Draft Budget Scrutiny 2013-14
I reconvene the meeting by asking the cabinet secretary to make a brief opening statement, after which I will invite committee members to ask questions.
Thank you, convener. I am grateful for the opportunity to discuss the draft budget with the committee.
I think that the whole committee will agree that one of the defining measures of a civilised society is the support that it gives to its most vulnerable people. I am very clear that the welfare reforms that the UK Government is pursuing do not reflect our values—I know that they do not reflect the values of the Scottish Government, and I do not think that they reflect the values of the Scottish people. I am concerned about the repeated anxieties that I have heard from experts, professionals and worried individuals and families about the reforms’ impact.
You will have heard—we have discussed this before—that the estimate of the reduction in benefit spend in Scotland will be around £2.5 billion by 2015. It is fair to say that the cuts, alongside the changes to the way in which benefits will be delivered—some of which we touched on at the end of the previous evidence session—will have significant impacts on vulnerable people in Scotland. Just last week, we saw the report from the Children’s Society, Citizens Advice and Disability Rights UK that suggested that, across the UK, 450,000 disabled people could be worse off to the tune of up to £58 a week under the new system. That has massive implications.
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We will continue to make the case to the UK Government that it must do more to protect the vulnerable, and we will look to influence the DWP’s work to prepare people for the changes that are coming down the track, as I have heard concerns that it is not doing enough to educate and prepare people for them. Obviously, however, we must accept the reality that change is happening, and the Scottish Government needs to be prepared, as far as we can be, to do as much as we can to help to protect vulnerable people. We will do that, but I must be clear, as I have been with the committee before, that we are not in a position to mitigate every impact of the changes that the UK Government is pursuing. It is not possible to do that with a fixed budget. I dare say that people—including members of the committee—will look to push us to do more. I understand that, but there are limits to what we can reasonably do, as there are consequences that are simply beyond our ability to mitigate with our budget. I strongly believe that what is happening with welfare reform powerfully demonstrates why the Scottish Parliament rather than the UK Government should control welfare issues.
That said, we are doing as much as we can with our limited powers and resources. I have already discussed our decision to supplement funding for the new Scottish welfare fund, so I will not go into detail again on that. We are working with COSLA and local authorities to develop the arrangements for that, and we have previously decided with our partners in local government to mitigate the 10 per cent cut in local government council tax benefit funding for 2013-14. Both investments are significant ones by the Government in areas of devolved responsibility, but the size of the UK Government cuts and the scale of the changes that it is introducing mean that many challenges remain for individuals throughout Scotland.
The committee has raised important points in response to the introduction of the universal credit and the other UK welfare changes. We need to build consensus around the areas of greatest impact, continue to challenge the DWP, and continue to work together where we can in response. We need to consider the impact of welfare reform on specific sectors in which we have devolved responsibility. The impact on local government, housing and the national health service, for example, is potentially considerable, as it is on the third sector. I am very committed to working with those delivery partners across all those areas.
We are engaged with COSLA on a number of fronts, including on pilot projects to help councils to prepare for the introduction of the universal credit. We have also worked with COSLA and other stakeholders on a housing benefit reform action plan. From that, we have seen funding to the housing option hubs to develop and share good practice, funding for training for social landlords, and funding for a dedicated housing and welfare reform staff resource in COSLA.
We are doing everything that we can and are committed to continuing to do everything that we reasonably can, but there is a limit to our powers and resources, as members will appreciate. However, I take very seriously our obligations to our poorest and most vulnerable citizens, and we will continue to help and protect them as much as possible.
Thanks again, cabinet secretary.
I will open up the discussion by asking a very important general question. I invite you to give us specific examples so that we will have them on the record. In line with the Parliament’s equality duties, we must ensure that the budget is focused on the groups that are most disproportionately disadvantaged. Can you give us specific examples of how the budget will meet those duties, possibly in relation to disabled people or single-parent families?
The examples that I have spoken about this morning fall into that category. Although the £9.2 million for the social fund, which I have mentioned, does not yet appear discretely in the draft budget, it will by the time that we get to the end of the process. That will directly help the groups of people whom you are talking about—disabled people, lone parents, elderly people and people who suffer social and economic disadvantage. The funding that we have directed to local authorities for next year to mitigate the council tax benefit cut will similarly assist people in all those groups. How our housing money, which goes to local authorities for distribution to housing associations and so on, is spent through local housing strategies should focus on helping people in those groups. The money that we spend on third sector organisations should impact similarly. So, action is being taken across the whole budget as well as within the massive health budget, which I know very well from my previous responsibilities.
