 Take care everyone. Welcome to everyone's 26th meeting of the Social Security Committee. I remind everyone to turn off their phones, and other news devices are silent,s as they make it difficult to disrupt the meeting. No apologies have been received for today's meeting. I will turn to agenda item 1, which is the draft budget scrutiny for 2018-19. Welcome to the committee this morning, Jeane Freeman, Minister for Social Security, James Wallace, Head of Finance, Graham Lockhart, Head of Platforms and Technologies, and Merlin Kemp, Team Leader, Housing Benefit Reform and Affordability Scottish Government. While the budget briefing materials provided to the committee have covered areas that members have expressed their interests, such as council tax reduction and employability programmes, they fall outside the remit of the Cabinet Secretary for Community, Social Security and Equalities, so the minister may not be able to respond fully to those questions, so if they come up, as they have been provided in the papers. I would like to invite the minister to give her opening statement. Thank you very much, convener, and good morning to everybody. Could I just take a couple of minutes to start to put on record the committee my thanks to Sandra White, a previous convener for all the work that she has done on social security in particular, and can I also take this opportunity to welcome you, Ms Adamson, to your new role? I look forward to working with you. On the specifics of why we are here this morning, following last week's publication of the draft budget, members will be aware of the community's social security and equality portfolio's focus on our overarching aims to create a fairer Scotland to support inclusive growth, tackle inequalities, promote community empowerment and the participation of people in all aspects of Scottish life. Through the budget, we, as a Government, have continued to prioritise funding to support our major expansion of affordable housing to reach our 50,000 affordable homes target in this parliamentary term, tackle fuel poverty and support our targets on climate change, regenerate strength and empower our communities, support the third sector and develop social enterprise, promote equality, continue our efforts to tackle poverty and inequality and continue to mitigate the worst impacts of the UK Government's welfare cuts and, of course, continue our work on policy and operational plans for the delivery of the 11 devolved benefits with our new social security powers. Key points for the portfolio in the draft budget include the introduction of a tackling child poverty fund worth £50 million, an investment of £20 million in the empowering communities fund to tackle poverty and inequality, and a continued priority of community engagement to advance equality within Scotland. In the social security budget, we will make funding transfers to local authorities, supporting the continuation of the Scottish welfare fund, a proven necessary provision to support those who find themselves in emergency financial situations, and we are continuing to fully fund discretionary housing payments. That is to enable us to mitigate losses affecting over 70,000 households as a result of the bedroom tax implemented by the UK Government. Members will be aware that the Scottish Fiscal Commission has prepared forecasts to accompany the budget. We will see that, in relation to DHPs, we have utilised the FCSFC forecast in full, allocating £62 million, an increase of £12 million, that is 24 per cent, since 2016-17. Similarly, for the Scottish welfare fund, we have utilised a forecast of £33 million, maintaining the value of the fund. The Fiscal Commission has forecast that, in 2018-19, an additional £1 million may be required for the mitigation of the UK Government's reduction in assistance for housing for 18 to 21-year-olds. We will monitor whether that requirement materialises and will make additional funding available to the Scottish welfare fund if it is required. As in 2017-18, the social security programme will continue in 2018-19 to draw on a level 4 budget of £75 million held within the finance and constitution portfolio for Scotland Act 2016 implementation. The approach allows us to continue to adapt quickly through implementation to effectively meet evolving policy circumstances and expectations. We have not made budget available for payment of benefits in advance of parliamentary scrutiny of the Social Security Scotland Bill being complete. As the executive competence for the benefits to be devolved transfers to the Scottish Government, we will make available budget as required. Executive competence transfers in future will trigger block grant adjustments, providing the funding to make budget available. Those transfers and associated forecast expenditure will then need to be reflected in the Scottish budget. The timing of the addition to the budget will depend on when the benefit is devolved. For example, if a benefit were devolved mid-year, we would expect a block grant adjustment and the associated budget to be reflected through the Scottish budget. However, if a benefit were devolved through the Scottish Government in-year budget revision process, the addition would then be scrutinised by the finance committee and approved by Parliament. Therefore, it is not possible to allocate funding for specific benefits until the social security bill is passed. I can confirm, as the finance secretary said, that additional funding will be allocated in year to support the landmark step of increasing the carers allowance in the financial year 18-19. The increase will be delivered by the summer of 2018 and backdated to April of that year. Alongside the bill, this past year has seen other positive developments in the social security programme, including our recruitment of 2,400 volunteers to the experience panels, the decision on our agency location with its headquarters in Dundee and a major centre in Glasgow, together with locally-based social security staff across Scotland, the awarding of a two-year contract to IBM UK to build the first phase of the new social security IT system. To deliver the initial set of benefits that we have announced and, of course, stage 1 debate on Tuesday for which I again want to record my thanks to this committee. All of that is informed by our continuous engagement with key stakeholders, our expert advisory group, our experience panels and with members and committees in this Parliament. As part of our transparent approach, we recently sent this committee a copy of the detail that we provided to the Public Audit and Post Legislative Scrutiny Committee, breaking down the £190 million high-level estimate cost of IT implementation that is contained in the financial memorandum attached to the social security bill. I hope that this breakdown has assisted members to see how our initial estimate has been built up for IT, and I have committed to provide further regular updates on IT implementation, which will allow me to share with the committee how actual implementation costs compare with these initial estimates over time. As we continue our work, we do, of course, need to remember the important part. Our relationship with the Department for Work and Pensions will play throughout the devolution process. Our shared and effective work is critical to delivery. The relationship is reinforced by our forums for resolution, providing an opportunity to discuss any issues that may arise at either the Joint Ministerial Working Group on Welfare, which deals with policy-related issues, or the Joint Exchequer Committee, which deals with financial issues. The committee, of course, will continue to have oversight of these forums, and my officials and I will make sure that members are kept abreast of developments as we make progress. My thanks to you, convener, for the opportunity to see these few opening remarks, and I'm more than happy to now take questions, as assisted by my officials. The new social security system is a large undertaking. It's setting up a new agency, new IT systems. There's partnership working, as you've already said, with the DWP and councils that are going to be key to this. At this stage, can I just ask how well that's progressing, as, obviously, delays