 Good morning, everyone. I welcome you to the second meeting of 2019 of the Social Security Committee. I remind everyone present to turn off mobile phones or other devices and put them to silent mode so that they don't disrupt the meeting. We've had one apology this morning, unfortunately, where Deputy Secretary for Parliament Neil MSP can't be with us and we've moved to agenda item 1, decision to take items in private. The committee has asked to agree to take item 5, consideration of evidence heard with item 3 on the EU withdrawal act to be taken in private, as the committee agreed. Thank you to that. We've moved to agenda item 2, budget to 2019-2020. The committee will take evidence to the Scottish Government's draft budget, 2019-2020-2020, and I welcome Shillland, some of old cabinet secretary for social security with us this morning and also your officials and McVie, deputy director of social security policy division and James Wallace, social security head of finance, Scottish Government. Good morning, everyone. I thank the committee for embracing the new budget scrutiny process this year, and the letter ahead of the budget statement focusing on the Scottish welfare fund was very helpful laying out the committee's views. Our spending plans are ambitious and clearly set out this Government's commitment to creating a social security system based on dignity and respect. That is, of course, the first year that the social security budget is set out separately from the Scotland Act implementation budget line and does certainly provide more transparency both to Parliament and to the public. Following last month's publication of the draft budget, members will be aware of the social security and older people portfolios focus on our overarching aims to create a fairer Scotland and tackle poverty and inequality. The budget recognises the cross-cutting nature of equalities and human rights and supports delivery of equalities objectives right across government. We support and celebrate the skills and talents of our older people and seek to reduce barriers for all to contribute to their communities. The budget continues to prioritise funding to support the design and implementation of our devolved social security powers. In 2019-20, our investment in social security will be over £560 million supporting the programme of delivery and the administration of social security Scotland with a forecast of £435 million of assistance going into the pockets of people living across the country. Key points for the portfolio in the budget this year include delivering new services while continuing to deliver the currently devolved elements of social security, maintaining funding for the Scottish welfare fund and discretionary housing payments, and investing £77.8 million in the social security programme to ensure the safe and secure transition of the remaining benefits to be devolved under the Scotland Act 2016. Social Security Scotland was established in September 2018 as an executive agency of the Scottish Government and now employs more than 270 people based in its headquarters in Dundee and in a second site in Glasgow. Once fully operational, Social Security Scotland will employ an estimated 1,900 people. All of those jobs are new to the Scottish administration. Social Security Scotland staff are working with organisations and people with experience of the current system to ensure that recruitment is based on the principles of dignity, fairness and respect. Social Security Scotland represents both in spirit and in fact an investment in the people of Scotland by the people of Scotland. Our priority is taking on full responsibility for all the devolved benefits through a safe and secure transition so that people can continue to receive the right support at the right time and at the right amount. Our relationship with the Department for Work and Pensions plays an important part in our work throughout the devolution process to ensure that that happens. 2019-20 will mark the third year of our social security programme and work continues at pace. I talk often about the complexities of the implementation programme and how we are using agile methodology to manage those complexities. I therefore like to take this opportunity to invite committee members to visit the programme staff in Victoria Key and see agile in action. It is the methodology that allowed us to successfully deliver the carers allowance supplement and best start grant in the current financial year. As I set out to my letter to the social security committee on Thursday 20 December 2018, I am pleased to report that the carers allowance supplement payments are running smoothly. This Government has put an extra £442 into over 75,000 carers pockets this year, an increase of 13 per cent and an investment of over £33 million and made our commitment of paying carers this additional supplement in this financial year. Carers will also see their benefits retain their value with inflation level increases to carers allowance and the carers allowance supplement in 2019-20 of 2.4 per cent. In 2019-20 we expect to spend £37 million on carers allowance supplement payments. Best start grant represents a significant additional investment by the Scottish Government in comparison to the UK Government Sure Start maternity grant provision, which it replaces. That new benefit provides a payment of £600 on the birth of a first child, which is £100 more than the Sure Start maternity grant. Second and subsequent children who get nothing under the DWP system will receive a payment of £300. Two further early learning and school age payments of £250 will be introduced by this summer 2019. The best start grant pregnancy and baby payments were launched on 10 December, and as you are aware, application numbers in the early days of operation were exceptional. The unprecedented response demonstrates a clear need for this new, more generous benefit and that people know that the Scottish social security system will be markedly different from the current UK model. Steady progress is being made in processing applications and making payments. That is a fantastic response to the best start grant, and the budget reflects the Scottish Fiscal Commission's forecasts, which assume a start date of 1 June 2019 for the best start early learning and school age payments. Allocations will be refined once actual start dates are confirmed. In the meantime, I would like to reassure you that this is a demand-led budget and all eligible applicants will get a payment. We are also on track to deliver our new funeral expense assistance by summer 2019, improving the support available to lower-income families struggling with funeral costs at a very difficult time. Arranging a funeral following the death of a loved one is hard, and it can be even harder if funeral costs are an issue. We will widen support by 40 per cent compared with the current payment, and we will support that with £2 million of Scottish Government funding above the transfer from Westminster, totaling £6.2 million. We are also working with people with experience of the current payment system to improve the parts of the process that people find most difficult at present, and we will be laying the funeral expense assistance regulations early in 2019. As well as continuing to deliver the newly devolved elements of social security in 2019-20, we will continue to invest in actions to mitigate the UK Government's welfare reforms and support those in low incomes. In this financial year, we expect to spend over £125 million in total to mitigate the worst of the UK Government's welfare reforms and to protect those on low incomes. That is over £20 million more than in the previous year. It includes investment of nearly £100 million for discretionary housing payments and the Scottish welfare fund to continue mitigation of the bedroom tax. We are also continuing to fund discretionary housing payments with assistance to the value of £63.2 million. That is, of course, on top of work that is completed in other portfolios that also assist those on low incomes, ending homelessness together—for example, £50 million in the tackling child poverty fund to give but two examples. That contrasts with the UK Government welfare reform measures that are expected to reduce annual benefit spending in Scotland by £3.7 billion in 2020-21. Clearly, it is outwith the capability of this Parliament to mitigate these cuts in full, however, we are taking important action to support individuals and families where we can. We should not