By definition, the health budget is helping people in disadvantaged groups, but there are specific elements of that budget—for example, the keep well funding—which are targeted specifically at people in areas of disadvantage. There are many examples of how our budget seeks to help those people and, in doing so, helps us to meet our obligations under the Equality Act 2010.
Thanks. It was useful to get that on the record to show that we have asked questions about equalities, which is an important issue that we should all keep a focus on.
Colleagues will now ask questions on other areas.
It came through strongly in evidence, mainly from third sector organisations, that there is concern about the impact of welfare reform changes generally on other policy areas such as housing and health, in which there may be an increased demand. Has there been any assessment of the impact of the budget on those areas?
I do not like sounding as though I am answering too many questions with, “We don’t have enough information,” but that is unfortunately true in this case. We are assessing and will continue to assess the impact as best we can, but right now I cannot tell you what the level of universal credit is going to be and cannot, therefore, accurately assess what the impact will be on different groups. However, with our partners, we will continue to assess that as effectively as we can as we go through the process.
From what I know now, I think that it is inevitable that there will be impacts on the health service. Given the proportion of the £2.5 billion of cuts that I spoke about that comes from cuts to disability benefits, it is inevitable that there will be an impact on the health service. The changes in housing benefit will also result in the stories that we can all tell from our constituencies. For example, a disabled man who is living in a two-bedroom housing association house came to my surgery a couple of weeks ago. Because he will now be deemed to be underoccupying that house, he will lose 14 per cent of his housing benefit come April next year. That is £60 a month that he or the housing association will have to find or he will lose his home.
There will be impacts on all the services that I have mentioned, and the third sector will see an increased demand for its services. We must assess those impacts as we get the information that allows us to do so, and we must work as effectively as we can with all those organisations to ensure that they are as prepared for dealing with those impacts as they can be.
We all appreciate that it is early days and that you cannot yet quantify the impact. However, there is a commitment to quantify that on a continuing basis in future years.
Yes.
Thank you.
It will come as no surprise to members that I share the view that, if we had control over all our resources, as a normal country would, we could be having a completely different discussion this morning about a normal budget rather than a devolved budget.
Picking up on Jamie Hepburn’s point about on-going assessment of the potential impacts of the reforms, I wonder what focus there could be specifically on the position in rural areas. In addition to all the problems that they share with people living in urban areas, people in rural areas face the added cost of transport, which has a further negative impact on top of the known negative impact of the welfare cuts. What work could be undertaken in that respect?
You make a good point. We will ensure that we try to capture the impacts on different parts of the country in the work that we do. I imagine that there will be significant differences in impact between rural areas and urban areas. I have no hard evidence for this, but I imagine that one of the big problems in urban areas, which involves the ability of housing providers to move people from houses that they will be deemed to be underoccupying into smaller houses, will be more acute in rural areas, where housing provision choices are more limited than they are in the cities. That difference is important, and I assure you that we will try to capture such differences to as great an extent as possible.
To take the housing benefit changes as an example—because we have more clarity about some of the changes that are coming down the road in that area—perhaps 95,000 households in the social housing sector will be affected by the underoccupancy rules and will lose between £27 and £65 a month. We estimate that that will represent a one-off cost to the Scottish economy of £87 million and will remove around £55 million a year thereafter.
Those are enormous impacts on individuals and on the economy. We need to keep updating our information on that and, as you rightly say, ensure that we take account of differences in different parts of the country.
I want to stay with the topic of housing, because folks are particularly worried about possible impacts in connection with that issue.
Having talked to a number of people and organisations, I know that the supply factor is worrying people hugely. With regard to the underoccupancy scenario, in which folks will lose money if they continue to stay in their present homes, I do not think that the Westminster Government recognises the housing supply issue. We in Scotland have had a drive in recent years to build much more family housing in the social or affordable sectors. Beyond that, we have created homes for life, so that people can stay in their property throughout their lives. Now, however, we are saying that that is all going to change and that in some cases people will have to go into a single-bedroom property.
