 Welcome to the first meeting of the Social Justice and Social Security Committee for 2024. We have apologies from Katie Clark. Our first item of business for today is a decision to take agenda item 3 in private. Are we all agreed? Great. Thank you. Our next item is an evidence session on the Scottish Government's budget for 20 24, 25, gyda'r Cymysgol Cymysgol Cymysgol. That is an opportunity to consider the commission's forecast spending on devolved social security benefits and how that is reflected in the social security budget for 2024-25. I welcome to the meeting Professor Graham Roy, chair, Professor David Ulf, commissioner and Michael Davidson, head of social security and devolved taxes. I thank you very much for accepting the committee's invitation. Before we move to questions, I will invite Graham Roy to make some opening remarks. Good morning, convener, and thank you very much for the opportunity to come along and speak with us this morning about our forecasts. Overall, we estimate that Scottish Government's total budget next year is set to increase by £1.3 billion from the latest figure for 2023-24. That is a rise of 2.6 per cent in cash terms or 0.9 per cent after accounting for inflation. Most of that increase in funding comes from income tax, a combination of the Scottish Government's policy choices, high inflation, fixed tax thresholds in cash terms and relatively strong earnings growth in Scotland have all contributed to a sharp increase in income tax funding. However, the Scottish Government's spending commitments are also rising, with pressures from decisions to freeze council tax, increased public sector pay and our forecasts of increased spending on social security. We forecast that social security spending will rise from £6.3 billion in 2024-25 to £8 billion in 2029. That is a larger result of payment rates being uprated by inflation and higher spending on disability payments, which reflects both a UK-wide increase in the number of people receiving disability payments and the effects of the Scottish Government's policy and operational changes to disability payments. We estimate that social security spending will be almost £1.1 billion more than the social security BGA, the block grant adjustment funding that the Scottish Government will receive in 2024-25, with a gap rising to £1.5 billion in 2029. That gap is the result of Scottish Government choices and social security in the budget and in previous budget decisions. That includes things like the introduction of new payments, such as the Scottish child payment and also the new approach to implementing social security benefits, such as adult disability payment. Those choices are designed to deliver a new approach to social security in Scotland, but they have consequences for the Scottish Government's budget and future budgets, as we highlight in our report. We are grateful to Social Security Scotland for the statistics that it has published on Scottish child payment and the new disability payments, as well as its on-going insights and intelligence gathering that it shares. In particular, the statistics on adult disability payment have allowed us to begin to evaluate the assumptions and the effect of the changes introduced by the Scottish Government on the overall budget. There is no clear evidence from the data that we need to adjust our judgments on the level of successful applications or the average award level. However, we have modified our assumptions around special rules for terminal illness, as a result of being fewer cases than we had forecast. We will continue to monitor the data from Social Security Scotland and refine our forecasts as necessary. I will come in now with some questions. The first question is, so much of the cost of upreating is covered by the block grant adjustment that you indicated. To what extent does this year's upreating policy put pressure on Scottish Government budget choices? It is a really good question. One of the things that we talk about in the report is the effects of uprating and inflation. Essentially, with high inflation, the key benefits get uprated by a higher number. We have a box in our report, box 5.1, which will show you that increase. The total effects of uprating by the end of the period are £1 billion, which is essentially coming through adjustments for higher inflation. However, as your first part of your question mentioned, this is essentially uprating that happens similarly across the UK as a whole, so the block grant adjustment essentially protects a significant amount of that increased expenditure through coming from higher funding. We talk about a rough rule of thumb. We think that about 85 per cent of that increase in uprating is matched by an equivalent block grant adjustment, and the remaining 15 per cent is not covered by the BGA, so that is where you would see the pressure coming through in terms of the Scottish budget. Early on, 15 per cent is a relatively small number of increases, but as you clearly get to the end of the forecast period, that number gets chunkier and bigger. Professor Alft, would you like to come in on that? I just want to make an additional point here. When you are operating benefits for inflation, there is both a cumulative and a compounding effect of that uprating. For example, if you operate for inflation by 10 per cent in year 1 and by 6 per cent in year 2, that means that benefits in year 2 or spending on benefits in year 2 will not be 16 per cent higher, it will be 16.6 per cent higher than it otherwise would have done because you are operating the first year's inflation by the second year's inflation, so long periods of persistent inflation can adapt to very significant moments of uprating in the future. That is why our forecasts for the effects of inflation tend to be very large. It is not just that there is large inflation further out, it is the cumulative and compounding effect of earlier years of inflation that are driving that. My next question is, how uncertain are the inflation forecasts? That is another really good question. There is a lot of uncertainty about the outlook for inflation, at least over the short to medium term. Over the longer term, we can be pretty confident that inflation will move back to target of 2 per cent, so by the end of the forecast horizon, you will have inflation much closer to the target. The reason for that is that the Bank of England has a legal target to do that, so it will make it happen. In the short to medium term, inflation is really uncertain to try and predict. You see that. Again, we talk about in our report about differences even in our forecasts over the past year about trying to predict inflation. For a couple of reasons, one is that a lot of the effects that we are seeing or the variability that we are seeing in inflation are things far outside the control of this place, far outside the control of even the UK. It is global supply changes, it is pressures on energy prices such as the war in Ukraine. Those are the big drivers of what has been feeding through to inflation. Although it is uncertain to predict that and to try to predict global events, it is really quite difficult. In the short to medium term, there is uncertainty about the outlook for inflation. Over the longer term, we can be much more confident that it will come back down towards target. The final point that I would make is coming back to the discussion of your first question, which is to an extent that the BGA, the block grant adjustments, protect the Scottish budget from that uncertainty in inflation because the funding flows through from that. Clearly, it is something that we have to monitor and we update our forecasts as we go as we get new inflation numbers. I do not know if anyone else wants to come in. When you think about uncertainty about inflation, there are two different aspects of that. There is uncertainty about the level of inflation, but there is also uncertainty about the persistence of inflation. The question is how far inflation is embedded in the system through wage demands