Seòmar agus comataidhean

It is always a pleasure to be able to take part in the committee’s pre-budget scrutiny period.

Let me begin by reiterating a fundamental point that I made at the Finance and Public Administration Committee last Tuesday. Investment that we are very proud to be making in the people of Scotland through our social security expenditure is absolutely essential. It is essential to tackle the worst impacts of United Kingdom Government cuts, essential to tackle inequality and child poverty and essential to provide vital assistance for older people to heat their homes, to help disabled people live independent lives and to help Scotland’s unpaid carers, who provide such vital support to those they care for and who, in doing so, contribute over £13 billion to the Scottish economy. Every single pillar of that investment package directly results, of course, from the bold and deliberate policy choices that were proposed by this Government and supported by Parliament, and which are founded on the unanimously passed Social Security (Scotland) Act 2018,

The impact of that spending includes keeping 40,000 children out of relative poverty this year through our investment in the Scottish child payment alone, which stakeholders across the UK are urgently calling on the UK Government to match. A fortnight ago, the children and young people’s commissioners for Wales and Northern Ireland spoke about that at the House of Commons Work and Pensions Committee, with the commissioner for Wales stating that matching the Scottish child payment would be

“one of the most effective ways of getting money right to the places where it is needed the most”.

Meanwhile, the Scottish Government’s modelling estimates that our action to mitigate the pernicious two-child limit will result in 20,000 fewer children living in relative poverty in 2026-27 compared to the situation had the cap not been mitigated.

One of the key points is that investment today to mitigate the harmful effects of poverty can lead to reduced demand for and expenditure on a wide range of other public services, such as healthcare. It can lead to improved productivity through a healthier workforce and greater participation by reducing labour market barriers, particularly for disadvantaged groups. To put that another way, as Emma Jackson of Citizens Advice Scotland said at the committee in May, the cost of not mitigating damaging UK Government policies would be

“astronomical and the long-term impacts would last for generations.”—[Official Report, Social Justice and Social Security Committee, 15 May 2025; c 35.]

While we have set up a social security system that is intentionally fair—and we are proud to have done so—it is also robust, with applications assessed thoroughly so that those who are not eligible for support do not get it, but those who are eligible do. All our benefits are subject to rigorous evaluation to test whether they are working as expected.

In 2025-26, we are investing £1.2 billion more than the block grant adjustments that we are forecast to receive from the UK Government for social security. Of that, £649 million is to mitigate the worst impacts of the UK Government measures, such as the bedroom tax and the benefit cap, as well to address the totally inadequate standard of living provided by universal credit—we established the Scottish child payment to help to combat that. That investment is possible precisely because we have balanced our budget every year despite more than a decade of welfare cuts from successive UK Governments.

We recognise the fiscal challenges facing the public finances and we have a clear strategy and plan in place to ensure that the public finances are on a sustainable path, including actions set out in the medium-term financial strategy and the fiscal sustainability delivery plan. It is important to emphasise here that the proportion of the resource budget that the Scottish Government has chosen to invest in enhancing social security in Scotland compared to the situation in England and Wales is projected to increase by less than 1 per cent by 2029-30 compared to this current financial year.

That provides the context in which to view the latest Scottish Fiscal Commission forecast, based on which the Scottish Government anticipates spending about £8.8 billion on social security assistance by 2029-30. In 2025-26 our spending will support about 2 million people, which is one in three of the population. I encourage those who think that our spending should be reduced to take part in the future budget discussions that the Cabinet Secretary for Finance and Local Government and I will be hosting, and help us by determining which groups among those 2 million people they would like to see help removed from.

Earlier this year, the First Minister said that our decision to invest in Scotland’s social security safety net and to target help at those who need it most reflects the values that are fundamental to who we are as a nation. I could not agree more and it is exactly because of those shared values that we are intent on delivering this vital investment through social security benefits on behalf of so many people and families in Scotland.

You mentioned forecasts and it is very important to recognise that the budgets that we have are based on the Fiscal Commission forecasts. We work very closely with the commissioners, who look at the assumptions for the forecasts that they produce. It is exceptionally challenging to forecast demand-led budgets, particularly for new benefits. The level of error in forecasting is reasonably small but you are quite right to point that out.

There are different ways to tackle the wider aspects of child poverty in particular, as you mentioned. Overall this financial year, we will spend approximately £3 billion to assist those on low incomes and with the cost of living crisis, which is impacting on many families. Social security is just one part of the investment that we make. In the work on the child poverty delivery plan—and we are just going through the drafting of the next one—we will look at different policies from different parts of Government and work out what the impact is and the best way to spend that money. I will bring in Julie Humphreys to expand on that a little bit further.