Has any analysis been done by local authorities and shared with the cabinet secretary around the issue of one-bedroom properties? I know that experiences will be different across the country but, in my city, a lot of the one-bedroom properties are flatted accommodation, which is a problem because many of the folks who might have to move are people with disabilities, who might not be able to cope with flatted accommodation. Have local authorities done any work, through, for example, their regular housing surveys, to see exactly what the situation is?
On a national level, we have given some money to the Chartered Institute of Housing to deliver awareness-raising training for social landlords that covers issues such as modelling impacts to estimate potential loss of income, identifying people who are in the greatest need, and considering ways in which they can amend their allocations processes, adapt their services and so on.
From my constituency experiences—which others will share—I know that local landlords are working hard to understand the position in their own area and think through how they can respond. However, we quickly come up against the problem that you outline with regard to the shortage of one-bedroom properties in Scotland, which is, to some extent, the result of the deliberate policy to provide family accommodation and housing for life. Housing associations are not going to find it easy to move people into accommodation that they will not then be deemed to be underoccupying.
The individual in the constituency example that I cited a few moments ago would be happy to move to a smaller house, but the housing association does not have one to offer him. If he is offered one, it is likely to be outside the area that he lives in, which will take him away from the family who help to care for him because of his disabilities and will put a burden on statutory services elsewhere.
I know that the committee discussed the issue with DWP officials. I agree with Kevin Stewart: I do not think that there is a sufficiently developed understanding of the implications of the welfare reforms, whether that is deliberate or just a failure to understand. We are frequently told that people will change their behaviour—that they will take in a lodger and so on—but such ideas do not seem to take proper account of the impact on people’s budgets or lives. We are talking about people’s lives here. This is one of the areas of the welfare reforms that disturbs me the most. It could mean uprooting people from their way of life and their communities, which could have quite significant physical and mental impacts on them.
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Many of us represent constituencies that have quite a large private rented sector, particularly of one-bedroomed properties. Some of the organisations in my area, such as the Aberdeen Cyrenians, are saying that the changes will inevitably mean that private landlords will stop renting to folks who are on housing benefit because they will not be paid directly and budgets will be slashed. What are the private sector landlord organisations saying?
I will clarify that some of the changes that we are talking about apply only to the social rented sector, mainly because those changes have already applied to the private rented sector—I can provide the committee with more information. Not all the changes will have the same implications for the private rented sector as they will for the social rented sector.
You are right to make that point because, even if the changes impact only on the social rented sector, they might well have a knock-on effect on demand in the private rented sector. We need to ensure that the private rented sector is part of our discussions. However, the immediate impact of the changes that will take effect from next year will be on the social rented sector.
If the changes to the social rented sector mean that people have to downsize, for example, that will have an inevitable impact on the private rented sector.
That is what I mean. The changes will have a knock-on effect, even though they do not directly affect the private rented sector in all cases.
Are we having discussions with the private landlord associations about what is happening?
I can feed back to the committee on the interaction that we have had, but I take the point that it is important that they are part of the discussions.
I have a final question on downsizing. People rely on an additional bedroom for many reasons. Families split up and the mother or the father might have their kids for only two or three days a week and that contact may have to go if they do not have an extra bedroom. Some folk have physical disabilities and so require the extra space. You have already pointed out that folk who have mental health problems often require additional space. Are you aware of any analysis by the DWP of the possible impact of the proposed policy?
I am happy to check what the DWP is doing and feed that back to the committee.
There are exemptions to the underoccupancy rule for disabled people who require to have a carer living with them. Many disabled people will not be in that position, but they will still need the extra space for some form of care.
I think that you are right about the impact on families. It could have a devastating impact on single parents who have their children for part of the week.
I have been contacted by a woman who has two daughters who are both under 16, so they are deemed to have to share a room. One of the daughters has chronic conditions that keep her up half the night so she needs her own room, but the rule changes will be applied and the woman will lose benefit. I said earlier and I will say it again: many aspects of the welfare changes concern me. This one probably concerns me more than others because it is about not just a budgetary impact on people—important though that is—but potentially re-engineering the way that people live their lives. The impact of that is really quite distressing for very many people.
In your introductory remarks, cabinet secretary, you said that the Scottish Government cannot fully mitigate all the consequences of welfare reform, which is a very fair point, but the committee is interested in what you are doing to mitigate welfare reform. You talked today about the additional £9 million for the social fund’s successor arrangements as part of that mitigation. That does not appear in the draft budget but, as you said, it will at the end of the process. Another sum that I think does not appear in the draft budget is the welfare reform contingency fund that your colleague Mr Swinney said stands at £20 million.