and cannot use our budget to paper over the cracks of the UK Government's mistakes. The Social Security and Older People portfolio budget for 2019-20 reaffirms this Government's commitment to creating a fairer Scotland and tackling poverty and inequality, and this budget outlines the strong contribution that social security can make in that regard. I thank the convener for the opportunity to address the committee this morning, and I look forward to your questions. Thank you very much, cabinet secretary. I am sure that a lot of positive things will be explored as the meeting goes on, but it concerns the committee's hard over a period of time before my incumbency is community of this committee when it was previously clear Adams in relation to whether the Scottish welfare fund meets the demand that is out there in society, with local authorities obviously delivering that. How does the Scottish Government assure itself that the £33 million that is provided for in the welfare fund is enough to meet all the aspirations and needs that are driven by the welfare fund itself? As the committee will be aware from my response to their letter on the Scottish welfare fund, the fund did help over 300,000 individual households, which is a very important lifeline to people on low incomes in times of crisis. We have ensured that we have continued the funding of the Scottish welfare fund, and that is despite the cuts that we are seeing from the Scottish Government's budget from Westminster and the welfare cuts coming from the UK Government in general. I assure the committee that we take very seriously, not just on an annual basis, but, as the year goes on, to constantly assess the Scottish welfare fund through the management information that we have from local authorities. That can be, for example, on applications, awards and expenditure. That allows officials and their briefings to keep a close eye on the applications that are coming in from local authorities. I appreciate that the committee wishes to see more money in that budget, as is right to look at that and raise those issues. However, I hope that it can take some comfort from the fact that we take very seriously looking at the number of applications, of refusals and the amount given in a grant so that we are keeping up-to-date with what local authorities are spending year on year. That is helpful, cabinet secretary. I note that, as the previous committee on May suggested, there could be more money required for the welfare fund and I had written in November on behalf of the committee saying something similar in relation to growing pressures out there in society. However, I note that it remains underspent each financial year by £2 million to £3 million. There appears to be a disconnect between the numbers and what we intuitively think is happening out there in the communities that we represent. I notice from our briefing that, in relation to the community care grant and the Scottish welfare fund, that, in quarter one for the financial year 2016-17, 66 per cent of those grants were successful, but in quarter one for 2018-19, that was 58 per cent. For the same time periods for the crisis grant, that was previously 72 per cent. For quarter one for 2018-19, that had fallen to 65 per cent. It is not a huge decrease, but it is certainly a reduction. The committee would like reassurance over, I suppose, that local authorities are not simply managing a tight budget. Therefore, the way of doing that is to approving less application of welfare fund than, perhaps, they would like to. Certainly, that is one of the aspects that we look very closely at. The number of applications for example for community care grants has increased. The acceptance rate for that has dropped slightly year on year. We note, of course, the number of reviews that take place. That is a test to see if the correct decisions were made by the local authorities. Over half of the original decisions are upheld for community care grants. The number of crisis grant applications has increased over the past years and the acceptance rate has fallen slightly last year. It is also important to look at the amount of money that is being given in the awards. For example, for crisis grants, the average award in 1314 was £71, for 1718 it was £77. Therefore, we are not seeing a decrease in the amount that is being awarded to people as we go on. When we are looking at the community care grant average awards, it went from £638 in 1314 to £600 in 2017-18. It is a very slight increase. One of the things that would be obvious to look out for is if we were seeing the amount that people were being given would be a sign of concern, but we are not seeing that coming through. You are quite right to point out, convener, that local authorities will use their money in different ways. We have some local authorities who are management statistics. Those are not official statistics, but what we look at month on month, we are seeing around 19 local authorities are roundabout on-budget or below where we would expect, with a further within 3 per cent of where we would expect at this time of year. There are some local authorities who spend right up to their limit. There are some who have an underspend that carries on into the next year. All of those different percentages and the ways that money is spent through the year is very closely analysed. If there are any areas of concern, and of course if there are, then officials will have very close liaison with the local authorities during the year to check in to see why decisions are being made. They are reassured that there are no issues in that area. I think that the committee would welcome more information in relation to that specific process. I note in the reply to the letter that I previously written to you, cabinet secretary, on behalf of the committee. One of the things that you said, the Scottish Government is reviewing the statutory guidance on the Scottish welfare fund in the early part of next year, now this year of course. There is also a mechanism in there as well in terms to make sure that if there is sufficient funding in the welfare fund that all is good with that, but if there looks an anticipated shortfall, should demand increase. I think that we are all seeing what we feel is demand increasing in our communities, but not necessarily that demand increasing with the welfare fund, and we have some concern around that. What mechanism do you have in place in relation to that increased demand? Does it manifest itself in relation to applications to the welfare fund that local authorities are managing it properly? What flexibility is there in the Scottish budget to provide additional or reallocated monies given the type of budget situation to make sure that the Scottish welfare fund has got enough cash? The Scottish welfare fund budget is set during this process, and the allocation of that to the local authorities is set by a formula that has been agreed by COSLA, and that is based on SIMD figures. The allocation between local authorities is not set by the Scottish Government alone, but is agreed with the local authorities. Last year was the first year where that new formula was in place in its totality. The Scottish Government and COSLA have on-going discussions on the Scottish welfare fund, and they will continue to be so. When we are looking at the management of the Scottish welfare fund, we have close working relationships with officials at the Government level and the different local authorities. There are good practice discussions throughout the year to ensure that local authorities, while using their local discretion, follow the statutory guidance. The guidance is there to not dictate how the local authorities use their money in that aspect. It is guidance that they should be mindful of. Officials are there during the year to encourage good practice from local authorities as we move through that. I have no further questions, cabinet secretary, which is for clarity when I used the expression reallocation. I went from one part of the portfolio to another. I am conscious of the financial situation that exists in Scotland right now. Any more information can provide us in writing in relation to the mechanism by which we make sure that the forecast budget, as agreed by COSLA, is not exactly science, is fit for purpose as we progress through the forthcoming financial year. We will be welcomed by the committee to allow us to grapple with whether the £33 million is, indeed, an appropriate sum for the Scottish welfare fund. I think