from the committee and, as I said, I am happy to answer any questions.
Thank you, Deputy First Minister.
To clarify, are there any on-going discussions with officials from the DWP on the order, or have the discussions concluded? Is there anything that remains to be finalised, or are we progressing on the basis that things will take their course?
The power has now transferred from the United Kingdom Government, or the DWP, to the Scottish Government. The policy order that we are discussing relates to what we need to do to remove the cap, which we have been given power to do. It is not dependent on on-going discussions with the DWP.
Just to be clear, one point that is still dependent on DWP decision making, although it is not related to the order, relates to the decision on the amount of money that the DWP will allocate to local authorities for discretionary housing payments next year. That is not yet finalised. Obviously, the money that we provide tops that up. We have to wait and see what the final decision on that is, but the order that we are considering is purely within the Scottish Government’s remit.
Obviously, at the other end of the process are the local authorities, and discussions must still be on-going with them. Are there any issues that it might be worth while our being aware of now in case we have to consider them at some point?
Again, the key issue is not related to the order; it is the allocation of funding for next year. A proposal has been prepared for consideration with the Convention of Scottish Local Authorities, because we seek to do these things by agreement. It has not yet been finally agreed, but it recommends the allocation. Broadly speaking, it recommends that a significant chunk of the money is allocated, with some held over so that we can see the actual pattern of local authority spend throughout the year and adjustments can be made at a later stage to take account of that. I am happy, by correspondence, to keep the committee updated on progress in those discussions.
That would be welcome. I open up the discussion to members.
There were fears that some local authorities might become reluctant to go on paying out if they reached their limit before the change took place, in spite of the assurances that were given. I take it from your opening statement that no local authority will have spent more than the limit before the new arrangements come into place.
Owen Griffiths might want to add some detail on that, but the letter of comfort that was issued with assurances from the Government, the DWP and the Scotland Office was intended to take account of that. It gave local authorities an assurance that, should they get into a position in which they were overspending, they would be able to do that without fear of overstepping their remit. Of course, once the order is in place, there will be no limit, so local authorities will be free to spend however much they want.
Yes, but I take it that no local authority has got to that position.
We expect that a number of authorities will have reached the cap level, but we will not know for sure until we get the statistics at the end of November. However, the projections that we made at the beginning of the year showed that a number were expected to reach the cap last month, this month and over the next couple of months. We understand that local authorities have continued to make discretionary housing payments over the cap. That is not especially unusual, as a similar situation applied last year when the DWP made changes to the DHP cap and assured local authorities that they could spend money in that year in anticipation of the legal change. The situation is the same as that.
The statistics are due out on 25 November. They will show whether the projections have been accurate, whether local authorities breached the cap and, if so, which ones did so.
As you will recall, the DWP made some changes last year to how the cap was calculated. Previously, it was calculated in such a way that local authorities could spend two and a half times the initial DWP allocation at the start of a financial year. That was changed last year, because authorities had themselves made some top-ups to make the spending two and a half times the total amount from the DWP. The same assurance process was put in place so that local authorities could do that if they breached the cap before that change was formally made.
The key point for us—I am sure that it is the key point for the committee with regard to the impact on individuals—is that, because of the letter of reassurance, no local authority has in effect put payments to individuals on hold because it was reaching or had reached a cap.
The situation with funding is now well understood. We have spoken to people with housing-related debt from a previous year. Are the funds that are made available through this measure designed to deal specifically with liabilities incurred in the current financial year? Can they be used against debts accrued in previous years?
The principal objective of the funds that the Scottish Government is making available is to mitigate the bedroom tax in the financial year to which the funds relate. As I think I said on the previous occasion on which I was in front of the committee on the issue, local authorities have discretion to spend more or to use underspends from previous years, if they so wish, to make payments to individuals relating to arrears accrued because of the bedroom tax. That would be a decision for local authorities to take.
The money that we are providing to local authorities is for the mitigation of the bedroom tax in the financial year to which the money relates. In the year ahead, it will be for 2015-16.
Sufficient flexibility would exist among individual local authorities in relation to other parts of the budget that goes into the discretionary housing fund to allow them to decide whether they wish to pursue that.