Is the £9 million towards the Scottish welfare fund part of that £20 million? If it is, how is the remainder likely to be allocated? If it is not, how might the £20 million be allocated?
As you will recall, the contingency fund was used to mitigate the 10 per cent cut to council tax benefit. The money is now with local authorities for 2013 to allow them to do that.
We will recast our budget plans in order to find the head room to provide the £9.2 million.
So there is not any further contingency fund as such?
It does not give me any pleasure to say this, but every pound that we have to find in our budget to mitigate the impact of policy changes that are being decided in another budget is a pound that has to come from somewhere else. There is unfortunately no discrete pot of unallocated money called “fund for the mitigation of disastrous and wrong-headed policies of the UK Government”. We have to balance our budget with that and it would have to be a big, big fund to do that. We are trying to cast our budget as best we can to do that. I appreciate that you have accepted this point, but I cannot sit here and say that we can do that in every respect, because we have a fixed and declining budget.
We need to look at where we can do that and we will. We can continue to talk to the third sector about how we help it to deal with demand. I think that I said earlier that I have had discussions with Citizen’s Advice Scotland about how it might organise itself to deal with increased demand and how we might be able to help it with that. This is not a closed book; within the budgets we set for the health service, local government—although it is obviously in charge of its own budget—and other strands, we will continue to look at how we spend the budget as well as possible to mitigate the impacts. We do not have extra money to do that; it has to be taken from other parts of the budget.
I did accept that.
I know that you did.
You cannot mitigate all the changes, but I was simply pointing out that there was in fact a fund to mitigate the effects of “wrong-headed policies” and I wondered how that had been allocated. You have answered.
I hope that I have explained it.
The point that you make is true: a pound that you find to mitigate the impact of wrong-headed welfare reform has to come from somewhere else.
In the budget, £70 million has been allocated to freeze the council tax and the draft budget says that that
“will provide further protection to hard-pressed households across Scotland, many of whom have been affected by the economic downturn and UK welfare reform.”
Maximum council tax benefit, which you have also protected, is a passported benefit. Those in the welfare system will not pay council tax, so that statement is not really true, is it?
Yes, we have funded a council tax freeze to the tune of £70 million. I have no doubt that you will correct me if I am wrong, but I think that when you stood to be First Minister, you wanted to spend £80 million a year on freezing the council tax.
Yes—for two years.
Well, hey—okay.
I just do not accept that the answer to the policies of the UK Government that are about to penalise vulnerable people is to put other people’s council tax up, because there are also people who are not in the welfare system who are living on extremely constrained budgets. When previous Administrations were in power, the council tax went through the roof. I do not think that it is right to raise the council tax at this time. That used to be a point of agreement between us; I know that that is no longer the case, because you have changed your mind on the issue. However, that remains our position, and we will continue to defend it.
The council tax freeze was a point of agreement between us until the budget that we are discussing now. At the time that you are referring to, we suggested that the council tax freeze should be maintained and properly funded for two years, but it could not sustainably be done before. Where we differ is that I have never claimed that a council tax freeze helped those who are affected by UK welfare reform, because I know that those who are in the welfare system—because of council tax benefit—do not pay council tax. The council tax freeze may well benefit other households, but my point was that it is not part of the support for people who are affected by the UK welfare reforms, and the draft budget should not say that it is.
The point is that universal credit affects people who are in work and goes quite high up the income scale. Universal credit is not just an out-of-work benefit, so the point that you make is wrong in that respect, but I am happy to defend our position.
You say that you wanted a council tax freeze for only two years. I accept that that was your position. As of May this year, your party colleagues in Glasgow promised to freeze it for another five years. Regardless of whether you think that the council tax freeze is right, my position has been pretty consistent—I think that it is right, and I will continue to defend it, as I will continue to defend the policies that we will introduce to mitigate the worst impacts of welfare reform. On the latter, if not the former, I hope that we can build a bit of consensus around this table and in the wider Parliament.
I will move on to something that everyone admits to agreeing with. One of the things that I think that it is absolutely super that this Government has been aiming to do and doing is preventative spend. There has been a major shift in how public expenditure is looked at in this country. I tie that in with the work that is being done on the change fund, which is about trying to join up services so that people get maximum benefit from them.
