Getting money to families in financial hardship – what can Scotland do?

As policies start to diverge north and south of the border, debate regarding the role of different governments in providing financial support to individuals and households may also start to gather pace.

There have already been calls to find ways to get more money out to children living in families on low incomes in Scotland from the Children and Young People’s Commissioner for Scotland (CYPCS). Aware of the stresses and strains that lockdown is putting on families already struggling, the Commissioner’s plea is to ensure that more children aren’t pushed into poverty as a result, and to try and relieve some of the financial pressure of those already on very low incomes. Most children in poverty live in working households, so there is definitely cause for concern over incomes falling further due to job losses and/or reductions in hours.

The Scottish Child Payment is a benefit aimed to do exactly what the CYPCS is asking for – a national payment aimed at children in families on low incomes. Payments were due to start for some children later this year but have been delayed. This raises some questions about whether the delivery method chosen was the most appropriate, and whether alternatives would have been more resilient either to the specific Covid-19 issues this year, or to economic crises more generally.

Regardless of what has gone before, we also consider if there are alternatives available to the Scottish Government to get money to families who need it in the short-term.  Whilst there are funds that can help, such as the latest Supporting Communities Fund announced by the Scottish Government last week, this article focuses on direct support into the pockets of families who need help.

Roll out on pause

The update provided at the start of April from the Cabinet Secretary for Social Security and Older People announced that the Scottish Government had delayed plans for benefits that were due to be rolled out in Scotland over the coming year. This included the Scottish Child Payment. The reason for this delay seems to be primarily to do with staffing issues:

“My officials have been engaged in an intensive exercise to determine the impact on our programme, assuming the spread of Covid-19 develops as we expect and with the impact on staffing I have outlined. We have used assumptions which see staffing levels fall for between 2 and 12 weeks due to school closures, caring responsibilities, self-isolation and contraction of Covid-19.”

In addition, to deliver Scottish Child Payment, which requires an application from claimants, recruitment of additional staff into the Social Security Agency was required.

“We simply cannot recruit and train the staff required and it is not possible to say when we will be able to do so.”

Clearly there are understandable reasons for this delay (although with a global pandemic at the top of most risk registers, it would be of interest to see how the Social Security Agency planned to deal with such an event). Although partly an issue of bad luck with regards to timing, it is frustrating that the Scottish Government cannot operationalise powers on social security at a time when undoubtedly most needed.

Lag between announcement and delivery

The process to get a new benefit out of the door does take time. As well as the legislative process, there is the requirement to know who is entitled to the benefit, and to find a system for paying them.

There were two legislative routes for the delivery of the Scottish Child Payment using powers devolved in the Scotland Act 2016 and enacted in the Social Security Scotland (Act) 2018:

  1. ‘Top up’ of an existing, reserved, benefit. In practice, this means that eligibility for an existing, UK, benefit can be used as a ‘passport’ to define eligibility for an additional payment. Requires secondary legislation in the Scottish Parliament.
  2. Creation of a new benefit. This allows the Scottish Government to design a new social security payment from scratch, and be completely separate from existing, reserved, benefits. Requires primary legislation in the Scottish Parliament.

The route that the Scottish Government chose for Scottish Child Payment was via a ‘top-up’ rather than a new benefit. It was chosen due to the shorter timescales for delivery. Whilst a year on the legislative process is still underway, until the Coronavirus hit, the Scottish Government believed it was on track to get the first payments for under 6s out the door by the start of 2021.

Full roll-out, for children up to the age of 16, was expected by some point in 2022. The reason for this longer and more uncertain timescale appears to lay with UK Government departments.

As the Scottish Government decided it wanted the Social Security Scotland to deliver the benefit it needs DWP and HMRC to provide data to check eligibility by providing a data feed. This is critical to delivering a ‘top-up’ benefit. Strict protocols for data sharing are needed but another hurdle appears to be the actual process of extracting relevant information from existing databases within UK Government departments to allow transfer of that data into systems used by the Social Security Scotland. In short, this is not as simple as many assumed it would be, and it remains unclear exactly why this is.

There are existing data-sharing protocols and a data-feeds in place for children under the age of 6 due to the Best Start Grant which has been in operation since December 2018. But for over-6s, DWP have not said when they will be able to transfer the data. Given demand on DWP staff for delivering the large increase in Universal Credit claims, if the reason relates to capacity, this may mean that the timescales may now been even longer.