and pay increases as well, which will tend to make it a more persistent level of inflation. I believe that Rose McAll wants to come in with a supplementary question on that. That is very helpful and informative. The initial question was the upgrading policy between pressure on the Scottish Government's budget choices. We have been very much focused on inflation, which I understand is inflation the biggest concern when it comes to those pressures or the variance of policy decisions of the Scottish Government. If there are no differences in policies and that everything was exactly the same as what was happening in the rest of the UK, then, broadly speaking, the BGAs would be equivalent to how much spending was being made in Scotland. The additional spending, so where the additional money needs to be found within the overall totality of the budget, essentially comes through the policy choices that the Government makes. We talk about how that is the figure that rises. We estimate that it will rise to £1.5 billion at the end of the forecast horizon. Roughly about half of that is new or social security, so that secure spending does not have a block grant adjustment, so things such as the Scottish child payment. The other half of that is where we think that our judgments are that the different approach in Scotland is likely to lead to higher spending relative to the equivalent in the rest of the UK. We talk about spending pressure and a gap from a public finance point of view, but it is clearly Government decisions prioritising certain elements of spend over others, so it is just the nature of the funding that means that there is a gap there, but it is just choices that the Government is making. In addition to the pressures coming from inflation, we are seeing pressures coming from the rate of application for benefits. There is some interesting data coming out. There is UK-wide data that the level of inflows into particularly disability benefits is far higher than the level of outflows from that. The number of people getting benefits is increasing quite rapidly across the UK but also within Scotland as well. I am now going to invite John Mason in. Continuing the question of inflation, I realise that I am also on the Finance Committee, so you might have answered that question before. You said in your opening remarks, Professor Roy, that the cash increase for the whole Scottish budget was 2.6 per cent and that was a real increase of 0.9 per cent and the difference is 1.7 per cent. I wonder if you could explain that 1.7 per cent, because we are putting up benefits by 6.7 per cent and maybe you can just confirm it. Is Westminster putting their benefits up to 6.7 per cent as well? Michael, you want to come in on some of the specifics. When I am talking about the total budget, one of the big things that is driving the change in the total budget is what is happening to the capital budget, which is falling. If you look at the resource budget, it is going up by more than the total budget, so there is a cash increase of about 3.3 per cent on the revenue budget, so the resource budget, which is where social security is. The total budget is going up by less because capital budget is being cut significantly. We also have something else, which might be helpful to Mr Mason as well, to see as we have a table in the document, which I will try to find, but what happens to the total resource budget when we strip out social security and the non-domestic rates income, so essentially the remaining discretionary budget on resource and you see that that is actually going down in real terms next year, which I think is the flip side of your question about what is happening to the total resource budget and then what is happening to social security within it. It is figure 2.7. You see that between 23, 24 and 24, 25, the real terms growth in the resource budget taking out social security and non-domestic rates income, which are essentially commitments that have to be paid for, the resource budget is falling in real terms next year. That is essentially the effect of the squeeze on the overall budget of the commitments through social security. I can just confirm the point on the UK Government's rate in England and Wales is 6.7 per cent as well as it is in Scotland. The same rates have been applied, so that is why much of the increase in spending in Scotland is matched by the increase in bought-grant adjustment. You suggest that the cost of living crisis may be causing a short-term increase in applications for disability benefits across the UK. Can you explain further how that impacts occur and why would you consider that to be short-term? I would say a couple of things. On David's point that he made about what we are seeing at a UK level is a really significant inflow of people into disability payments. We might come on to that, but it is linked to concerns about mental health and various other prevalence of disabilities coming through. That is the big driver of the overall increase that we are seeing in adult disability payments over the past couple of years. That is matched by a BGA, because it is a UK trend that we are seeing. One of the things that we then pick within that is part of that overall increase. Evidence that we are seeing the cost of living crisis potentially leading an uplift in people moving into claiming for these benefits. That can be a variety of reasons, because the cost of living crisis is increasing concerns around disability and mental health. It is pushing people into difficult positions, so they are more likely to claim these benefits. It could also be that, if people are facing a difficult choice in terms of their household incomes, are they more likely to take or claim a benefit that is higher than a benefit that they might not otherwise claim. You might see an increase in people moving into disability payments rather than, say, some of the other benefit universal credit and job seekers and the things. You would get a potential more of an inflow into that. To that extent, it is a potential that it can be short-term in the sense that it is a short-term decision that people are doing. We talk a bit about that. There will be our talk about that effect in there, and it is essentially a short-term economic cycle effect. The one caveat that I would put in there is that once people move into certain disability payments or move into a certain aspect of the benefit system, they tend not to come out quite quickly, so there is a potential risk that if more people move into claiming certain benefits, that can potentially lead to a longer tail effect of any short-term effect that might be coming through from the inflow into those disability payments. Can I just elaborate on that point? We are not talking about a short-term effect on caseload. What we are saying is that the caseload may increase, but, as cost-of-living pressures ease, those pressures to apply for it will fall back a bit. What the OBR talks about is that caseload growth rates will be falling in the future as the cost-of-living crisis eases. It is not the level of the caseload that drops, it is the caseload growth rate that comes down in the future. I was trying to understand that, because we are talking about non-means-tested benefits. I was wondering why that would drive up the cost-of-living crisis to them. You also indicated that there is a take-up of disability benefits through the form of ADP will be higher in Scotland. What do you think the case is for that? We have always made assumption very early on that our judgment has been that the different approach to delivering disability payments within Scotland and the combination of factors on things like promotion of those payments, encouraging people to apply a different approach to how you engage with people, so a more supportive environment for people, more help in the applications, less interrogation of the various requirements that people have, that overall quite a different approach to delivering social security, which is the entire purpose of what the