There is £50 million available between the DWP allocation—I caveat that immediately by repeating that we do not yet know what the final DWP allocation will be this year—and the £35 million top-up from the Scottish Government.
Our estimate of what the mitigation of the bedroom tax will cost is just under £44 million. There is other funding within that total for other uses. In a previous year, there was an underspend on the £20 million—as you may remember, the Scottish Government made £20 million available in 2013-14. The underspend on that was not clawed back by the Scottish Government; that money remained with local authorities.
There would be discretion in that regard. I am not saying that I expect local authorities to act in that way—it is entirely a matter for local authority discretion to decide whether they wish to make payments relating to any legacy arrears.
So flexibility exists and discretion lies with local authorities.
There is flexibility. We have made the point repeatedly that, ultimately, the responsibility—indeed, the right—to decide how discretionary housing payments are used lies with local authorities, although we are making it clear that the money that we are providing is for the mitigation of the bedroom tax.
I wish to clarify a couple of points. I understand that, under the section 63 order, the power to lift the cap is now permanently with the Scottish Government. However, the revocation order before us applies for one year. Is that right? Does it apply simply for the year 2014-15? If we wish to lift the cap on discretionary payments by local authorities next year, the Scottish Government will have to produce another such order.
No. The order that is before us will continue unless it is repealed.
So it is permanent. It is just that I read one version, which says that the order applies from the financial year, while another one says that it applies within the 2014-15 financial year. It will apply from now on, anyway.
Yes—it is a permanent order until such time as a Scottish Government chooses to repeal it.
I will look backwards, to follow up the point that Alex Johnstone raised. I see that you intend it to be entirely up to local authorities to make discretionary payments as they see fit, but I want to double check that point. Are any moneys from the DWP or the Scottish Government ring fenced for DHPs, or can they be used by a local authority to mitigate other things?
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In the allocation that the DWP makes—“ring fenced” is not the correct term for it, because it is still up to local authorities to make DHPs as they see fit—particular amounts are nominally allocated to things such as the bedroom tax and the benefit cap, for example. Legally, the responsibility for deciding how to spend DHP money lies with local authorities. However, the Government and I have made it clear to local authorities that the money that we provide to top up the DWP allocation for DHPs is for mitigation of the bedroom tax and that we expect everyone who is affected by the bedroom tax who applies for a DHP to get one. In other words, no other means test should be applied to such decisions.
The concern is that some people will not apply for a DHP. There are two elements, the first of which is helping those people. The second element is that you passed the £50 million to the local authorities and you have not clawed such funding back in previous years, so the expectation is that it will not be clawed back now. Can local authorities budget on the basis that they have £50 million to allocate through DHPs or other welfare mitigation schemes and that, if they do not draw it down, you will not ask for it back?
We want the money to be spent on helping people with the impact of welfare cuts. We are in as good a position as it is possible to get us into, given that we are dealing with a policy that is not of our making.
Your point that people still have to apply for DHPs is absolutely correct and is a point that I laboured in the statement that I made to Parliament when we got the agreement to transfer the power—I think that I answered a question from you on the issue. Local authorities, housing associations and all of us must encourage people who are affected by the bedroom tax to apply for that help.
I will not beat about the bush: this is the best position that we can be in given what we are dealing with, but it is second best. The best position would be not to have a bedroom tax in the first place, so that no one would have to apply for help. However, I cannot abolish the bedroom tax—if only I could—so I have to find the best way to mitigate its effect. Inevitably, the solution will be imperfect in some ways. One of the imperfections is that it relies on people applying for help. Unfortunately, that is the position that we are in.
You have made your position clear. I suppose that my point relates to the certainty that local authorities will have over control of the particular budget. If, for example, the cost of mitigating the bedroom tax comes to £44 million, but the Government is providing £50 million, local authorities will have £6 million extra to use to help residents in their area, through DHPs or other devices. I want to check that you have no intention of clawing that back.