that that will be helpful. A couple of supplementaries on that and some further questions, Alison Johnstone to follow by Shona Robison. Thank you very much, cabinet secretary, for your evidence so far this morning. Just for a bit of clarity, clearly there are some areas that I appreciate not all, where there was an overspend in 2017-18, including areas with large populations such as Edinburgh and North Lanarkshire, and several, including Glasgow, were really close to their allocation. When we took evidence last year, Morag Johnstone from Glasgow City Council said, the statistics and the evidence for Glasgow show that the allocation that we received through the distribution model is not sufficient to meet demand. I appreciate what you are saying about closely monitoring demand, where the funding is being exceeded and where it is not being required. Are you clear as yet that underspend is reflecting a lower level of need, or are you still looking as to whether or not it is just about the way that particular local authority is managing the fund? What is up to the local authority to determine each decision that comes forward for the Scottish welfare fund? Therefore, the Government sits apart from the decision that was made on an individual basis for that welfare fund decision. We encourage local authorities to ensure that there is promotion of the Scottish welfare fund, so that those who are eligible for the Scottish welfare fund are being made aware of it and being assisted to apply for that if they require that assistance. I can appreciate that the committee would wish that the budget to be higher. That is a budget that has been discussed by the committee previously. The money that has went into the Scottish welfare fund over a number of years will have different pressures at different times, depending on what is happening, but the relationship that we have with local authorities, as I said, because of the work that we are doing around applications and ensuring that the number of awards granted, percentage-wise, is not showing dramatic statistically significant decreases, satisfies me that the welfare fund is being well used and well utilised by local authorities in relation to what is required of it, and that process works well year on year. There are two more supplementaries in relation to the welfare fund. I apologise to the members to ask them to make those briefings. I spoke for some time on it, but there are a number of themes that we have to cover in this morning's scrutiny session, but I will take those, and I will show them obviously to be followed by Michelle Ballantyne. First, for clarification, my understanding is that the £2 million underspend is being carried forward for 2019-20, which will mean a budget of £35 million, which is positive, but presumably that would need to be carefully used, because it would not necessarily be recurring, or would it be recurring? The underspend is not taken away from the welfare fund, so it is not like what you do not want to get into as a position at the end of the financial year where decisions are not being taken appropriately, so underspends are not taken away from the local authorities. Obviously, it depends year on year on how much underspend they have, so that would vary from year to year. Moving on to the formula then, I understand how your formulas are negotiated and are based presumably on a number of existing ways of allocating to local authorities, and I understand that. However, I guess that there is a lot of local variation emerging here, so you have some local authorities overspending or spending to their limits, some underspending, some supplementing the welfare fund with their own resources. My question is that, is there the opportunity in the light of going from the formula as was set to seeing in practice over a period of time what that actually results in in terms of a more accurate, factual picture of local need? Is there the opportunity in the light of that evidence to then review the formula? It strikes me that it cannot be right going forward if there are local authorities consistently underspending and others that are not being able to meet need. That would suggest to me and, hopefully, to COSLA that there would be a need potentially to look at the formula again in the light of the actual practice of spend in real time. As I said in a previous answer, this is the first financial year in which the formula has been completely based on SIMD statistics, as agreed by COSLA. It is very important, of course, once we get the information in for the year in total, to have a look at that and to see whether that formula is working from our point of view and from COSLA's point of view. As I said, it is not our formula, the Government alone, to review. We are planning to analyse what comes in under the formula and to ensure that people are content with that. If there are discussions at our local authority level around that from COSLA that would have any concerns or points where they want that to move forward, then we are certainly open to that. I think that that is helpful. Am I right in saying that, according to our papers, funding for the Scottish welfare fund was transferred from the UK Government in 2013? My question is around, one, according to the papers that we have, it has not kept pace with inflation, so has it stayed exactly the same as it was when it was transferred? Secondly, as it was a transferred benefit in terms of the financial side, is there any restrictions on the use of it? Has it got to stay like that? Is it added to the block grant forever now, or does it disappear if it disappears? Of course, the Scottish Government took the decision to move forward with the Scottish welfare fund, where in England there are no such funds given by the DWP, but we did feel that it was important to continue with that type of funding under a devolved settlement. The aspects around the Scottish welfare fund are set out in legislation, and there are specific areas in which the Scottish welfare fund is spent. The crisis loan, for example, is one example of that. We have the opportunity within Scotland to determine how that money is spent, to ensure that it is meeting what we believe that the principles of the fund should be, which is to help people in times of crisis. That is what we would continue the fund's principle aim to be around. The money is not attached specifically to having to deliver that remit. It is now part of the block grant that is what I am trying to establish. Yes, yes. Sorry, I misunderstood. Okay. That was quite a lot of time spent in the welfare fund. I thought that that was important, given that we are on-going dialogue with the Scottish Government in relation to that significant amount of other themes now that we are hoping to cover. Keith Brown. Yes, thanks for your evidence, cabinet secretary. In your opening statement, you mentioned things like best art grants and the funeral expenses, which go to the idea of a genuinely cradle-to-grave welfare system. However, the Scottish Government is spending around £90 million on mitigation of Westminster measures. I suppose that my question is to find out if you have given any thought to what you would prefer to be spending that £90 million on. Are there a series of things where you could go further in terms of a Scottish social security system? I would imagine that you would want it to stay in your portfolio, but are there other things that are being frustrated by the fact that you are having to mitigate so much of what Westminster is doing? I am sure that Mr Mackay would have a view on what he would like to spend that mitigation money on as well. Keith Brown is quite right to point out that the money that we are spending on mitigation and supporting low-income families because of what is happening down in Westminster, particularly because of welfare cuts, is money that we are not spending elsewhere. I am very aware, as we go forward with the different aspects of social security that stakeholders, the committee and other members of Parliament will have wishes for me to do more. We have had that discussion that I know of our best art grant, funeral expense assistance. We will have it over the young carers grant and job grant. All of the decisions about how much the Scottish Government is spending have to be done on the basis of the measures that we are undertaking to mitigate the worst excesses of that £3.7 billion cut to welfare expenditure that I have said. In an ideal world, which I cannot see happening under the