Government is trying to deliver in all of that. We think that that will lead to not only a potential improvement in the service that people who are already claiming those benefits would receive, but it will make that people who have been discouraged from applying in the past, or who have not even thought about applying, are more likely to apply. We will see an increase in applications, and David Sitt was saying that there is less of an outflow at the end. That just means that all else remaining equal, we think that there will be more people who have a higher caseload of people around adult disability payment relative to the equivalent system that was in place before, and that will lead to higher payments being made by the Government, which in turn means that there will be a higher public spending element of that. If I can go back to my general point about earlier, that is a strategy that is a policy decision to do it. We would say that all the different from a public finance point of view is a cost, but is everything else that comes through about the improvements to tackling poverty, the improvements to well-being more generally across society in there, but it comes with a public finance cost? Can I just add that the lower rate of outflows that Graham was talking about, that comes about because of longer periods between caseload reviews and lighter touch reviews. Now, we are not actually seeing those reviews taking place, yet we are just seeing the additional applications for ADP, but as that starts to come through, that will be another factor that is starting to drive that gap between ADP and PIP numbers, so that will be a factor driving that up more in the future. I am now going to invite Jeremy Balfour, who is joining us online. Thank you. I hope that you can hear me and a good morning panel. I am a little confused about this, because ADP and PIP, the criteria are exactly the same. There is no difference between the two. So surely the awards in England match the awards in Scotland, so if you apply for PIP in England and you apply for ADP in Scotland, you will have the criteria the same, so you get the same decision, or you notice a different decision making happening north and south of the border. I think that I heard your question there. You are entirely right in that what we are not saying is that there is a change to the value of the payment, or the amount of payments that people are getting. What we are essentially capturing is the fact that we think that because of the different approach to delivering social security in Scotland, that will encourage or support more people to apply for the same benefit than otherwise would have been the case. So things like promotion campaigns, encouragement to apply, a more accessible and supportive application process will mean that more people are successful in applying, so someone who might have started the process and then found the process really quite difficult or quite challenging and might be given up on that and not followed through, they will be more likely to be supported to complete that process in Scotland. Things like changes to assessments, so we know that people may be put off by face-to-face physical assessments, but they might perhaps be more likely to not be put off if that is not a requirement in there. So essentially what we are thinking is that, and we talk a bit about caseload, where we talk about, we show the difference between ADP and PIP. We think that there will be an increase in the number of people applying and successfully receiving this benefit relative to what otherwise would have been the case. So it's not that the actual benefit itself is changing, it's just that there will be a higher caseload of successful people applying and then securing that payment. Can I just add one point to that? One interesting thing we've learned through talking to Social Security Scotland is that one of the factors that Graham was referring to about making it easier to apply for benefits is that people can produce a wider range of evidence in support of their claim and some of the evidence we've got from Social Security Scotland is that people thought that the Government already had this information and so they turn up to apply, assuming the Government has all this wide range of information available and then they find out that the Government doesn't have that so they have to go off and acquire that information themselves. But because they've made the initial application that triggers the onset of the award and it may be that the award only comes along later but it is backdated to the data which they initiated the application. So you might see a timey effect on the payments because of this but it won't affect the fact that the overall level of payments will be higher. Just to say that we've started to get the data through from Social Security Scotland on what's happening with adult disability payment in terms of applications and approval rates and in a report in figure 5.9 we show that since adult disability payment was launched, if you do sort of on a comparative basis to England and Wales even though as we've discussed is that UK wide effect so in England and Wales applications are increasing. You can see from the launch of ADP the increase far more quickly in Scotland, that sort of supports our assumptions that we think there will be more applications and then we followed that through in the data and looking at approved applications as well and we hit so far we haven't found any evidence in the data that suggests our assumptions that there will be more people relative to PIP. So we're holding steady on those assumptions at the moment and as more data becomes available we'll continue to refine them but just to say at the moment sort of those assumptions around how more people will receive adult disability payment and would have received PIP seem to be holding. Thanks very much, that's really helpful. I'm going to invite Bob Doris in now. Thank you. I've got a brief supplementary on Mr Balfour's question which I thought was really important, convener, because clearly ADP and PIP are two different things but they've been run similarly at the moment with the same criteria. I think Professor Roy has outlined why you can solve a greater uptake under the same criteria depending on the culture and systems you put in place to encourage applications. However, once migration of PIP to ADP is complete, the Scottish Government will be reviewing criteria including for example the 20 metre rule and the reason for not doing that just now, convener, would be you would have two qualifying households in Scotland, one assessed under one criteria under PIP and a different one under ADP but once that's all together under ADP there'll be a new criteria. Will yourselves have a role to do some modelling work around that further to see what the additional benefit would be to disabled households in Scotland but I suppose what the additional cost would be in budgets in terms, that's something that you'd be expected to actively involved in. Yes, so you're right. So essentially when we're trying to make a judgment about social security spending, so something like ADP, the essentially the two elements that are the big thing that drive it aside from things like demographics in the stock of the population is one is essentially judgments that we make around eligibility, take up successful applications and that's essentially what we've been talking about so far, the same system but delivered in quite a different way that we think will lead to an increase in people successfully claiming these benefits and then the next bit is then is if in the future policy around ADP was to change either could be, you're right, about the eligibility for it or it could be about the value of payment, it could be about the kind of length of it all these things once that starts to change then we would start to model that as part of the budget process as part of our policy costings and we would essentially take the government policy if it was to be revised on