will incur costs? Just to get a general idea of things going well and to schedule at the moment. We have, in the social security directorate and I review monthly, a regular risks update against the overall plan for implementation. As I know members in this committee appreciate, there are a number of parallel work streams all working, led by the incremental approach to taking responsibility for the individual benefits. We've announced the first three that we will assume responsibility for following agreement by Parliament on the bill. Those incremental taking of responsibility is paralleled by an incremental build in terms of the agency, the infrastructure that sits beneath that agency to support it, which includes, of course, IT, but not exclusively IT. Therefore, the recruitment of staff and the work that is going on now completed initially with local authorities and with health to look at the different models that we might adopt around the country for our local social security staff. At the moment, we continue to be on track to meet our commitment to take responsibility for all the benefits in the lifetime of this Parliament. There are various phases in that approach, but as I said, there is a regular check by me every month with the senior directorate team, which covers all those areas. There is also internally in the civil service, a programme board and, of course, our regular meetings at the joint ministerial group. I would like to ask about the fiscal framework. It would be helpful if you could explain the interaction between the fiscal framework and the social security system and whether you believe that it is working. More specifically, how will in-year budget adjustments take place if governed by the fiscal framework? Is it flexible enough to ensure that we can deliver the benefits that we want to and meet policy objectives? If you do not mind, I will be assisted by Mr Wallace in the detailed workings of the fiscal framework and in-year budget adjustments. One of the important things for me to say in terms of the fiscal framework is that we continue as a Government to believe that it is a fair agreement that will work for us and for the UK Government in terms of the devolution of the benefits. Of course, the amounts of money agreed in terms of the contribution that the UK Government will make on implementation and delivery costs is a share of the costs. It is not expected to be, and part of the agreement is that it is a share. We understand very well what those numbers are and how they sit against our estimate of what the overall cost will be for implementation and continued delivery. We remain content with the fiscal framework and its adequacy to allow us to meet the responsibilities that we currently have and will assume. If I may, I pass to Mr Wallace to talk you through the in-year adjustments and how those work. I am happy to tell you about that. The fiscal framework is not just for social security, so it covers a range of powers. In some areas, the mechanisms that are described in the framework are new. We have not used them before, so we are breaking new ground in some areas. It seems to be a fairly flexible arrangement at the moment. We speak regularly with our colleagues in Her Majesty's Treasury to discuss exactly how the interactions between the UK Government and the UK Government are going to work in terms of funding transfers. The committee will probably be aware that the block grant adjustment is initially based on the year prior to devolution, so year 0, as it were, where the OBR will make a forecast of benefit expenditure. The initial block grant adjustment for the Scottish Government will be calculated based on that year 0 figure. The year 0 figure will be reconciled to DWP outturn in year 1 and in year 0. A reconciling adjustment will be made to our block grant. The block grant adjustment will be indexed every year, as happens at the moment to block grant adjustment. We look to comparable areas of UK Government expenditure to decide what consequentials are required, positive or negative. There is then the opportunity to have in-year adjustments to that block grant. For me, the area that is slightly different from how other block grant adjustments may work—for example, for tax. Taxes always begin generally on 1 April in any year, so we are in good time for the draft budget statement to make a block grant adjustment with social security devolution. That may not always be the case. Unless a benefit is devolved on 1 April, we will probably not be in time to agree a block grant adjustment in time for the draft budget statement, which will require an in-year adjustment to the block grant. It is fair to say that that was not what was envisaged when the fiscal framework was agreed. Because it is new ground, no one quite understood the slightly differing mechanics that would be required to allow an in-year adjustment to a block grant to happen. As I said, that is something that we are discussing with Treasury about how we will actually make that work in practice. Because it is new ground and because we are only in the first wave, we have never done it before, so the groundwork that we lay this year with Treasury will allow this process to be very smooth in future years. That is not to say that it is not smooth at the moment. We are working very well with Treasury to apply the mechanics of the fiscal framework, but it is a timing issue. The actual mechanics of the block grant happen every single year for the Scottish Government. The reconciliations happen every single year. The key point for me is that there is some flexibility through the in-year adjustments, which is really quite helpful from a financial management perspective, particularly when it is not an income-based adjustment that you are dealing with, that it is an expenditure-based adjustment. If the year zero forecast proves to be below, the Scottish Government financial management arrangements will be supported by those in-year adjustments to make sure that there are top-ups to the block grant to meet it in-year expenditure, which minimises some of the risk around cash management to the Scottish Government. I know that committee members are very familiar from previous discussions about the regular, sometimes twice daily, if not more frequent contact, between social security officials working in terms of our programme and DWP officials. It is worth saying that there is comparable contact on a regular basis between our finance officials and those in Treasury and elsewhere. Across Government, as Mr Wallace said, it is not simply about social security in terms of operationalising that fiscal framework. The other point, just to make in case members are, in any sense, a little bit anxious, is that the driver for delivery—in other words, the driver for us on when we take responsibility for the individual benefits—is based entirely on our readiness to assume that responsibility in terms of the agency's readiness, the IT system and so on. The driver is not how close it is to the start of a financial year in order to help with that, although we would not want to cause unnecessary difficulties to our finance colleagues, but the driver always has to be that we are ready, according to the plan and with everything else in place, to assume the delivery of benefit X or Y, making sure that people who are in receipt of it will continue to receive the money that they are entitled to. That is helpful. Here, obviously, the two agencies are working well together, but is there potential for conflict? It is very complex. It is new, as we mentioned. What are the risks around that? I can just mention one of the points. As you would understand, it is a wee while since the negotiations happened and the agreement was reached on the fiscal framework. Inevitably across the civil service, both here in Scotland and at Whitehall, individuals move on and move on to other posts, become promoted or whatever. Sometimes, there have been a couple of occasions where we have had to go back and help people to understand what the thinking was and the actual agreement was around particular aspects of the fiscal framework. Members will recall a previous discussion here on a policy matter around the application of the benefit cap. Some