All the measures that we are talking about today are reactive to things that are completely outwith the control of the Government. Are you concerned that, given that we have to ameliorate people’s circumstances, there is a danger that we might undo the good work that has been started on preventative spending and might not be able to expand it in the way that we wished to?
That is a very good question. I do have such a concern. What is happening with the welfare reforms makes it all the more important that we invest in preventative spend to prevent people from getting into a position in which they are reliant on the benefits that are being reduced. At the same time, it is getting harder to do that. I have just said that we will spend £9 million to supplement a fund to help people who will be penalised by the reforms. I would rather spend that £9 million in a much more preventative way.
Incidentally, I should say that part of the social fund—the community care grant—falls into the category of preventative spend, because it is about supporting people to live independently. However, crisis grants do not do that—they are highly reactive. The fact that welfare reform is increasing pressure on some of our statutory services makes it harder for us to be as successful as we would want to be on preventative spend. That is just an example of the disjoint in policy that occurs when one Government decides some things and another Government decides others, and the two policy directions clash. I do not think that that is the right way of conducting public policy.
I will return to the issue of council tax benefit. Is it not incorrect to say that all people in receipt of council tax benefit do not pay council tax? Would it not be more correct to say that some of those in receipt of council tax benefit pay no council tax, while some have to pay a portion of council tax? Could you not say that those people benefit from a council tax freeze?
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Yes, is the succinct answer. Absolutely. I have already answered Iain Gray’s points on council tax. It is wrong to say that a council tax freeze has no benefit at all for people in those categories. I have already said why I think that the council tax freeze is right and I will to continue to argue that case.
I am sure that you will.
Before I come to my final question, since we are on the subject, will you tell us how much Glasgow would have been penalised in the budget for the next five years had it not agreed to freeze council tax?
If Glasgow did not agree to freeze the council tax, it would not be Glasgow that would be penalised but the council tax payers of Glasgow—
But there was a financial penalty. The cabinet secretary for finance said—
It is not a financial penalty. It is an agreement with councils that if they freeze the council tax, they get funded to freeze the council tax. If they do not agree to freeze the council tax, they do not get funded for freezing the council tax. Why would we fund a local authority for doing something that it has not agreed to do? That might be the way in which the previous Administration operated but it is not the way in which this Administration operates. It is not a penalty; it is an agreement.
Incidentally, Glasgow Labour Party went into an election in May this year voluntarily agreeing to freeze the council tax for five years, in other words, beyond this session of Parliament. Maybe it was either assuming that the SNP would continue to be in government or making a conscious choice to do that. I suspect that some of those questions might be better directed to Glasgow Labour Party than to me. Thankfully, I do not speak for Glasgow Labour Party.
People do want us to ask about the impact of welfare reform. Kevin Stewart raised the issue of the pressure that will come on the private sector. However, there is a lot of concern about a possible increase in rent arrears for social landlords. Will you point us to where in the budget there is support for social landlords in order to address that situation, should it reach the level that people fear it might?
We will work with housing providers to try to avoid that situation arising. I cannot sit here and say that we can completely mitigate the situation and that we can fund housing associations to fill a gap caused by rent arrears that result from a policy instituted by the UK Government. However, I can say that we will continue to work with housing providers to minimise the risk of that happening and to deal with it to the extent that it does happen.
Has a budget stream been identified to support organisations such as Citizens Advice Scotland and those who provide support and advocacy for people who find themselves adversely affected? I am talking about not just advice from the Government or trying to develop capacity building within the sector, but financial support.
There is a miscellaneous welfare line in the budget of £3 million in the next two years, which will be used for some research supporting capacity response and mitigation work. As I said, we have had discussions with Citizens Advice Scotland about working with it to see what more we can do to support it to plan for the increased demand.
We already fund those organisations—not always directly but often through local authorities and other routes—for their work. We will be looking to see whether there are ways, within the constraints that I have spoken about, of supporting them better as they deal with increased demand.
There are no more questions, cabinet secretary, so I thank you again for giving up your time this morning to speak to us. In the past, you have sent us information supplementary to the discussions; you have already given a commitment this morning to do that on some specific areas. If anything else that might be beneficial to the committee occurs to you or your officials, it would be gratefully received.
Of course. I give you a commitment to do that.
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Meeting continued in private until 11:27.