say the 20 meter role and then we would make an estimate about who would benefit from that, what might that then be in terms of a fiscal a fiscal implication and that's where we that's where we would come in. It's not our role to make any judgments about the policy objectives and how far this is delivering policy objectives, our role is simply to assess the fiscal consequences of whatever policies are being implemented but we will certainly be updating our models and our thinking as soon as the Scottish government reforms other aspects of the ADP system. That's just for clarifying Professor Ove, absolutely, I would never draw you on the merits of policy intent but obviously politicians have to make informed decisions on costings because there's lots of things we'd like to do but we also have to afford the budget for it not just from year to year but in the longer term which is why this evidence session is particularly important. Can I ask a little bit about baseline data for all of this I suppose because the Scottish Fish Commission notes that the average award level for new applications currently for adult disability payment has not yet stabilised. Can I ask by that do you mean awards that are successful or do you mean the level of award or a combination of both but more importantly when would you expect that to stabilise and would that become our baseline data by which you'd be advising the Scottish government about modernly work for any future changes. You're right, so one of the things that we're in and it is a really difficult thing to just kind of try and explain and understand where we are is that with the roll out of these benefits we're in essentially a really period where we're a wee bit in the dark because we don't know what the long term sustainable trends in these data are because it's the first time we're doing it so we are very impatient waiting for the data to come through so we can actually say are our judgments right or wrong where do we need to make the differences and as Michael was saying you know we track for example the application rates and we can then look at them to see how they are doing we look at you know changes and say inflows and outflows and the like and one of the ones which is crucial to what we do is this average payment and once we have a stable average payment that then becomes fundamental to us in terms of pushing it forward because we know what the average payment is if we know what the average inflows and outflows are then we can be pretty confident in our forecasts and we don't yet have enough time series to be really confident about that average payment and what we know so far from the data is that the average payments that we've been tracking the actual data of successful payments coming through has been quite volatile so I think early on when it was rolled out we were seeing a significant increase in average payments relative to what had gone before and that's come down a bit and it's not as high as it had been when we can speculate about what that might be the case it might be prioritisation within Social Security Scotland to get to the people who are needing the most support early on and that means what that's why average payment has been has been higher it's coming down now and I think we just need a bit more time to see more data points then we can then have a bit more confidence in that average payment so it won't be as volatile as it is now. I probably guessed my final part of the question you said a bit more time the Scottish Government are committed to reviewing all of this in the round they can't do that unless they're constant a bit robust baseline data quite rightly you need a bit more time this committee needs to plan how we wish to scrutinise all of that what's a bit more time looks like where that's stabilised and we have that baseline data. I mean I think this question is how long is a piece of string in my news I mean I think that we are now as we start to move into year two year kind of three and four and move through this it should start we should have much more data points that we have at the moment there's also been the issue around you know backlog and things and actually just working through that and we see the progress that Social Security Scotland have made over the last few months and reducing that and that again is really helpful because it just gives us more data points coming through of that I mean I would I would think as we move over the next year then you should start to see that average payment start to stabilise and at that point then we can be we can start to get more confident I don't think we'll have a we'll have an update where we go now we're confident it will just be a gradual process of having more data and being clear. I apologize Professor Roy almost just needs if you're a politician which you're absolutely not but this was a minister or a cabinet secretary that I'd asked this question to invariably myself or colleagues would have said the financial year 24-25. One Social Security Scotland has outturned figures for all of that and they could be verified validated and analysed are you good to go on this and if so what's the timescale around that because we'd asked that question to the politicians but the politicians then have to ask yourselves so you know so I feel like we're asking the experts directly. One point I think that that'll mean that things are maybe a bit more stable is once the case transfer from from DWP from the PIP cases is complete and I think that that should be completed in the 24-25 year so after that but then obviously there's still the lags that the date is available so I think Social Security Scotland just published their latest statistics. It was I think the same day as the budget on December the 19th they published so that we've currently got added disability payment statistics up to the end of October so they're actually really quite up to date with the sort of case load and application statistics so but then it's it would still be after the end of the 24-25 year that once things have settled down a bit more with that case transfer complete which I think is where we maybe expect to be. Thank you. Can I maybe just add a point here that I think there are different trends going on here that the trend that Graham referred to where perhaps it was the early cases or the most clear clock cases where decisions were made and those are wars tend to be the highest awards which is a fact of driving average wars down. We've also got this issue I referred to earlier about like-to-touch reviews longer periods between reviews and the impact of that on average awards we won't start to see for a while but that could start to have it the opposite effect of driving up average rewards of the early awards or high and you're prolonging those high early awards so this fact is going in different directions here which makes that part of the reason why it's hard rough to say exactly when this was stabilised and settled down. No more questions that was really helpful thank you. Okay thanks very much I'm now going to invite John Mason in thank you. Thanks very much convener. Right looking at the overall picture in this £1.092 billion which is more than that's the additional spend that we're having to find now if I'm right in saying roughly half of that is the Scottish child payment which is completely ours because they don't have one in the UK and then another big chunk is the ADP extra is that right are there other factors in there as well? Broadly at a macro level so in terms of the chunky numbers that's pretty much that's pretty accurate so when we're thinking about what's driving social security spending so what's driving the increase that we're seeing over the next few years and there's the chunk of stuff that we've spoken about already which is trends at the UK level so inflation and the big rise across the UK of people inflowing into disability payments to link to mental health legacies of Covid and the like but that's all matched by the BGA so that drives the increase