of that is not maliciously intended to create a difficulty. It is simply that not everyone sitting around the table and in those discussions was there at the time when the agreement was reached and therefore read it on the page and don't necessarily interpret it the way it was intended at the point when it was first reached. Mr Wallace will clearly be able to add any detail to that. That can apply in terms of the overall fiscal framework and how we work with those financial arrangements and how you categorise different areas of cost in terms of how they are then seen by Treasury or whoever. I agree with what the minister said. There can be quirks and there are new issues in here. From my perspective, working within the programme and dealing with Treasury and the DWP, relations are good. It is in everyone's interest to make devolution work. That is a major factor in the discussions that we have. We may have points of disagreement, we may have different viewpoints but we work through those professionally. The fact that everyone wants to see that work adds a real driver behind it to make sure that we do come to agreements in sensible, pragmatic solutions where the fiscal framework, for example, throws up quirks that we might not have expected. That was very helpfully set out. It is just a quick question in relation to part of our brief. The Social Security Committee costs are no longer included in this portfolio. Instead, they are included in the Scotland Act 2016 non-taxed implementation in the financial constitution portfolio. Is the reason for that what you have just described? It is because it is a question of the fiscal framework. The reason that I wanted to get that clarified is that it is quite important going forward. I would be certainly wanting assurances from you that, in future years, the committee can question to understand the finances around the fiscal framework as it will affect. It is not dissimilar to last year. As Mr Wallace said, the fiscal framework covers more than social security. It covers the powers that were devolved as a consequence of the Smith commission and so on. That all sits at the moment within that other portfolio. We draw down from that as I said. We draw down in terms of implementation as we go. However, from next year it is our intention that, once the Social Security Bill is approved by the Parliament in whatever form it then approves it, we will begin to deliver those first three benefits that we announced not so long ago. The financial year that we are looking at in 2018-19 is the carers supplement. That is when the transfer is made over. We need the legislative basis to make that payment. We need DWP to transfer the competence for carers allowance to us so that we can pay the supplement. Then we will begin to see in the social security lines of the draft budget those amounts of money. As Mr Mackay said, he will make that available in year. That then becomes an in-year budget adjustment to the Scottish Government's budget, scrutinised by the Finance Committee and approved by the Parliament. If we take responsibility for each of the benefits, then you will continue to see that happen. I just wanted to ask a few questions around the Scottish welfare fund. Firstly, it was around the value of the fund. The SPICE figures indicate that the proposed budget, in comparison to the budget in 2013-14, represents a real terms cut of £2.5 million. From last year to this year's proposed budget, it represents a real terms cut of £600,000. I just wanted to ask whether there was any consideration to maintaining the funding real terms against the backdrop of the implementation of universal credit and all the difficulties that the committee has heard around that. I think that we have done overall is look at how demands have been made on that fund and anticipated in terms of both its use for crisis grants and for community support how we can best maintain that. At the moment, the overall agreement that we have reached is what is in the budget. We have always said in terms of the Scottish welfare fund that we continue to review with local government the demands that are placed on it and maintain a position of being able, if we can and if the need is there, of returning to see whether we can apply any additional funds as the year progresses. I am looking at it and trying to predict the demand on that budget. Was there any particular attention paid to those areas where universal credit has already been rolled out and the demands on the welfare fund in those particular areas to try to project forward as it rolls out across the country? The Scottish welfare fund is, as I understand it, allocated in terms of the COSLA formula. You know as well as I do, Mr Griffin, that both citizens advice and local authorities have produced important evidence about the impact of the roll-out of universal credit on peaks and demand. Nonetheless, it is allocated on the basis of a formula agreed between the Scottish Government and COSLA, which applies across the board. We continue to have discussions with COSLA about whether that remains an adequate basis on allocating the fund or whether there is the option of looking at a different approach that responds to where there are peaks in the welfare fund. As a consequence, there are some of those matters, such as the roll-out of universal credit. However, the overall fund or the overall formula for allocation applies across Scottish Government allocation to local government across a number of areas. Therefore, making a difference for one aspect of it carries implications that COSLA has to have a real good think about before it would consider moving in that direction. However, we continue to have those conversations with them about whether or not the formula is adequate to the different demands placed on different local authorities as a consequence of those circumstances. You mentioned the potential increase demand on the fund because of the Government's intervention on housing benefit for 18 to 21-year-olds. There is also a new demand being put on the fund with a new commitment to a family reunion crisis grant. I wonder what consideration has been given to the cost of that when it has come to setting the budget for the Scottish welfare fund. You also mentioned the figure of a projected £1 million cost for the 18 to 21-year-old housing benefit section. You mentioned that the spice figures have said that if there is a 100 per cent uptake, that could cost up to £3 million. Have you made allowances for that in the potential costs of that provision? On the 18 to 21-year-old housing benefit, the Scottish Fiscal Commission forecast that it could require an additional £1 million. As I said in my opening remarks, we will keep that under review. To date, in the interim solution that we have put in place, only three individuals have required the support through that interim solution. In part, that comes because, as individuals come to local authorities, 18 to 21-year-olds looking for that support in terms of housing benefit, the work that is then done discovers that they would fit into one of the UK Government's exemption categories. They continue to receive the support through that route. So far, we have only supported directly three individuals. We have noted the Fiscal Commission's forecast. We remain ready to increase the amount of money that should be required, but we do not, on the basis of the evidence of three, agree that £1 million should be allocated under that heading at this point. I should say that the money that we have allocated to the Scottish welfare fund does take the Fiscal Commission's forecast for that into account as well. Can you just remind me what the other part of your question was? The other new commitment to the fund was the family reunion crisis grant, which is supposed to be coming online towards the end of this year, just to see what additional demands were expected to put on the fund and whether any financial figure had been set aside to cover that demand. If you forgive me, I am not in a position at the minute to answer that question, but I will undertake to do so and come back to you by the end of today. Finally, my last question was, around the fund in the previous year, eight local authorities used their