Local authorities can have certainty about the £50 million. For understandable and legitimate reasons, the bedroom tax has captured much of the focus in the issues that people are getting into here, but there are other consequences of the welfare cuts that will lead to people applying for discretionary housing payments. Local authorities have certainty about the £50 million and are also free—although I accept that local authority finances are strapped, as are everybody’s—to top up that budget further if they so choose. That is the beauty of taking away the cap completely. If local authorities want to and can access the resource, they can spend even more than the £50 million that we are, through the DWP and the Scottish Government, making available.
You have partly answered the question that I want to ask. The money is extremely welcome, but the best solution would be to abolish the bedroom tax completely and utterly. Will the Scottish Government continue to lobby the Westminster Government for that abolition so that we do not have to tinker around at the edges, as we are doing with the transfer of powers to allow the DHP cap to be lifted?
Yes, I will. As I said to Ken Macintosh, we are getting ourselves into the best position that we can for the people affected, but it is not an ideal position. I will do two things. First, I will continue to argue strongly that the UK Government should repeal the bedroom tax. I do not hold out too much hope of that happening at this stage, but I will continue to make that case. Secondly, I will continue to argue—I hope that others will argue the same case—that power over housing benefit should be devolved to the Scottish Parliament as part of the process that is under way.
There is an issue that I was going to say is subsidiary, but it is more than that. There are parties involved in the Smith commission process other than the Scottish National Party that advocate the devolution of housing benefit. If that is to be meaningful, we need to stop or at least put on hold the process that is under way to abolish housing benefit by subsuming it into universal credit. If we are to have a meaningful discussion on devolving housing benefit, we need not only to argue for that devolution but to stop things that are happening in parallel that would make it impractical.
Good morning, Deputy First Minister. I have a brief question on the timing of the section 63 order. I understand that the UK Government agreed to devolve the power at the beginning of May. Am I right in saying that the timetable thereafter has been dictated by the processes involved, particularly as far as the Westminster end is concerned?
Yes, in short, although to be fair to the UK Government and the Scotland Office, it is reasonable to say that the transfer has happened as quickly as the processes allow. We can argue that the processes are too long and cumbersome, but they are the processes that are there.
The timetable that David Mundell and I set out in May has largely been adhered to. In fact, we built in a bit of contingency to allow the order to be passed in the Privy Council in December if we did not meet the November timescale, but we did meet it. There might be an argument for shortening some of the processes generally, but I am satisfied that we have stuck to the timetable that we thought we would need.
However, you are right that it has taken a long time. From May to November is not a short time for something that is relatively straightforward. That is why the letter of assurance became so important. We projected that local authorities would start to hit off the cap, so it was important that they had the comfort that they needed so that that did not start to interrupt payments to individuals.
We are about to hit our time limit for the session, but I want to clarify something that Ken Macintosh touched on in relation to local authorities. We know that money has been available through DHPs, but some local authorities have made representations to the committee that they had alternative options that they would have preferred for getting money to those who are being hit by the bedroom tax. Are there on-going discussions with those local authorities, or have they accepted that the DHP is the only way in which the money can be provided?
Since we issued the letter of comfort, no alternative ways of mitigating the bedroom tax have been raised with us by local authorities. The proposals that were mooted at an earlier stage were alternatives or contingencies if the power to lift the cap was not transferred. There is no doubt in my mind that the best option is to abolish the bedroom tax but, short of doing that, our approach is the best way to mitigate the bedroom tax. Local authorities have not put forward any alternatives to that but, if any local authorities want to discuss something along those lines with us, we will of course be happy to do that. As far as I am aware, local authorities are content that our approach is the correct way to mitigate the bedroom tax, given the confines of the policy that we work within.
Okay. As I said to the committee earlier, we will deal with agenda item 2, which is consideration of the order, at a future meeting.
Before I suspend the meeting for a short break to allow people to attend the remembrance day ceremony in the garden lobby, I thank you, Deputy First Minister, on the committee’s behalf for the way in which you have engaged with us and made yourself readily available when we needed to discuss issues and for the level of communication that you have had with us. I know that my clerks appreciate the support that they have had from your staff, under your leadership. On the committee’s behalf, I thank you for how you have engaged with us.
I thank the committee. You have been a pleasure to work with.
10:40 Meeting suspended.Previous
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