in social security spending but there's an inflow in funding so then we're left with what's the bit the bit of the budget that is not matched by an inflow in in BGA funding and roughly speaking you're right you know there's a chunk of things which is there is no equivalent funding flowing in from the rest of the from the from the UK and that's things like the Scottish child payment which is unique to Scotland and there isn't equivalent benefit in the rest of the UK and that's roughly you know the rule of thumb that's roughly about half of the funding differential and then there's the remainder which is the judgments we've just spoken about with Deputy convener there about the additional approach that's being taken in Scotland to deliver equivalent benefits in the rest of the equivalent in the rest of the UK and that is leading to the higher inflow and that's the remaining half in there so and the two big chunky bits in there is Scottish child payment in the first of these and then adult disability payment in the in the second part and there are some smaller elements in there so things like child disability payments which we think will run ahead of the BGA which again is added in into that and then there's some other smaller elements around on the there isn't equivalent BGA on things like discretion housing payments so the stuff around bedroom tax carers allowance supplement which again adds a small amount of money into there but they are typically in the margin of about 100 million rather than the 500 million or so from the Scottish child payment so they're kind of rolled into the Barnett formula they're not specifically so some of them are rolled in so we separate this out into the into the maybe if you can find a table Michael but we separate it out so there's some there's some social security payments that have no equivalent funding at all whether BGA or Barnett and things like Scottish child payment there are some things whether there are some elements that are rolled into the into the block grant but they're very small in the in the scheme of things I think they're about 100 million overall and then there's the other bits which are matched by a BGA which are the is a net position and so there's three combinations so we figure 5.8 we can separate out the three different elements into there to come up to your 1.1 billion about 368 of that is the net position 600 million is essentially these new social security payments that don't have an equivalent BGA so child payment and about 100 million from these other things which are are wrapped some of them are wrapped up in terms of in terms of Barnett okay so I mean and you're assuming I think as you said the previous questions that there's no change in policy so both the UK carries on with its policy and Scotland carries on with its policy yeah I mean presumably our figures could be affected by either of these changing if the UK government changes them they'll have more extra is that right exactly yeah I mean one thing I just said to about one thing I would say is in terms of policy in terms of like payments etc it is a policy to implement quite a different system in Scotland to encourage take up and to support people into it so it is it is a discretionary policy decision by the Scottish government to implement a different type of social security system even if the payments and eligibility are not changing it still is a different policy because you're going to get more info than okay so you've got UK policy and Scottish policy but you're assuming that both of them can carry on exactly exactly yeah so and and and you can get this is where in time if you start to have changes in policy at a UK level that will feed through to potential to the BGA so again changes to eligibility for universal credit would potentially have a knock-on implication in terms of eligibility to the Scottish child payment if the UK government for example were to reform PIP in the future that would then have an implication in terms of the BGA which is then feed through to how much funding was flowing in into the budget so it wouldn't if the UK was to change PIP ADP policy wouldn't change automatically the funding might change the funding would change into the overall budget in terms of the BGA but then be a Scottish government decision about how they may respond or not respond in ADP yeah and i mean it's often said that both of these both for UK government and Scottish government this is a demand led area and we really cannot control it very much so you can yeah i mean David come in a second you can control it in the sense of what you do is you set the policy you set eligibility and you set criteria and then essentially that set you then rely on essentially the demand of people flowing into these into these payments clearly you can then expose start to change eligibility and payments if you wanted to but once you set a policy then essentially for the next year and the next month you're in essentially relying on take up of these benefits and that's quite different from traditional devolved spending such as health where you choose i'm going to give x amount of money to this health board and it's x amount of money that flows to that health board here what you do is you set criteria and eligibility and then you essentially let demand of people flowing into that and that's the that's why it's quite a different a way of managing the public finances and spending relative to other normal devolved expenditures professional yes just to elaborate on that point that what happens in other areas of spending like health and education is the Scottish government and the parliament approve overall levels of funding other people then split that down into say funding for universities funding for schools and then every university in school gets a budget out of that and they decide how that's going to be spent whether they feel opposed by appointing a geography teacher or a PE teacher so the real implications of that are felt at the end of a chain of decisions by a lot of individuals parliament has set an overall number and the implications flow through at a lower level it's almost the other way around the social security you set the eligibility criteria social security scotland interprets those eligibility criteria to say who's going to get the awards you set the amount you set what evidence people have to provide in order to get the award and then that all gets translated into numbers an overall spending number that emerges from a whole series of decisions you don't choose that spending number that emerges from a lot of decisions by other people but you can't control that because you can change some of the initial decisions but you're changing the things that are really conspicuous to individuals you're saying we're changing your eligibility criteria we're changing the amount of money you're going to get we're changing this aspect of how you can apply so the implications for individuals are much more immediate when you're trying to control social security whereas if you just change else spending people say okay else has been caught but they don't quite see the implications for their own GP visits for quite a while from that so yes it can be controlled but politically I think it's a different set of issues you're facing because of the direction of flow between the spending money and the ultimate implications okay well i'll certainly find that helpful personally that have it laid out in that kind of way and and the final point i was going to make so we've got we had that split we looked at the split of the 1092 million now going forward that split is kind of changing a bit am I right in saying so whereas Scottish child payments about half at the moment it wouldn't be half going forward can you explain why that's the case so essentially the as you move towards the end of the of the forecast horizon that's where we think that the effects particularly the different benefits in scotland and the different inflows that's where they start to have a gradually greater impact