own funds to top up the Scottish welfare fund. Given the position that local authorities are in with this financial settlement, it may prove much more difficult for those eight to continue with that. Aside from the commitment to step in with in-year adjustments to cover the 18 to 21 housing benefit provision, would the Government step in with in-year provisions to increase the budget if there was such a demand there as a result of universal credit and increased applications? Of course, we have not reached as a Parliament a final position on the budget, and I am sure that there will be continued discussions with respect to local government and other areas. However, the Scottish welfare fund is a really important part for us and for this portfolio in terms of how we mitigate the worst effects of UK Government welfare cuts. We are open to continued discussion with local authorities through COSLA where there are additional demands and issues that they raise with us that require additional support, and we would continue to look at that. Is that supplementary in this area? It was going back to the first question supplementary. That's fine, that's fine, yep. Good morning minister. Just going back to the budget halfway through the year being devolved, does that mean that when different benefits are devolved, the payments that people get will be the same in Scotland as in the rest of the United Kingdom? Or, if there is differential payments or more people get that, how will that be accounted for in, say, if it happens in June for the rest of that financial period? Or is it that everyone will say the same amount of money as they were before the powers transferred? I think that you tell me if my answer makes sense and whether I have answered your question properly or not. With the exception of where as a Government we have made manifestal commitments to increase the level of financial support, for example in the change from sure start grant to best start grant, with the exception of those benefits, what an individual will receive when the responsibility is transferred to the Scottish Government will be the level of the benefit that they are currently receiving. Where we are increasing the financial spend on the benefit, that is not transferred to us from the UK Government. Those are additional financial commitments that the Scottish Government has made and will be accounted for in future budgets by Mr Mackay in terms of looking at how he allocates spend across portfolios and produces the balanced budget that he needs to. For the year that we are looking at just now for £18.19, the benefit that we will take responsibility for, that we know at this point will be in that financial year, is the carers allowance, now carers allowance will transfer the competence for that needs to be transferred to us after the bill is passed. DWP will continue to deliver that carers allowance until we take delivery responsibility for it later in this parliamentary term, but initially in order to ensure that we can pay the increase that we want to pay to carers, that supplement, as we are currently referring to it, will be paid by Scottish Government through our delivery agency and that additional amount of money is not transferred to us from the UK Government. That is allocated by Mr Mackay as he said he would do from the overall Scottish budget for that year. Thank you minister, I think that your answer was a lot better than my question. In regard to just going forward, obviously we don't know the regulations for the other and these will be published in due course. Will your officers or civil servants be doing modelling to see the uptake in regard to these different benefits? Will more people be uptaking it unless there will be an extra cost? Will that be met by the UK Government or if more people take up an award? Will that be a cost that falls on to the Scottish Government? Modelling is quite hard to do in terms of benefit take-up because the baseline data is not there for all the benefits. The baseline data is UK data and it is not held. When we have had previous discussions about benefit uptake and we have indicated an estimate that there is about half a million people in Scotland not receiving some of the benefits that they are entitled to, that is quite a small number of benefits and that is because that is the only data that is available. It is difficult to model increase in uptake when you don't have a starting point. However, that is the first point. We will, through our new social security agency, attempt to create baseline data for Scotland so that we know what the uptake is for the benefits that we are responsible for and what we anticipate it ought to be and then attempt to increase uptake, so we close that particular gap. What we won't be starting from is a baseline figure that comes from the current uptake numbers on those benefits. What is transferred to us in terms of the benefits that we will take responsibility for is—I am sure that Mr Wallace will correct me if I am wrong—the amount of UK spend on those benefits in Scotland in the year before we take responsibility. If we then successfully increase uptake, that is clearly for the Scottish Government to find the resources to support that. We understand that as we promote a benefit uptake campaign because our view is that people who are entitled to the benefits should know that they are, should have a fairly easy and streamlined process for application and should receive what they are entitled to. However, we are very conscious that what we are dealing with here over the piece is, of course, a demand-led spend. That is one that has to then be managed by folks such as Mr Wallace and others in terms of the risks around demand-led and being able to forecast ahead. However, that, too, is where the Scottish Fiscal Commission's independent role is particularly helpful in its advanced forecasting. I think that it covers some of that in the report that it has produced for the current draft budget. I want to ask you about the Ferros Scotland budget, which is increased by 303 per cent. Why? Part of that includes the new funds set aside to support the Child Poverty Bill. Indeed, Ms Constance will never forgive me for that. We just correct that record, if we may. The Child Poverty Act and additional moneys in terms of empowering communities and so on. We have also increased the equalities budget and maintained some of the other areas. All of that is because the commitment to the Ferros Scotland action plan is a solid one on the part of this Government. Those discussions on the overall budget and the portfolio within that have held true to that commitment. Indeed, I am glad that you mentioned the equalities budget, because it has increased by £2.5 million in addition to the increase in the Ferros Scotland budget. Would I be right in presuming that some of the budget under the Ferros Scotland line is going to go towards the preparation and delivery of the first delivery plan under the Child Poverty Act? The delivery plan is due to be published by April 2018. Clearly, there has to be resourcing behind that, so the £50 million fund is there. We have also asked the new poverty and equalities commission to advise us on that delivery plan. We have an expectation that there will be specific actions that they will require us or recommend that we should take. The £50 million figure is not £50 million for this year, it is £27.8 million for this year. How is that number calculated? How do you know that you need an additional 303 per cent, not an additional 200 per cent or 500 per cent on that budget, when you do not yet know what the delivery plan is going to include? You draw on the work of organisations such as Joseph Rowntree Foundation and the work that we currently do in tackling poverty and the discussions with our stakeholders to see where we can make additional interventions that will make a difference in terms of the numbers of people in Scotland who are in poverty, and from that you make a forward estimate of what you anticipate you will require. You then work with the commission and others to specify specific actions that will take you towards the targets that are contained in that new act. How are we to in future years assess the efficiency