Was/is there faster way?

If this pandemic crisis had struck a few years from now, the Scottish Child Payment would probably have been up and running and the Scottish Government would have been in a better position to act quickly, for example by increasing payments to existing low income families and being able to get new, additional, money to new families coming onto UC due to falls in income. We’ve seen this type of action being taken with a proposed one-off increase in Carers Allowance Supplement.

But now that we are left with a pause in paying out the Scottish Child Payment, this opens the door for looking at other options. Many of the most viable are via existing payment mechanisms. One possible way could be via the UK Government.

We don’t fully know why the Scottish Government did not opt to deliver payments, at least in the short term, via DWP and HMRC. Many other devolved benefits are being delivered by DWP until Scotland has the infrastructure to take them on themselves. Indeed, for the Scottish Child Payment, where we were assured time was of the essence, this would have removed the time needed to arrange for an additional application system, or do the IT build, and therefore could have made the roll-out of payment to children of all ages happen more quickly – and probably much cheaper from an administrative point of view. Although thorough on many issues, the original options analysis that informed the decisions made on the core design of the Scottish Child Payment did not cover the option of delivery by UK Government departments. There is previous analysis on governance published by the Scottish Government looking at delivery of the social security system as a whole, which finds drawbacks with a Service Level Agreement (SLA) with DWP due to uncertainties over long-run costs. But even here it recognises that:

“ as a transitional option, which could be used until it is clear what the system in Scotland should look like and expertise was in place to deliver this, an SLA is a realistic and therefore strong option”

Still, there is no guarantee that this would have meant additional payments could be happening now. Firstly, it would still have required secondary legislation, a process that is still not complete. Secondly, timescales would have depended on the UK Government having the resources to operationalise the payment via both DWP and HMRC (due to the fact UC isn’t full rolled out, there are some eligible claimants still on Tax Credits). However, we’re not sure how actively SG enquired of DWP and HMRC about capacity, and as far as we are aware, any active consideration payment via this mechanism was not discussed publicly.

Could they do so if asked now? Given current demands that DWP and HMRC are under from the rise in claimants to UC and with other new schemes to administer, it seems perhaps unlikely. It would also require a change to the current legislation. But if there is a chance that this payment could be paid out by alternative means sooner than the current, paused, plans allow then this should be explored. Unprecedented times may call for unprecedented changes of course.

There are other routes, that are likely to be more viable, that can be explored to get money out the door. Many of these were looked as possible interim options for the then ‘income supplement’ which subsequently became the Scottish Child Payment (see this JRF and IPPR Scotland briefing). These include existing payment mechanisms operating through local government, such as free school meals and uniform grants, although these payments do not always come via cash transfers and different criteria can apply in different local authorities. Increasing the lump sum paid through Best Start Grant is another option – although those that are in an age group not in line for a payment this year would miss out unless a creative way could be found to bypass this. The Scottish Welfare Fund has been expanded and remains a possible route for support, although we currently have no information on whether demand is being met.

A key consideration is of course cost. The huge spike seen in Universal Credit claims level will more than likely translate into higher demand for benefits that have UC as a passport (Best Start Grant and Council Tax Reduction for example) and £50 million has already been set aside by the Scottish Government to pay for rising costs of existing welfare commitments. The cost of paying the Scottish Child Payment would rise above levels currently budgeted for if paid out in the near future. As ever, the decision on whether to take forward spend on one area depends on its priority relative to other areas.

Concluding thoughts

Effects stemming from the virus will no doubt continue for some time, and there is yet no certainty on what will happen to UK Government support. Given the devolution of social security powers that the Scottish Parliament holds, and the delay to the Scottish Child Payment, we would expect the Scottish Government to be considering all the options it has to help individuals and families through the next year. Given the delay of the current plans for the Scottish Child Payment, this will mean other options will need to be looked at.

Thinking longer term, the Scottish Government will want to review its risk assessment procedures for the roll-out of future benefits and perhaps consider how well it’s social security apparatus can respond to economic crises. We will come back to this subject in future articles.

Authors

The Fraser of Allander Institute (FAI) is a leading economy research institute based in the Department of Economics at the University of Strathclyde, Glasgow.

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