as the as the case as the applications and caseloads increase and that's why as a proportion of that kind of gap you see the the the the block the gap on the block adjustment taking up a slightly bigger outshare on that because what we essentially assume on scotland child payment is essentially numbers broadly remain relatively flat relatively stable going forward but then the payment is upgraded by inflation whereas we think that if you look at things like the disability payments adult disability child disability you have a growth in these numbers which leads to the higher levels of expenditure on that okay okay thanks okay thanks very much and i'm now going to invite um Jeremy Balfour in thanks i don't have any i don't have a supplementary at this point okay um i believe there was a question i think was it question seven i believe Jeremy i'm going to invite bob doris in thanks thank you um i know um what it was the community was hoping to get in the record from the fiscal commission somebody asked that and then roll together my my other question if that's okay uh so by 20 2019 the scots have the respect to spend around 1.5 billion more on social security than it receives in funding through the block grant adjustment the soft forecast of course based on all the best evidence you can get how uncertain is that figure yeah i think there's there's two different aspects just built on a bit the conversation i had to be Mr Mason there there's an element of the spending around things like scottish child payment which we can be relatively confident aside from any future policy changes in the amount of spending that that will take in the future and then therefore that relative that doesn't have an equivalent bga because that largely is a benefit around the number of children who are eligible via universal credit so it's quite it's a relatively straightforward element to forecast whether there's a greater uncertainty and where there's there's the greater potential variability is in the second element of the benefit that the social security funding differential we're talking about which is where the scottish government is implementing a new different a new approach to crucially in terms of adult disability payment and that's where there's the greatest uncertainty around that we've made judgments i think we started making these judgments in may 2022 for the first time where we said look we think that this different approach will lead to a difference in in funding and i think we're we're we're very confident and if you look at the data so far that there will be a gap relative to the funding flowing in and in many ways that is entirely what you'd expect you wouldn't be expecting to implement a different system that was designed to encourage and support more people to claim these benefits and to change the system and to make it more supportive and then not expect more people to be successful in applying so there will be a gap the uncertainty essentially comes around how big could that gap be and that's the bit where there's an uncertainty so it's essentially half of that funding gap is where there's an uncertainty there will be a gap how big that uncertainty is is the bit again by a question we just need a bit more data to wait and see whether that comes through as michael said we look at all these things as we go and we thought there would be a spike when adp was introduced that happened we thought there'd be higher levels of adp relative to pip after that spike once it was natural the national launch that's happened so the data that we're seeing is is consistent with our judgment calls we just need to wait to see actually what the exact number is to see whether or not to see whether or not these specific numbers need to be revised or not does the fiscal commission build in almost like a tolerance level in relations at 1.5 billions that absolutely get it your forecast could be dramatically blown off of course by a significant policy change at either a uk or a scottish level or an unforeseen event does the fiscal commission build in uh even though this is a thing because this is this is not my area do the building like a five percent tolerance a ten percent tolerance so would you say we're forecast is 1.5 percent but that could be 10 percent greater or 10 percent lower based on our the the range of judgments and if so what is the tolerance level around that so we don't do we don't do a specific tolerance of saying five percent ten percent in part because the nature of what we're tasked to do is to come up with a specific number to help the government set their budget what we do though is that through both our reports but also our forecast evaluation report which is a crucial bit that comes out every year when we look back that's where we unpick all the different elements so we say this is the essentially the we've said before this is the essential element we think will come through more successful applications this is a thing that will come through terminal illness this is a thing the increase will come through average payment so you can essentially do that sort of work yourself ditto as well we then look back at actually where have things changed and where might be the the variation in that so we don't do a specific here a rule of thumb to do but we we we can i what we show our working so anyone can can look at the potential relevant certainty there so i just want to come in on just to pick up on when we've added in you know forecast for the chain different approaches compared for the disability benefits i think we started to do that in the run-up to may 2022 but it was in may 2022 that we did it first for all benefits that included the pensioner ones as well as the working age adult one but the main i think the first time we did it in full for adult disability payment was in august 2021 where we provided quite a lot of information there along lines where i was talking about about the different breakdowns okay thank you could i just add that when we first produced our forecasts for adp there were 12 different areas of reform that the Scottish government had introduced into how adp was going to be delivered and we had to make because there was no evidence at all we have to make judgments on each of those 12 elements now the judgments we made on the things that have come to pass so far as graham said we have although we haven't we can't say our judgments were definitely correct apart from terminal illness we haven't seen anything that says they were very far out but we haven't yet seen our the implications of our judgments about lighter touch case reviews longer periods between case reviews the implications of that are still dependent on our initial judgments that we made two or three years ago so that is where the area of uncertainty still remains it's a judgment-based forecast but that doesn't mean we just made the numbers up that was based on lots of discussions with experts and other people in this area which is why i think some of our earlier judgments have turned out not to be very far off the mark i love that quote professor we don't just make the numbers up glad you put that on the on the record can you hear i had another question as you know but you have to manage the time that i think you kind of actually touched upon rosie's next question as well but if you would still like to come in rose um yeah i keep doing this to me um no because the the two do follow on and i was very interested in in forecast error um and it very much touches on that of what you've said and i do appreciate the information you've given me um but we're looking at a three percent or 127 million um as per the information you've given us now three percent as alluded to before when you're talking about as as time goes on and and the um the bill increases the um therefore the three percent variance becomes a lot of money um so um do you think that three percent error is what we will continue to expect um because we really need to have a plus or minus figure in our thought processes as to how we