and effectiveness of this budget? Would it be fair, for example, for us to use the Scotland performance update, which is one of the documents that is published alongside the budget that was published last week, which has, in its social security committee chapter, a list of 15 performance indicators or measurements, and performance is improving—this is the Scottish Government's own analysis. Under the Scottish Government's own analysis, performance is improving in only three out of 15 indicators, so performance is not improving in terms of reducing under-employment, increasing the proportion of young people in learning training or work, increasing the proportion of graduates in positive destinations, improving support for people with care needs, improving people's perceptions of the quality of public services, improving the responsiveness of public services, reducing children's deprivation, directly relevant to child poverty, increasing the number of new homes and so on and on. In none of those areas is the Scottish Government's performance improving. Next year, when we look at the Scotland performance update, will we be able to see whether there is a direct relationship between this £27.8 million of public money that is being devoted to fairer Scotland this year and performance improving in some of these areas, which at the moment are not improving? I think that, Mr Tomkins, you are being a little unfair in terms of your interpretation of those performance figures. I do not have them with me, but, from memory, many of the areas that you have just read out, performance is being maintained. If I recall correctly, there are only two areas in the performance set where performance has declined. If I recall correctly, some of those areas would be reasonable to say that performance has declined as a consequence of factors that are outwith the control or the powers of this Government. I am not complacent about our performance, but I think that your description of it is a little unfair. For the record, we should note that there are a number of areas where performance is maintained. To get back to the substance of your point, when the committee comes to look at the effective use of expenditure in the future, it will, of course, look at those performance statistics, which, as a Government, we produce for the very reasons that our performance can be judged in that basis. We would also be looking over the piece at how we perform as a Government in terms of meeting the very specific targets that the Child Poverty Act sets out and how we are performing in meeting the actual expenditure against the estimates that we have produced, for example, in the finance memorandum attached to the social security bill. There is more than one place to look and determine whether or not we are securing best value for money, whether our forecast and estimates have been accurate and whether or not our performance is being maintained or is improving or in some circumstances perhaps where we need to do better. Can I bring in Mr Smith first? Thank you, convener. Good morning, minister. You made reference in your opening statement to the stage 1 debate that we had on Tuesday earlier this week, and one of the issues that I raised in that debate was around DHP's discretionary housing payments, so I'll just have some questions around that in terms of the budget. I've noticed from analysing the figures that the DHP budget seems to have been significantly increased over the past three years, going from £35 million in 2016-17 to a total of £62 million in 18-19 with an additional £1.2 million for admin. I just wondered if you could explain the reasoning for this. The increase is partly based on the forecast, and you'll know that a large part of the DHP budget goes to mitigate the bedroom tax, so the demand is on us to do that. In addition, we have included other areas where DHP's can help individuals in terms of what is required. The admin costs come from local authorities in terms of what they tell us. It costs them to administer this benefit on our behalf. It's particularly interesting to get clarity on the £1.2 million for the admin. You mentioned the bedroom tax and the £70,000 households that have been affected by this. Has there been a solution agreed with the DWP on paying the bedroom tax, and if so, what difference will this make to DHP's budget lines in the future? You will recall, as I'm sure other members do, that our starting point was to mitigate the bedroom tax at source. The initial area of difference that we had with DWP was its interpretation that, if that was done for any individual, the consequence of what they received in benefit took them over the benefit cap, the UK Government's benefit cap, and they would impose the benefit cap. That was not our understanding of the overall agreement that came as a consequence of the Smith commission and the fiscal framework. We have now resolved that, and therefore those individuals will not be penalised in that way. What we are doing now is working through the technical solution to that policy solution so that, as universal credit is rolled out, we can mitigate the bedroom tax at source. The individual does not have to apply to local authority for the DHP support in order to mitigate the bedroom tax by that route. What that means, though, is that we then pay DWP. The monies that you see in the DHP line that are set against mitigating the bedroom tax are funds that will then go to the DWP to compensate them for the income that they would not receive. You will start to see that across both lines, because we are mitigating the bedroom tax at source within universal credit. As universal credit is rolled out, the monies come out of the DHP line and go into a line that would say that we are paying the DWP here, but in the interim you will see it in both places. Does that make sense? It does, and it is helpful to know that for future years on analysis and that that action is being taken. On the other DHP funding, if there has been consideration whether funding for other DHP between local authorities will be the same or differentiated in the years ahead, given the variations in the private rental market across Scotland. Is that an Edinburgh MSP? Is that the PRS in Scotland in the city in Edinburgh and its relationship with, for example, the bedroom tax has caused difficulty for constituents of mine? I understand that, and you know that in the proposed budget line, in the draft budget, something like £10.9 million is there under the DHP heading to help those affected by welfare reform, including the benefit cap and local housing allowance. My answer is very similar to the answer that I gave to Mr Griffin. That is that the agreement between the Scottish Government and COSLA in terms of how funds to local authorities are dispersed sits on that formula with COSLA. From my perspective, it would be fair to say that we can see differing needs across local authorities. However, the formula is one that both the Scottish Government and COSLA are committed to. Although it takes account in some aspects of differing circumstances across local authorities, there is room for further discussion about how adequately that account is taken as we begin to see some of the discrepancies that you are referring to. Mr Griffin referred to that, but that is really for a discussion between my colleague Mr Stewart and Mr Mackay and COSLA to determine whether there can be any discretion or changes in the formula in terms of whatever the different areas of spend that it is applied to. Thank you, minister. Thank you and good morning. Still on the subject of the DHP, I mean Ben Macpherson has pointed out that the draft budget proposes an increase in the DHP budget, but this is ring fenced for bedroom tax mitigation. The rest of the DHP budget line is flat in cash terms, so it is an effect of real terms cut. CPAC Scotland has reported cases in which people who are eligible for DHP payments are being turned away because funding has run out. In addition, we know that the new benefit cap is going to hit markedly more families than 3,700, potentially, compared to only 500 under the previous version. So demand for DHPs will rise. I just wondered if you could explain why. I realise that this is a draft