continuing ideology down at Westminster, there are a myriad of different ways that we could be spending that money that we are currently spending on welfare mitigation to support those on low incomes and to use in social security although, as I say, I am sure that my colleagues in Cabinet would also have ideas about how they could also spend that money, but you are quite right to point out that that money is used for that. It is not being used for something else. I think that what has been done in terms of mitigation is absolutely right. If you look at the Trussell Trust's statement on the rise in substantial rising food bank use when universal credit moves into an area, you can see the genuine need there. I take from the answer that you have just given it really if you were to have that money or such proportion of it as you were allowed to keep. It would be to build upon the different initiatives that you have taken already rather than any other new initiatives that might be waiting in the wings to be taken forward if more resources became available. I think that the opportunities that the Scottish Government has under its new powers would allow us to look very seriously at what else can be done, and we are doing that with the income supplement. That is yet another example of a very ambitious policy that will have a significant cost attached to it that we will have to fund through our Scottish block grant while continuing to fund mitigation measures to support those on very low incomes. Again, you could use that money in many different ways. I just launched the job grant consultation, for example, yesterday, which seems to be very welcome for stakeholders in the support that will give young people to provide for travel costs and clothing costs to be able to get them into a new job. What more could we do on the young carers grant? I know that the committee had a great discussion about the amount that we were putting forward for the young carers grant and whether that was sufficient for young carers. There are a number of areas that we are already doing, but we are looking very seriously at what else we could do under our new powers, but that has to be done within our budget, obviously. The very one last question. Does all those things taken together mean that you could be looking at, or have you done any work on, all those things being superseded by, for example, an initiative to have a guaranteed basic income? The basic income is, again, another ambitious policy that we have over the longer term. I share with Cabinet Secretary Elaine Campbell responsibility for this. She is in particular looking at the pilot areas that we are looking at at the moment to see what could be learned. I hope that that points to the innovative ways that the Scottish Government is attempting to look at what we can do to tackle the areas around poverty, particularly child poverty, in a more innovative way than simply doing more of the same and putting out benefits in the manner that the DWP does. Part of the mitigation measures budget is the financial health check, which is going to be £3.8 million spent over the next two years. If the Government is setting a target for the number of people that they hope to reach and the amount of money that they hope to improve or the amount of money that they hope to be able to support people to claim, just in light of the statistics produced by Northern Ireland, which has shown over the last year that its benefit campaign resulted in £37 million of additional income for citizens in Northern Ireland. I will perhaps get back to the committee on that. That is a specific area that does not sit within my portfolio but sits within Aileen Campbell. Within the waiting tomb that I have in front of me, I do not have the details for specific targets for that, but I will certainly get that provided to the committee. However, you do, in general, point to a very important point around ensuring that people have benefit take-up. That is something that the committees discussed, which is within my portfolio that we are looking at very seriously within social security, to ensure that we do everything that we can to ensure that those are eligible to take up their benefits. However, I will provide the committee with details of what is in Ms Campbell's portfolio in due course. I was hoping to ask a little bit about the payments that have been made to the DWP. I note that, in particular, the Scottish Government's administrative costs for 1920 with regard to implementation costs are under negotiation, as I understand it. I wonder what was being negotiated and where that was headed, please. It is something that we take very serious consideration of when we look at our dealings with DWP. There are a myriad of different ways in which we have to continue to interact with the DWP. For example, around the best start grant initiative, we have to give money to the DWP because we want to verify people's identity using a DWP system. There is a cost from the Scottish Government to the DWP to allow us to run the best start grant in the easiest way for the applicant, because we do not have to get them to re-check and re-verify their identity when they have already done it for DWP. For example, in the carers allowance supplement, we need them to data scan who is entitled to carers allowance supplement. Therefore, there is money that is transferred to DWP from the Scottish Government to allow that to happen. Those costs come from a variety of different budgets, and they will change year on year, depending on what the Scottish Government will be doing. I wonder if you want to add, James, something about the negotiations that are currently on the map. I can add a little bit, cabinet secretary. There are essentially two categories. There is the cost we pay them where they are administering something on our behalf. The costs there may vary year on year, depending on the volumes that the DWP administers for us. We, at an operational level, official speak weekly to DWP to monitor those costs and to agree them under the agency agreement that is in place. On implementation costs, it is case by case, depending on what the programme is doing and what we actually need DWP to do. At an operational level, we will take the fiscal framework agreement and we will interpret that with DWP to decide what is and is not rechargeable. Then we will have all those costs validated, discussed, talked about whether they are appropriate under the fiscal framework and then recharges will take place. It is an on-going and live negotiation that never ends. One of the aspects that is important, of course, is that point that James points to within the fiscal framework. If we are asking DWP to change something in their system to allow us to deliver something up here, we are charged for that. That depends, as James says, on what happens year on year. However, the fiscal framework aspects around charging require us to do those negotiations exceptionally carefully to ensure value for money for what we are doing up here. You mentioned that the work never ends. I am curious to know what kind of development work might lie ahead, what might be requested for the coming year and what the illustration of what the development work might mean in practice? In essence, it is any changes because of what we are doing with the new-devolved benefits that are on steam for the completion of wave 1 and wave 2. Anything that we require DWP to change, we will have to look at. I cannot give specific examples of that, because we are still formulating the policies for what wave 2, for example, will look like. However, there have had to be changes made to allow us to run wave 1, and those types of changes will have to be made when we are looking at the wave 2 benefits. Obviously, in the past, there has not always been straightforward getting information from the DWP, so are you satisfied that those negotiations are being provided with adequate information at the moment from the DWP? Was a Freudian slip in the current situation? The DWP? I think that my negotiations with the DWP are complicated enough without bringing in another party. I think that those are always going to be very difficult negotiations. I can appreciate from the DWP's point of view that they will want to ensure that they are pressing my officials as hard as they can and they do. Likewise, I am very content that, at the Scottish Government level, we are doing everything that we can to push back when, for example, we think that the DWP would be making changes