look at budget forecasting moving forward yeah um so the the three percent figure relates to 22 23 and the one thing that drove that to be slightly potentially higher than you would think is that when we talk about error we talk about the difference between what we said at the time of the budget and then actually what transpired that can change for error in terms of our forecasting but can also change for error because policy changed and that was one of the big drivers about why that happened in 22 23 so for this year so 23 24 we've not had that same in-year policy changes and we also haven't had the legacy effects of Covid so we think that error will that you know at this moment in time touch with that error will be smaller this year than than it was then the broader question though you're saying is that um and one of the things i think we have to factor in and you know in time we will get a better time series about the average error and the average forecast error that goes in there and again we've just got to get more data points we've got three percent for 22 23 we'll soon have the number for 23 24 and that gives us another data point that we can look at and interrogate one thing i would say more broadly though is that and this is a fundamental change with devolution and it's the same conversation we have with the finance committee on tax this is a fundamental difference in the way that the scourge budget now operates in the olden days you had Barnett you got that money and then you spent it on devolved elements of spending you now have a forecast for income tax that will change and be volatile and the government have to manage that with social security is exactly the same it we make a forecast but it's volatile and government has to manage that risk to the extent that the risks are shared with the UK the bga will protect if there's any differences in these risks between scotland and the rest of the UK then that will now be a fork that will now be all on the Scottish budget and that's just the nature the diff the really difficult need and the change in the way the Scottish budget is now going to work okay so just make sure i've got this correct in my mind so for every variance that the Scottish government puts forward as far as policy is concerned and the changes that they want to adapt the insecurities that follow on from that will mean that there could be a well there needs to be a recognisance of that as far as the budget process is concerned and we need to be aware that that will have an additional effect based on their policy decisions yeah yeah so essentially there's two big risks there's the risk of no differences in policy and scotland just being different from the rest of the UK and there's a second bit which is where the differences of the policy choices might lead to their own risks in terms of how they might be and that would be that that would come through as well that's excellent thank you very much indeed um i'm going to bring in paul but before i do i've got a quick question and it pleasens ultimately here and it's more a technical question in relation to the papers that you provided us with and it's the IFRS 16 and i'm just if you could just as i say it mentions about it's being used progressively within the public sector at the moment it's a new standard that's obviously come in in terms of the lease and impacts on capital but what it states and just for the benefit of myself and the rest of us here if you could just put it in layman's terms about how it impacts on the resource compared to and increases the capital yeah so it's largely so that IFRS is largely a technical accounting definition of the budgets and where things score and where things are reported in there it doesn't change actual it doesn't it's not changing the actual kind of outflow of what the government is spending and actual spending in that regard it's just it's largely a way of reporting it and it's essentially the changes bringing the Scottish government budgets in line with good process for how budgets are reported so we talk a bit about how this is how if you looked at it through the with the new IFRS system these are the numbers here this is how it would look if you're looking at the old system but it doesn't actually change the actual spend it's just how it's all it's all how it's reported okay that's great thank you very much for that and now i'm going to bring in paul okayne thank you thank you very much convener and good morning to the panel i'm interested to understand more about policy costings both in terms of i think new new policies that will come in this year but i think my first kind of question would be about whether there are delays to new benefits the impact that that has in terms of forecasting so we know for example that the delay of carers report payment from spring to autumn it has been you know widely discussed and we've spoken about it in this committee i just wonder to what extent that has an impact in terms of the forecast yeah um so in the in the part in terms of the totality of spend it doesn't impact because everything is backdated where it may have an impact at the margin would be as if it's impacting year on the changing in year on year so um if you had people who were not say receiving a payment in 23 24 but they got it in 24 25 and it was backdated and that would obviously uplift the expenditure in the year it was it was taking place the one thing i would caution and just saying that is that the it's it's we don't think at this stage and we we thought about this it's having material impact our forecasts in terms of the public finances because you're dealing with a relatively small number of of like inflows rather than the totality of there and it's a much smaller it's a small percentage so given that the it's a relatively small number of a much bigger number that we are that drives the overall totality it doesn't really have an impact on our on our forecast and also as well particularly we've seen over the last year within the last financial year we've seen quite a drop in in that which in turn means it from a public finance point of view it doesn't really have a material impact on our forecasts okay that's helpful and then i think in terms of new benefits coming on stream this year obviously there's a degree of uncertainty particularly around things like pension age disability payment to replace attendance allowance and i think you have said that costings remain you know highly uncertain in that space so i wonder to what extent you'd experience the forecasting other disability payments having formed your costings and that assessment of pension age disability payment yeah mic i don't know if you want to be recommend on just some of the detail about how the judgments we then use on things like cdp and adp in the data we track feeds through into that but maybe a bit about the actual process we go through about costing yeah yeah so with pension age disability payment our start point is attendance allowance the benefits replacing and then it's looking at we forecast based on the the caseload so the number of people getting the benefit and then the average amount that each person gets and then when looking across the changes that have been made about sort of promoting the benefit and encouraging more people to make applications we think that that will have an effect on the number of new people flowing into it so then in our models we sort of have ways of forecasting the month sort of thing what we call monthly inflows which are the new people starting each month and make adjustments upwards to reflect what our judgment is on on those increases and it's really helpful that you're mentioning cdp and adp in that context because i think we made similar judgments for cdp and adp and they're the ones that we've been starting to get the data through to sort of verify those judgments and and so far as i say we haven't seen evidence that we need to change those judgments for cdp and adp so the moment we we think we're sort of we're quite happy to make