proposal, it's a draft budget, but is there any hope that this decision will be changed, will be reversed? I have to answer that question, Ms Johnson. I'm grateful to you for it. With a bit of context, which is a reminder that in the 10 years to 2019-20, the fiscal block grant to the Scottish Government will be cut by £2.6 billion. That is quite a sobering piece of context, I think, for us all to be mindful of. Therefore, any request to increase any aspect of this portfolio budget, reasonable and understandable as they might be, has to be set in that context. We, as a Government, are, of course, always open to those arguments. There are many areas of my particular remit in terms of social security, and there are others, but all of it has to, at the end of the day, produce a balanced budget. I mean, I wholeheartedly share your frustration, and I appreciate that ultimately this is the fault of the UK Government, but I think that the Scottish Government has, you know, there's been a precedent for the Scottish Government to provide a safety net, and I'm just concerned that this cannot be maintained if we look at these figures in front of us. So I just wonder if negotiations are on going within the Cabinet on this area. So you're absolutely right that there is a precedent for this Government to provide a safety net as best as we can, and we retain in this draft budget our continued commitment to do that. I think the numbers bear that up. However, to be able to continue to do that in the face of that level of overall reduction, once we're trying to secure a balanced budget and do the other things that Mr Mackay outlined, not least contribute to additional support in education, economic growth and so on and so forth, is a difficult balance to strike. And securing additional funds in one area inevitably means that you reduce funds in another. Now there will be continuing discussions absolutely with other parties as we work through this draft budget and look at the other demands and suggestions that come forward before the budget is finally agreed. And agreed in those discussions will of course take place in Cabinet, but at this point I cannot make any additional commitments to what is currently in the draft budget, which has secured an increase in this overall portfolio. I would like to move on to the subject of employability, if the minister is able to answer questions on that issue. I'm just wondering if the social security agency will have any links to the fair start Scotland scheme. Yes, we anticipate that it will do. There are a number of early discussions going on between myself and my colleague Mr Hepburn and between David Wallace, who is leading on the establishment of the new agency and his colleagues in Mr Hepburn's portfolio, to look at a number of areas, both in terms of making sure that local social security staff and others are fully aware of the new devolved employability programmes, but also ensuring that, as we incrementally recruit to our new agency, we have diverse and equal opportunity-based recruitment policy and practice, as we possibly can. I know that a number of discussions have already taken place in Dundee, with different organisations working with individuals who are preparing themselves for the labour market and indeed in Glasgow, and that will be picked up as we go round the different local authorities. Is the minister aware of whether or not claimants of industrial injuries benefits will be eligible for the scheme, and if so, how they might be made aware of it? I am not aware of that, but I am not aware of that, but I undertake to find the answer to that and make sure that you get it before the close today. The other area that I wanted to mention was the new pilot programme that is a joint Scottish Government and UK Government-funded pilot programme, which looks at creating an integrated hub for individuals who become ill in terms of a long-term health condition, or a disability, while still in employment in order to help them retain employment as they recover. One of the areas of concern for some time has been that, when that happens to an individual, perhaps as they get a bit older, maybe they suffer a stroke or whatever, that, as they focus on their health and their recovery in that way, they fall out of employment when, as they recover, employment remains an option and an opportunity for them. What we are trying to do in the pilot programme is to streamline the route for them, but also for the various health and other agencies that are there to support them, and for the employers, so that the individual can easily move back into work if they are fit to do so, and that is what they want to do. Can I just bring in Mr Tom Coonson on that area? Thank you very much, convener. Minister, I just want to ask you about something that was said by the Fiscal Commission in their report that was published on the same day as the budget. There is a paragraph 51 of the report. The commission says this. To support the Scottish Parliament and the public in understanding and scrutinising the Scottish Government's policy proposals in social security, the commission will aim to produce forecasts of expenditure to accompany subordinate legislation relating to any areas of our remit. This is about the fact that the commission at the moment is able to forecast future social security expenditure only with regard to carers allowance in one or two other areas, because the Government has not yet published any proposals at all about who is going to be entitled to what with regard to attendance allowance or DLA and PIP and so on and so forth. The commission's words again are that the commission will aim to produce forecasts of expenditure to accompany subordinate legislation. What are we to do as a Parliament if the commission is unable to realise that ambition? Is there anything that we could or should be doing in your view to convert that from an aim into a duty? The commission is required to help the Parliament to understand the financial implications of the regulations as and when those regulations are produced. Let me say two things. Just for the record and to ensure that there is no misunderstanding, the particular proposals that you refer to are not yet available, not because we are sitting on our hands but because we have 2,400 volunteers on our experience panel. We have a number of stakeholder groups and we have a disability and carers benefit expert group, very well chaired by Dr McCormick. Our commitment is to engage in consultation with them at every step in the process. That is what we are doing. Beginning in January, we will be actively engaging with them in the early part of the programme in terms of the IT infrastructure for those benefits. As we do that work, we will undoubtedly reach particular policy decisions that will inform the draft regulations. I think that I have already committed in the chamber and at this committee to the super affirmative process and we will bring forward amendments on that, as I have said. We have also committed, indeed, we came to this committee and suggested that you give some consideration to the proposition of independent scrutiny. I have committed absolutely to that in a statutory basis and made the additional commitment that Scottish Government ministers, unlike UK ministers, should be required to consult that committee. In terms of what the Scottish Fiscal Commission does, that has already been agreed through a proper process in this Parliament about what its remit is, how it operates and how it functions. If the Parliament wishes to put any further duties on it, my suggestion is that that is for the Parliament and not for me as social security minister. Would you welcome or would you seek to resist or would you hold your position on the idea that the Fiscal Commission is legally obliged to assist the Parliament in this way rather than merely hopes to assist the Parliament in this way? The first part of it sounded like the beginning of a Christmas game. I think that the Fiscal Commission, like our own analysts in the Scottish Government, has a degree of difficulty in forecasting when the baseline figure is not known. I answered earlier Mr Balfour's question about it's difficult to forecast if you do not know how many