anyway, and it is not because we have asked it to do something because of the devolved settlement that necessarily the charges should come down to us. I can assure you that a lot of time and effort goes into it and that we take very seriously to ensure that we are not being asked to pay money that we should not be paid in that point, as you would expect us to. I think that the DWP's non-involvement is probably helpful in this. I suspect that members might want to see the Department of Work and Pensions moving forward if they are not too sure of how to express it. Michelle Ballantyne, over to yourself. Okay, thank you. A couple of quick supplementaries and then do you want me to go on to my substantive? Compliment you on this, then go to your substantive question. Okay. Quick one, the health check money. Is that part of the announcement that was made by the Westminster DWP when they were talking about the £30 million that was going to CAB? The financial health check money is a Scottish Government initiative. The money that it has been given from DWP—you have got me at this now—the Department of Work and Pensions to citizens advice for looking at the implementation of universal credits. It is very separate, and that is a UK Government scheme that deals directly with citizens advice, including citizens advice Scotland. Right, so we are getting a share of that. That is the key thing as well. It is going directly to citizens advice Scotland. Okay, thank you. I just want to move to talk about the costs of running Social Security Scotland and what is being delivered there. I asked the question—I see that it has appeared in our papers as well—in terms of the breakdown of the £41.5 million that was forecast for 2019-20 running costs, of which £6.1 million is the payment to the DWP for running the benefits that are currently being delivered by them. Am I correct in saying that the benefits that we are currently delivering under Social Security Scotland during that year amount is £58 million? So, looking at the costs of the staff and the buildings, etc., a quick calculation appears that it is costing 60 per cent of what we actually deliver in running, or the figures that I have got in front of me are not working. You are shaking your head. I think that perhaps if you want to run me through your question one more time, my apologies and all. Right, so the cost you gave me in terms of what Social Security Scotland is costing us next year to deliver next financial year is £41.5 million. Okay, £6.1 million of that goes to the DWP to deliver the benefits that they are currently delivering. Okay, which is—we have got an overall forecast, Scottish spend of £421 million, of which £283 million is being delivered by DWP, so that's the £6.1 million that we pay them, and the remaining amounts are delivered by us. So far, so good? Yes, yep. So, when you take out that amount, what we're actually delivering, the cost of delivering it is about 60 per cent of what we're actually delivering, equivalent to 60 per cent of what we're delivering. I wouldn't agree with your assessment on that. I'll try and take you through some of this, but perhaps provide figures in— The money, I mean it's equivalent to 60 per cent. Right, so the £6.1 million to the DWP isn't simply for carers allowance, it's for also the carers allowance supplement data scan and the best start grant verification identity payment and accounting. The money that we are actually spending in terms of what we will deliver to people doesn't just include money that comes from a transfer from the DWP, but also additional money that we will be getting on top of that. So, for example, we are putting more money in for a best start grant, we are putting more money in for funeral expense assistance, and so on, as well. The figure in terms of how much we are paying for benefits, I would argue, is higher than— 58.1 million. 58.1 million. I'll perhaps pass over to James, because my apologies, you've lost me a little bit in this aspect. I see the calculation that you're making. I think that it's an unfair calculation, if I'm honest at the moment. It's a calculation that DWP traditionally carry out under a steady state when they're not doing different things. Social Security Scotland at the moment is involved in the delivery of benefits, it will be involved in 1920 in the delivery of best start grant, funeral expense assistance, and those are some of the things that it does, but some of the agency is also training, getting ready, preparing for wave 2 benefits that will come on stream. That's costs that lead now that aren't necessarily attributable to the administration of benefits in the year. I think that over time, as the agency moves into a steady state, it will become a more valid calculation, but I think that the agency is not involved solely in the administration of benefits at the moment, which I think devalues that calculation slightly. Can I ask you then? My first question was just to establish that I was playing with the correct numbers, if you like, and that you weren't going to come back and say to me, you know that's completely wrong. If we've established that those numbers are correct, when in terms of the devolution of benefits and the taking on those responsibilities, because it's obviously this year there's been a number of staff that have come in post that have trained up to deliver the benefits that are going to be delivered in this year ahead, and in this year ahead what you've just said is you're suggesting that they'll be training to deliver the next year ahead. We don't have the numbers going forward, but what is your estimation then of the relationship between the cost of running social security Scotland and the delivery of benefits? Part of that will decide on the policy decisions that are taken around wave 2 and what that looks like. I couldn't give a long-term analysis of that, but what I perhaps can speak about is to give some examples of what's happening this year and in the forthcoming year that will hopefully assist with providing some examples for that. We're already having in place staff for the set-up and establishment of local delivery, which I know that you have asked about in the past. We're already seeing within this financial year what we'll have to do to staff up for best start grant payments, funeral expense assistance payments, but particularly the large aspect that will come on that will have a greater impact on that overall cost is what we do around wave 2 and particularly disability benefits as well. We are always looking to ensure that social security Scotland is being run efficiently and effectively, and that is a challenge that I will continue to put on the agency. As I know, the agency puts on its self, but we will take decisions to ensure that people have a service that treats them with dignity and respect. That might mean that we will do things differently than what happens under the DWP. If you were looking at a particular cost of doing something in a particular manner, it might appear that it's not as good value for money as DWP, but we will provide a service with dignity and respect for people. That will be done in a different way. As our social security Scotland agency develops and grows, you're going to also be comparing apples and pears, because we will do things in a different way than the DWP will do, and I think quite rightly so because of the impact that the way, for example, disability assessments have on the people that are going through it. Only because of time constraints. I've got three other members wanting to come in and raise three other themes. I apologise for having to cut you off at this stage, but can I make a suggestion? If it would be— I'll wait with them and ask the questions. Sorry. That means that the other members won't get in with their substantive questions, but it would be quite helpful if you could provide the committee with further information for what is a rolling programme of budget scrutiny, for what you believe the steady state administration's costs would be of social security Scotland once the set-up costs have been established. I think that they are absolutely valid and key-line of scrutiny, but we do have to move on. Michelle Ballarty or other colleagues won't get in, Mark Griffin. Thanks, convener. I wanted to ask about upgrading—there are some specific questions—but first, more broadly, on upgrading, the Government has chosen CPI as the measure to upgrade with. There are long been calls from civic society, charities and organisations that