similar judgments for pdp even though the the client group's quite different because it's a pension age client group we still think that relative to attendance allowance just because of as i said the promotion and the the help that people might have applying that there will be more applications and more successful people receiving the benefit compared to had attendance allowance continued and that then leads to sort of a gap versus what we expect the bga funding to be i wonder to briefly convey to you just on that point about adp and understanding the uptake as of both in the increase in people receiving that benefit i mean you say that analysis is underway or is being done is that something you would intend to share more widely in terms of to inform this committee's work yeah so we've in in the report yeah we've already started to sort of look at that and talking a bit more detail about that and figure 5.9 we show it in terms of applications but obviously that's the first stage in the process then further down the line and because of the time of processing so i think yeah it's this picture that we'll we plan to continue to build up in future reports and certainly in me it's it's one that i think we'll definitely build on more okay thanks very much i'm now i'm going to invite i'm oh sorry i believe miree mignair wants to come in and then i'm going to invite gerrymy balfour thanks thank you convener actually thanks for your indulgence i'd previously asked the fiscal about difference i'm more generous and quicker approach terminal unless it's making the scottish budget and obviously it's really important we get this right for this particular claimant you touched it on that in your opening speech do you think it can end further observations that you can bring to the committee for us just i'm really interested in that part yeah i mean michael maybe we want to maybe do you go into some of the detail around that the the broader part of what i was making around terminal illness is that we make one of the big things that we make an assessment about how that and about the number of climates that might be coming through for terminals and we had an assessment in there about what we thought might be the the number of people coming through on that and then looking at the data so far that we're getting so so security scotland we think that that our judgment was higher than has actually flown through so we've adjusted our number accordingly for that and that then feeds through to our our forecast in there i don't know if you want to explain a bit about what data is we're tracking and it shows that yes and published statistics we can see the number coming through under the special rules for terminal illness and as graham says it's below the level that we'd had in our forecast previously so but we still think sort of based on on the wider evidence that the level that we thought we it would get to by the end of the forecast will be the same it's just the rate that it'll get there will be a bit slower it'll just take a bit longer to build up so that means that in our forecast for 2425 that reduction and adjustment in the profile has reduced the forecast by 27 million to say for 2425 but then that sort of reduction reduces that makes sense in later years so then it gradually builds up are you aware of any reasons why that's the case is it the promotion of it or it could be this is sort of more in the speculative side it's difficult to find any hard data on it but it could be just the way that it's interacting with people applying through the normal rules and whether people at the moment have who might have become eligible under the terminal illness rules actually qualified under normal rules earlier so it's sort of it's not sort of a separate group of people coming in it does interact with the rest of the the caseload so yeah it's an area that we'll continue to look at to try and understand that but I think yeah it's difficult to try and then see there's any specific reason at the moment thank you much thank you I'm now going to invite Jeremy Balfour in and I think this will be our very last question for you so thank you very much it may be two questions I just wonder if I can follow that up slightly by asking is the data you're getting from Social Security Scotland sufficient and other areas you think we should be recording that we haven't recorded it yet when we spoke to the committee I think maybe 18 months ago we were saying we really needed much more data from Social Security Scotland and we were and we had some real you know we had some concerns about our ability to do the forecast I should say and it's good to put on the record is that we have you know the amount of data and support we receive from Social Security Scotland is is excellent and we've been we've had a lot of the data that we're now seeing and as we're as coming back to the question from Bob Doris about you know we're now getting data points coming in we're now tracking applications we're now tracking average payments we just need to wait a bit longer for that so we're getting a lot of that data from Social Security Scotland there's also we also get which is again really helpful is lots of really useful intelligence from Social Security Scotland so they're able to tell us about you know what's happening to backlog what they're seeing in terms of applications what they're doing around promotion etc and that again is really helpful for us because it then means that we can then take judgments about where we are on that I don't know if there's any specific Michael that we're still waiting on no I think it's more looking sort of to the next benefits that are sort of being launched like so in particular I think next one well that's just the pilots just start as a care support payment I think we're keen that obviously and and hopeful that they will then be able to provide the data on that in a timely manner and then following that it's PDP as well so I think it's just in future and the one area I think where we do mention an adult disability payment is is around award review data but I think that's because it's that that part of the process and is sort of in still quite the early stages but we're hopeful that we might have data on that for the to inform the next forecast which we expect to be in May thank you for going to my final question and what are the main elements of uncertainty in the costumes for pension age disability payment and pension age winter payment and can I just put on record as well that I am in the sheet of the highlights of this for all the lessons thank you okay thanks so on the on the pension age winter heating payment again that's probably one of the ones where there's much less uncertainty because it's largely just demographics is larger than number of people who are eligible and because it's it's going to universal it's just what the forecast is how many people are eligible that's that's basically it and there's more uncertainty around the pension age disability payment because as Michael said we've got a judgment about what might be uptake what might be the successful applications in there again avoiding the the the temptation to get a specific number on it it's probably likely to be less uncertain than ADP and child disability payment because of the nature of the demographics that we have in that and so there will be a there's a judgment that we've made in there but it's probably likely to be less uncertain than what we've done for some of the other benefits thank you okay unless anyone else wants to come in then that actually concludes our evidence session and our public business for today can I can I just say thank you very much and several of the committee are actually going to visit social security in Monday in Dundee so I feel that we are definitely armed with a lot more information to ask pertinent questions anyway so so thank you very much so and thanks again for for your attendance here today we'll now move into private and consider the remaining items on the agenda so thank you