people currently receive X or Y, therefore that was around benefit take-up. Unfortunately, in terms of some of the baseline figures that you may want to start from, DWP either does not collect those or does not hold them on anything other than a UK basis. I completely understand why the Fiscal Commission would say that we aim to. Until we can establish more clearly what our baseline is, then I think that their position at the moment is an entirely reasonable and fair one. Whether or not the Parliament wants them to move beyond that is, of course, as I have said, for the Parliament to determine. Minister, you did cover this earlier and I just wanted to be sure that I have understood it. This is in relation to Mark Griffin's question about uptake and benefits. At this point in time, discussions are on-going and a future date. The Scottish Government and the new agency will take responsibility for the delivery of the benefits that occur in the future. If there is a campaign where people take their benefits that previously were not, why would the Scottish Government have to pick that up? Surely, if more people are claiming their benefits that would have been entitled to them, then that would form the basis of a discussion between the Scottish Government and the UK Government under the Fiscal Framework as being the true basis. That is the baseline for those benefits. I just wanted to be sure about that. Absolutely fair question. It depends at the point where there is an uptake in a particular benefit. Who has responsibility for that benefit? We have committed and you will know that we are due to have a discussion with Mr Griffin on the benefit uptake campaign and the improvement to that work so that it is a shared campaign between local and Scottish Government following the roundtables that we have already had. We are committed to doing that in the lifetime of this Parliament. What a future Government does is, of course, for that future Government. The intention there is exactly that. It is to alert people to look at what they might be entitled to, particularly people who are in work, who may presume that because they are in employment they are not entitled to some benefits depending on the nature of their employment and particularly the income level. Other responsibilities they might have may well indeed be entitled to additional financial support and then to point them towards where to get advice and how to secure that. We will focus on particular benefits as well where we know that there is a low uptake. For example, we have focused on attendance allowance where what figures that do exist do show us that there is a low uptake compared to those who are entitled to it. In terms of if you are successful in increasing the numbers of people receiving what they are entitled to, who pays that? Clearly, if it is a reserved benefit then that is a cost to the UK Government and it would continue to be a reserved benefit and so on. If it is a devolved benefit, any one of the 11, then whether or not that additional cost falls to the Scottish Government or to the UK Government depends on where we are in the transfer of responsibility over the next three years. If it is at that point a benefit for which the Scottish Government is responsible and the numbers who are entitled to that claim it, if those numbers increase then that is an additional cost to the Scottish Government. One clarification might want to give, but there is a comparison that needs to go on between what happens for the element of the benefit that remains reserved and the rest of the UK. If uptake rises in Scotland but does not rise in our UK then the Scottish Government would have to meet that cost. If uptake rises in Scotland and rises in our UK then there will be an adjustment to the block grant that will be consequential as a result of the increased UK Government spending and Scotland would get the money. That is quite an important clarification because if you run a campaign in Scotland and the uptake rises and you do not run a campaign in England and Wales then naturally there is likely to be a higher uptake as there are not in Scotland. That would seem reasonable. I am more than happy, Ms McNeill, to run the campaign south of the border as well. I am clear about what you are saying. I am sure that you will speak up for the negotiations. It seems a little bit unfair if those benefits are entitled to. At that point in time it would still be technically reserved until such point as the Scottish Government takes full responsibility for that under the agency. It seems obvious to me that that should be paid for by the UK Government until such times as the Scottish Agency takes full responsibility for one of those 11 benefits. The unfairness of it is not something that I am going to disagree with you on. You would hope that both the UK Government and the Scottish Government would be encouraging individuals who are entitled to financial support to claim that financial support and secure it. I am not responsible for not being able to direct the UK Government more as a pity. I am only responsible for what we do here. We will do the right thing and encourage people to secure the financial support that they are entitled to. In your opening statement, you mentioned the letter that was sent to the Public Audit and Poets Legislative Scrutiny Committee regarding some clarification on the IT issues. Obviously, IT issues can be of concern and we should be learning the lessons of failures from the past. My understanding is that part of the issue with the DWP is that it is very disparate IT systems that in layman's terms do not talk to one another. I was wondering if your officials could elaborate on what the agile development model that has been adopted will do to ensure that some of those problems are not repeated but also about the scalability going forward for the social security system and how the decision to follow that meets the best value principles? If I could just say a couple of things to start with, it is important to repeat that the approach that we have taken to IT is entirely consistent with the advice from Audit Scotland, which has been consistent in its advice on learning lessons. That what you do not do is a big-banner approach that you grow a new service like this one in manageable chunks. I am sure that they put it better but essentially in manageable chunks. That takes us right back to what I have consistently said about you design it, you build it, you test it, you deliver it and then you repeat. As we take responsibility and deliver each benefit incrementally, we are learning from the first is applied to the second and so on. Our approach on the IT build absolutely replicates that at the various stages. In the design stage, the design and the test stages are where our experience panels are particularly helpful to us. In a smaller way but nonetheless an important way in terms of learning, we can point to having already done that with the introduction of our flexibilities in terms of universal credit. How that system would work for Scottish residents in receipt of universal credit, where it would come in to the stage in terms of their claim assessment period 2 and what they would then see on their screens and what they would be asked to do, was all followed that approach in terms of design and test in order to make sure that everything was as clear as possible and people understood what they were being offered, what they were being asked to do and what the consequences of that were. Members will be aware that we have now laid the regulations to extend those universal credit choices to individuals who were already on full service universal credit. On the specifics of what you asked, I am going to ask Mr Wallace to take us through those. I am happy to do so. I remind myself of your question. You asked primarily about agile and about best value. As the minister says, we are learning the lessons of past IT projects and we are taking due account of audit Scotland reports. It is the principles for a digital future report, which says that we should break complex IT programmes up into manageable stages. As it is an iterative approach to the devolution of social security powers, it is an iterative approach to the design and