represent people that RPI would be a more useful measure of inflation to upgrade benefits with. Can you say why the Government has chosen CPI over RPI? It was certainly something that I looked at in great detail as we are moving forward for annual uprating. There were many aspects that the submissions covered. Some of it was around what the DWP did, for example, just to make sure that we never fell behind what was going on in the rest of the UK, unlikely that that would be. Another example is what are more commonly used variations for inflation now compared to 10 years ago, where RPI was more commonly used at that point. There were a number of different areas that perhaps won't have time to go into today that we looked at when I was analysing what we can do about upgrading. In essence, to ensure that we chose the most meaningful measure of inflation that we could, that was easily understood, that was something that relates to other uses for measuring inflation in the Scottish Government. I hope that that gives a flavour of the types of aspects that we looked at. There was a great deal more, but it was an analysis to ensure that it was a useful measure of inflation and one that was commonly used within Government in essence. I think that because of the constraints of time, I would not be able to go into that in as much detail as you would have liked, but it would be helpful perhaps to supply that later. In our papers today from SPICE, they have said that the upgrading of the carers allowance supplement is going to be 2.3 per cent, but union opening remarks said that it would be 2.4 per cent. Can you just clarify that it will be 2.4 per cent? That is certainly the figure that is in all my briefings, yes. That is helpful. Finally, just on specific entitlements, can you say whether the best start pregnancy and baby payments will be upgraded going forward? There are no plans to upgrade for 2020, because it only came in halfway through December. Obviously, as the committee is well aware, there are a number of benefits and payments that we are required and committed to annually upgrading because of what is in the social security act. There is not a statutory requirement for us to uplift aspects around the best start grant, so that will be something that we will look on as part of the budget process. The important aspect that is also in the social security act is that we have to be transparent and report to Parliament about our thinking on that and the reasons behind any decisions taken. That will be part of the budgetary process, but it will be open to scrutiny, not just because of the usual budget process but because of the requirements under the act. I have Jeremy Balfour to be followed by Alison Johnstone. Thank you, convener. Good morning, cabinet secretary. I have two fairly brief questions, hopefully. The first is, I think that you have helped to say that this is a demand-led service and those that come forward and who are entitled to benefit will get it. We have heard on a number of occasions in the past few weeks from your colleague, cabinet secretary, for finance and from the First Minister that every penny has been worked out carefully. I suppose what leeway in your budget is there, so for example, if there was for some unknown reason within this financial year something happening in regard to a particular benefit that is required more to be paid, could that be met or would you have to go back to the Secretary of Finance? Well, this is an aspect that I can assure Jeremy Balfour ways heavily on me and also the Cabinet Secretary for Finance that the level of demand-led expenditure that we have and will continue to grow within Social Security Scotland is quite a key change for the Scottish Government. It is not something that we have had small pockets around, for example, educational maintenance allowance and so on, but the level of demand-led budget is greatly increasing and will continue to do so. The important aspect is that people are eligible for payments and they will be paid. How we deal with that within the Scottish Government is to ensure that we keep an exceptionally close eye on that as we move forward. Within Social Security, we have a team from finance directorate who are effectively embedded, for want of a better word, within the directorate. So this is happening continuously where we look at demand-led aspects and any red flags. In essence, your first port of call is to deal with it as an in-year budgetary pressure within Social Security. That is obviously the first port of call for any Cabinet Secretary, including myself. Obviously, it is a wider pressure for Government if it cannot be contained within Social Security. The Cabinet Secretary for Finance is quite right to point out that we are not sitting with an additional spare pot of money for any portfolio, including my own. That is where the forecasting that we are doing, that the Scottish Fiscal Commission is doing, is so important and how we continue to learn along the way. I know that the committee will receive information from the Fiscal Commission on how they are doing their forecasting, and it is something that we work very closely with the Fiscal Commission on as well, so that they understand our modelling, we understand their modelling and, of course, their modelling goes into the budget. However, that is our first port of call to ensure that we are getting the forecasting and modelling correct and to set out the budget as best as we can, with the knowledge that we can, from the Scottish Fiscal Commission, and then to move forward, as I have described, if there are any changes in year for a demand-led budget. I presume that, as the cabinet secretary and the Scottish Government, you are still committed to having all the benefits up and running by 2021, which will obviously mean a greater, greater pressure around that. Obviously, when you get to benefits such as PIP-DLA, which is much more demand-led and can be a variation, what work has been done with DWP people who have some experience office at a technical level so that, by that stage, we can be confident when we come to pass that budget? That amount of money will be there. You are absolutely right to point to PIP. As an example, I would point to some of the cold weather payments as other payments that can vary dramatically depending on the weather that we are having year on year. I suppose that that is one of the interesting areas that not just the Scottish Government but the Scottish Parliament will have to look at as we continue our budgetary analysis to think differently about the budgets than we have done before, because it will have to be very much in the case in future years that we are taking great cognisance of the fact that we are talking about substantial amounts of money that are demand-led and, in effect, not in the control of the Scottish Government. I can reassure Jeremy Balfour that we are doing a lot of work with the DWP. We may have our political differences and they are great between the Scottish Government and the DWP. However, on an official or operational level, the relationships are exceptionally strong. There are no concerns that I have about that type of sharing of information so that we can do the best that we possibly can. It is in the DWP's interest to make sure that we have a smooth transition as well as our own. I am very content that those relationships are working well. I think that that is encouraging. My second question is quite technical, so I am happy if you may not know the answer. I mean, it was just going back to following a wee bit from Michelle Ballantyne's question about the cost of the agency for this coming year. Facilities and property, according to our papers, break down at £4.2 million. I mean, I am no commercial lawyer, but my understanding, and if I am one, please tell me that we have property at present in Dundee, which we have visited as a committee, and property in Glasgow. Off at £4.2 million, how much of it is on rent? That does seem quite a high figure. What kind of diligence was done to decide if that is the best value property-wise for a taxpayer to be spending on, and going forward, what are the properties? I think that people can go locally within the 32 local authorities. What increase in that budget will be coming as that is rolled out in regard to more properties that the agency might have to either buy or rent? I do not have the breakdown for 4.2 within the figures that I have here, but I will certainly provide committee with further information on