build of our system. We build it in stages. The letter that we copied to the Public Audit Post Legislative Scrutiny Committee had the breakdown of the £190 million that committee members will recall from the financial memorandum to the Social Security Bill that we described implementation costs at a total of £308 million. Within that, the largest component of that £308 million was the £190 million for IT, which was our estimate at the time or initial high-level estimate of what it could possibly cost to design and build a system for the entire social security system. The agile approach is a well-established, well-developed methodology. It follows a number of phases, such as discovery, alpha, beta and live. There is sort of on-going user testing through that process. Members may also be aware that we have recently let the first contract for the wave 1 benefits to IBM UK Ltd for the design and build of the capabilities that were required to deliver the first wave of benefits. In terms of the process that we have gone through to get to that contract award, before we make any investment, there will be a business case created. We followed the Treasury's five case model to describe the strategic case for change, the socio-economic case, the financial case, the management case. We go through and we link the potential costs with the benefits and the outcomes that we expect to achieve. Specifically, in relation to the low-income benefit contract award, the way that system will be developed in the agile way is through statements of work. The total contract is a fixed price. We will not go over that price, but statements of work will be given to us and agreed between us as the client and the supplier. We will say, what stage are you at, what are you going to build for us, what capabilities are you going to deliver, exactly how much is that going to cost. After each stage of that, we will look back at the statement of work and say exactly what did you deliver, what did it cost and balance those two issues off together to say, did we achieve what we expected to achieve, do we need to take some kind of action to intervene here with the supplier to ensure that we are delivering what we expected to deliver, to ensure the capabilities are right, to ensure that we are securing value for the public purse. That is a major complex system that we are going to end up with. I think that it is wholly appropriate that we take that approach to make sure that we are protecting the public purse. That is the approach that we are going to continue to take throughout the programme. Can I just make a couple of other points? Just about how things work and maybe Mr Lockhart will want to add something to that. I think that it is quite important. I have spoken before at this committee about how, inside the social security directorate, the teams are working and that our teams are integrated. We do not have in one corner policy teams and other delivery teams and so on and so forth, but they are integrated around particular benefits. There is a low-income benefits team that incorporates all the different skills and areas of expertise that you would expect to see. We are sure as we go forward that what may be a good policy proposition is deliverable or what may be a delivery issue can be accommodated within policy thinking and development. That is probably the best way to describe it. Similarly, in this contract with IBM UK, they are not away in a different place working to our specification. They are working with our teams so that they are integrated as part of that process. That allows us to be agile ourselves, I guess, and to understand as you go through each piece of work within that contract what the issues are and resolve them as you go and provide the information that Mr Wallace was describing. I do not know Mr Lockhart if you want to add anything to that. IBM is on-site and is in bed with us. It is part of the delivery teams. The teams are made up of user research, policy, security, technical developers and business areas. They are all embedded in these core teams and they work through the agile sprint stage by stage. As Mr Wallace said, these sprints are broken up to clear statements of work, which are agreed by the Scottish Government and IBM accordingly. That is very helpful. Thank you for the answer. I think that the consent of the committee is that on that day one of switchover that no one has left is not in receipt of their benefits that they are entitled to and that we do not have any of those delays. Thank you very much for that. Are there any further questions or supplementaries? I look forward, minister, in regard to the new agency and the staff that will work on that agency. Will they be too paid across from DWP or will they be new people who are brought in first or will it be a mixture? What discussions are going on with DWP in regard to that? For clarification, I used to be a member of the tribunal services. Obviously, there are appeals in regard to the different benefits that go to tribunals. At the moment that they sit with the Ministry of Justice, will they be too paid across from those that sit on tribunals to your department or to a different department in the Scottish Government? What discussions are going on with the UK Government around those as well? I can answer the last one first. There is a devolution of tribunal responsibilities, as you know. That sits with Ms Ewing's portfolio and that includes the social security tribunal. I am sure that if the committee wanted clarification from her about how that work is progressing, she would have been more than happy to give that. She and I have discussed that and discussed where we might need an interim position as the devolution of tribunals process goes forward. We may be a little bit ahead of it, so we need to have an interim solution, but she would be more than happy, I am sure, to give you details on that. On the question of Chippie or for public sector, I believe that it is COSOP. Our officials are having detailed discussions with the DWP on that and where the jobs that we require fit into that category in as much as DWP currently have those similar roles for the benefits that we will take responsibility for. Of course, as a Government, we have an absolute commitment to follow that process. My anticipation in terms of the overall numbers of jobs that will be required in Scotland is that that number that would fall into that category will be relatively small. However, our officials are working through the detail, both in terms of the posts that will be based in Glasgow and Dundee and those that are based across local authorities. As that work progresses, we will keep the committee informed about how we are refining through the total number of 1,500 between Glasgow and Dundee and around 400 locally based social security. However, as I said, our expectation is that the numbers of posts that would fall under COSOP will be relatively small. My understanding is that, certainly for the first benefit in terms of carers allowance supplement, that does not apply. On that note, Minister, thank you very much for your attendance. I think that we have strayed a little bit from budget into implementation, but thank you very much for your comprehensive answers. I am sure that my colleagues will look forward to you getting back on the areas of clarification. Thank you very much to your officials as well. I will just suspend briefly and just wish you a very happy festive season. Thank you. We will get back on those two specific issues by close today, and my very best wishes to all of you too. If we could move to gender item 2 on supporting legislation, it is consideration of whether to take evidence on the universal credit claims and payments Scotland amendment regulations 2017, SSI 2017, 436. That was mentioned by the minister earlier. It is to give the options provided to new universal claimants to existing universal claimants. It is just to ask members if the evidence that has previously been taken in this year, given that they are content to take no further evidence on this instrument. Everybody is content with that. That is very helpful. We will consider the instrument at the meeting on 18 January. On that note, we move into private session.