that. There is a great deal of due diligence done over our property strategy, and I am sure that the committee will be aware of the analysis that was completed as we undertook where, for example, to have our headquarters in Scotland. Of course, Dundee was chosen around that. The property that we have at the moment are temporary properties, not permanent properties in either Dundee or Glasgow, and we have committed to bringing forward a property strategy later this year on our longer-term aspects. I suppose that the one point that I would like to make around the local delivery is that it is not necessarily local offices. What you are not going to have is somewhere in Edinburgh, a Social Security Scotland office, and in every local authority there will be an office. It is how we can use our staff well to take advantage of what is already out there. The reason for that is that we want to be where people are already, rather than assuming that they are going to start coming to an independent office. That is what people want us to see. It will vary from local authority to local authority, but what it will not be is a building that we are having to rent or buy in different areas. It could be sharing with local authorities, it could be sharing with someone in the third sector, within health, for example. We are looking at all those different options that will vary across the country, but it will not be a Social Security office. The Fraser of Allander Institute and the Joseph Rowntree Foundation produced a blog last week about raising doubts about how much the draft budget does to tackle child poverty. The blog says that it appears that the draft budget has not been geared towards tackling child poverty as a priority, despite the existence of statutory targets for 2030. I am sure that you will have your own views on that, cabinet secretary. I would like to understand what work your team has been involved in to establish what spending would be needed to start making progress towards achieving those targets. I have a number of joint meetings, as the committee would expect, with Aileen Campbell, who has the lead for the tackling child poverty delivery plan, to see how social security can assist with the delivery of that, whether that is through best start grant payments, Scottish welfare fund aspects, and, of course, the income supplement, which Ms Campbell and I have a joint responsibility for taking forward. I did note the blog with interest, and I think that it is quite right for us to be challenged to see whether we are doing enough on that. When you look at what we are spending our money on within the social security budget, it is, in essence, ensuring that we have money to continue to develop what we need to do and implement the new benefits, and to deliver the benefits that we have on stream at the moment. Those are specifically being designed to see what more we can do to tackle child poverty and to meet Government targets. I would point as well to the fact that it is not simply through social security that we will meet the tackling child poverty targets. There are a myriad of different aspects and different portfolios. It is important, for example, to ensure that we are delivering on our fair work programme and the living wage to raise people out of poverty in that manner, so that there is less of a reliance on social security. There is also the myriad of work that is going on within different budgets, be it education, be it health, to provide support for people on low incomes, as well as the more obvious budget headings, which perhaps sit in my portfolio or Ms Campbell's portfolio. It is very important that we are looking at that at a cross-government level, not just within social security and communities, to ensure that we are delivering on those targets. You mentioned the income supplement in your response, and you will be aware that, in December, a wide range of civic organisations wrote to the Cabinet Secretary for Finance expressing concerns that the proposed supplement would not be available until 2022, perhaps. I appreciate that the Government is not in favour of topping up child benefit, but do you think that there is a place for that to be topped up in the interim? Income supplement is going to be means-tested, which carries a whole range of barriers to be overcome. I would like to understand what action the Government is taking to ensure that that supplement will reach those who need it. The delivery plan, in essence, gives us two key tests for the income supplement. The first one is to ensure that it is targeted on families who need it most to lift the maximum number of children out of poverty. That is a very important target, because one of my main concerns around the Give Me Five campaign is that seven out of 10 pounds will go to families who are not in poverty. At a point in time where we have exceptionally tight budgets, I just do not feel that that is a useful way for us to spend our money and believe that we need to ensure, as the plan says, that we are targeting our support to lift the maximum amount of children out of poverty. I could not in all conscience agree with the policy that does not do that. The other challenge that is quite rightly given in the delivery plan is that we look at a robust and viable delivery route that ties into the idea of an interim solution. The idea that a top-up two-child benefit that would require intricate working with Her Majesty's Revenue and Customs is something that could be done simply and quickly. It is simply not the case. The analysis of all the work that we are doing with DWP around the work for social security and the work that we are undertaking with HMAC on other aspects that we have to link in with them. It does not make sense, I do not think, to have an interim solution that would in essence take a long time to deliver. I will finish on that point. I am then happy to take any supplementary on one of the aspects that we are therefore looking at around delivery options is to look at the timeframes that those aspects would take, the costs that the different delivery mechanisms would take as well, and that information will, of course, then be chaired with Parliament and with the committee to genuinely look at how long in detail it takes to deliver the income supplement and the differences that the delivery option would make, whether it is a top-up two-child benefit or a new benefit in essence, what difference those would make. It is very important that, as we move through the feasibility studies of the delivery options that I will report in the spring this year, we take a lot of understanding from that. I am very concerned that a lot of the debate seems to suggest that this is easy to set up and that the top-up four-child benefit could be done quickly. I am afraid that that is simply not the case. I am sure that committee members share my concern. We are just at the beginning of 2019-22 for people who are really struggling, and it is a long way away. I would just ask that this is pursued with great urgency. I could completely take that point. I hope that the committee can take some assurance from the work that is on going around the feasibility study and the option appraisals that will be undertaken at the start and early this year, which will ensure that, when the Cabinet Secretary for Communities and Local Government reports in June 2019, we are much further along in analysing all those different options. I have done so in a way in which we can have consultation, not just with Parliament but with stakeholders around those delivery options. I will check a technical question about some of that. When the income supplement does eventually materialise, will that appear in your budget line cabinet secretary in relation to social security? Obviously, child poverty is alien Campbell's remit as a cabinet secretary, so I am just wondering whether that is a budget scrutiny session as well. It is a really pertinent question to ask Alison George, but just for future reference, whose budget line would it appear in? I think that, in essence, it depends on the delivery mechanism. I am not going to give you an answer to that, because we have not decided on the delivery mechanism, but that would in many ways dictate. My apologies, but it depends on the appraisal that we are doing. That is helpful. It has been a really worthwhile session. I thank both your cabinet secretary and both your officials for this evidence session. I know that the cabinet secretary is sticking around for the next agenda item, but we will suspend briefly at this point until we change officials. Everyone, when I move to agenda item 3, European Union Withdrawal Act 2018, and I refer members to paper 2, note by our committee clerk, on 21 December 2018, the committee received notification from the Scottish Government of its intent to consent to UK ministers making regulations on its behalf in relation to four statutory instruments. The cabinet secretary stayed on to provide further explanation and to answer any questions that we may have. I welcome both the cabinet secretary and Stephen Anil, social security policy team leader. I invite the cabinet secretary to make a short opening statement and then we will move to some questions. I will keep my remarks relatively brief on this item. The statutory instruments that are described in the notification to Parliament make a series of technical corrections to the EU social security co-ordination regulations that were retained by the European Union Withdrawal Act 2018. Those corrections will allow the UK Government to continue to observe the existing co-ordination rules in the event of a no-deal Brexit. The effect is that the EU nationals living and working in Scotland will have the legal right to continue to access social security on broadly the same basis as it does at present. It would also allow UK nationals living and working in the EU to maintain their right to export certain benefits from the UK system to their country of residence and for contributions in other EU countries to continue being counted towards a UK state pension and also towards eligibility for contributory benefits. However, as the notification makes clear, that would be a unilateral action of the UK Government. In a no-deal scenario, there would be no legal obligation on EU member states to reciprocate. It would likely also be a temporary solution until such a time as a longer term arrangement could be found. As with all aspects of the UK's future relationship with the EU, it is distinctly unclear what such arrangements would look like. However, if the UK's white paper on immigration is anything to go by, it seems likely that in future the rights of EU nationals to live and work in the UK and to access benefits will be significantly restricted. The Scottish Government has continually made clear to the UK Government that on-going participation in social security co-ordination is essential for protection of citizens' rights. It is the firm view of Scottish ministers that a no-deal Brexit would inflict a specially severe social and economic harm on Scotland. It is therefore essential that contingency plans are in place to protect the people of Scotland, whatever their nationality, from the worst impacts of that outcome, an outcome that, unfortunately, is still too real a prospect. In that respect, the commitment of the UK Government to continue observing those rules in the immediate aftermath of a no-deal scenario is welcome, even if it may do little to alleviate the longer-term concerns of people who have built their lives around the advantages afforded by freedom of movement. The devolved aspects to those SIs is relatively nuanced. They require devolved assistance to be provided in a manner consistent with the present co-ordination rules. In essence, that means cheating EU nationals residing in Scotland in broadly the same way as UK nationals. The effect is therefore one of continuing a constraint on the exercise of devolved powers that presently exists through the EU rules. The SIs mean that Scottish ministers could still not, for example, propose eligibility rules that restrict access to social security for EU nationals. Since the Scottish Government would have no intention of doing so and regards access to social security as a fundamental human right, we have absolutely no difficulty in consenting to that. That is especially given the severity of the alternative, which would be to dismantle the legal rights of the European Union nationals to social security protection across the EU. While that no-deal approach is far from a perfect solution, and that is an understatement, it is at least welcome that the UK's default position on social security is to continue to observe those rules, come what may, from the Brexit process. It is for that reason that I invite the committee to agree the view of ministers that consent should be granted to these statutory instruments. Okay, cabinet secretary, that was very helpful in giving a context to what we are discussing here this morning. Do any members have any questions in relation to this? Keith Brown? Yes, a couple. I understand the point that the cabinet secretary has made in relation to that will restrict our freedom of choice, but perhaps not in a way that we would choose to exercise that freedom. Nevertheless, it still restricts our freedom of choice, and it seems to me appalling that, with 70 days to go, we are being faced with that. I have no substantive objection, but I just want to confirm that the Scottish Government has seen the statutory instruments and whether the committee has seen the actual statutory instruments. Just that the briefing that we have talked about will be submitted to the Westminster Parliament sitting committees on 13 December, and it talks about it in the future tense. I am just wondering where we are at with these, or have I am well aware in relation to, in the recent time in the health committee, that not only was the Scottish Government's designation of it as a category challenged by its spice, I think, correctly. I am not sure that that is true in this case, but the notice that we got wasn't sufficient and also that committee had to agree to SIs that it had not even seen and that the Scottish Government hadn't even seen. It had been given understanding of what would be in them, so it is just useful to get some background as to what status it has just now. Certainly, the Scottish Government has seen them when they are publicly available, and we can ensure that that link has been afforded directly to the committee if it is not already done, so it is a UK Government aspect. In essence, those are exceptionally technical. They lead to more than 100 pages of technical amendments, for example, taking out any reference to member state, because that simply is not the case. They are exceptionally technical amendments with those types of changes, but over 100 pages of those. It really is exceptionally technical in nature, and it is changes around terminology that just do not fit under a circumstance where the UK is outside the EU. Presumably, and it would be useful to hear perhaps Mr O'Neill as well, the UK Government could have done this months ago. The idea that we have had in recess over Christmas is counted towards a 28-day period, which I think is wrong, albeit that that has been agreed between this Parliament, Westminster and the Government as well. However, that could have been done months and months ago, as far as I can tell. People are saying that there is not much time left to do it, but there is a reason for that, because the UK Government has not moved on it, or am I wrong? Is there something that has prevented them from doing this before now? I think that it is hard to dispute what Mr Brown says about that. There is nothing as I understand that it would stop the UK Government taking action sooner than it has on that. Are there any other questions? It may just be worth putting on the record, because our clerking team is very good at identifying whether we are aware of any challenges that have been made to the proposed instruments and whether any issues have been drawn to our attention. I can confirm that that has not been the case, although I absolutely take on board the point that Mr Brown made about the 28 days. The link to the statutory instruments is available, so it is just to put that on the record. If there are no other questions, just before we move on to that point, I therefore thank the cabinet secretary and Mr Neil for coming along. We will now move to agenda item 4. Agenda item 4 is subordinate legislation and referred members to paper 3, noted by the clerk. The committee is invited to consider the Scotland Act 1998 agency arrangement specification number 2, order 2018, SSI 2018-13-44, which is subject to the negative procedure. Is the committee content to note the instruments? I would also note them enthusiastically, but we are noting the instrument. As agreed at agenda item 1, we will now move to agenda item 5, which we previously agreed to take into private session.