The budget discussions have not provided me or, as far as I am aware, the Cabinet Secretary for Finance and Local Government with any details yet from any other party about what changes they would like to make on social security, whether those relate to the mitigation measures or other measures. We are still very much in the foothills of those discussions and my door remains open. Clearly, when we are looking at the fiscal sustainability of social security, there are some areas where the expenditure that we have to provide as the Scottish Government could be freed up if we did not have to do the UK Government’s job for it. If the UK Government were to mitigate the two-child limit—and I notice some press activity that suggests that it may be coming to that decision—the First Minister has already said that we would be able to reinvest the money that we plan to spend mitigating the two-child limit on other anti-poverty measures. Imagine what we could do if the UK Government also took away, at source, the bedroom tax, which we currently spend another £80 million on. I could go on about the different mitigation measures. Those are the ones where we could free up money and allow the Scottish Government to invest it elsewhere.

At this point, no.

That is an important aspect for the Government to look at. We also have evidence from disabled people’s organisations, which has come through loud and clear, not because of changes that we were looking to make to ADP but because DPOs were concerned about changes that the UK Government was due to make. They spoke clearly about how taking away a disability payment could reduce disabled people’s ability to get into or stay in employment.

As for what the Scottish Government is undertaking, Professor Linda Bauld is already looking at research on expenditure in the Government on ADP. That requires further investigation and support not just to demonstrate the impact that is being made but to ensure that we have a positive narrative—this goes back to the convener’s first question—about why this is an investment in the people of Scotland that we should be proud of making, rather than something to be chipped away at, as appears to be the case elsewhere in the UK.

The DWP does not hold that information for the personal independence payment and we do not hold it for ADP. It is not part of the application process because ADP is not means tested. We would not collect that information.

An important aspect of this that I will come back to is that many people who are applying due to a mental health condition or behavioural conditions are already in employment. One of the reasons why we have seen an increase in people coming forward for ADP because of mental health issues or neurodiversity is that we are increasing the support for people to come forward for something that they have always been entitled to but never felt that they could apply for because of the stigma or the judgment. The fact that we have a system that encourages people to apply for benefits to which they are entitled is really important; it is about taking stigma away.

The work that is being done overall, not just by Government but in society, whereby we have a much more open discussion about mental health, is particularly important. We need to have supportive employability schemes to allow people who are not in employment back into the labour market. Social security is one aspect, but employability schemes that support and wrap around a person are also particularly important. Very recently I announced the additional investment that the Scottish Government is undertaking to ensure that employability support for disabled people in particular is available right across Scotland. It is about employability linking in with social security to ensure that support is provided for those who can get back into the labour market or those who wish to do so but do not have the ability at this time.

I will bring in James Wallace, if he wishes. You will notice from his title at the start that he is no longer in Social Security Scotland but has a wider remit to support me in all things budgetary now. He is well versed still in all things agency if he wishes to contribute.

We are looking very closely at the agency’s ability to communicate effectively with people. That has two benefits. One is that it is more cost effective and the second is that it may be what people would prefer. That clearly needs us to have the right information from individuals. For example, the agency would never move from a letter to an email if that is not people’s desired preference, because we are always keen to use the channel that is appropriate. We are looking at and the agency is already instigating work on moving, where supported by client decisions, from paper to emails for certain aspects. We are also keeping a close eye on the impacts of how we communicate and the cost of that.

We do not analyse every single part of the process and how much each individual staff member costs, because that staff member can move across different benefits and different parts of the system. That is to allow them to be more efficient and effective, rather than everyone sitting in their silos being told, “You must only do this.” That would be easier for us to measure, but that individual would not be effective and efficient. The agency looks at the impact and how we can save money if it is right for the client, and changes in communication with clients are an important part of that. I do not know whether James Wallace wants to add anything.

We have had an unfortunate run of changes to UK Government policy. To be clear, they have been unfortunate, most importantly, for the people that would be impacted by them. However, secondary to that has been the unfortunate impact on the ability of the Scottish Government to set a budget. We had in-year budget changes in the past year or so in relation to the pension-age winter heating payment, which made a significant change to the Scottish Government budget for the financial year that we were in. Our policies had been set, and, in order to balance the budget that year, we had to change those at pace and in ways that were uncomfortable for us. We must also take account of the changes that will affect the block grant adjustments over a longer period. The most obvious one of those concerned the proposed changes to PIP, which have been rolled back.

Those changes are challenging, and the committee will be under some of the same challenges as we are. The work that was produced by the Scottish Fiscal Commission includes the changes that the UK Government was due to make to the block grant adjustment, and we have to wait until the next fiscal event from the UK Government to get the next set of information from the Office for Budget Responsibility that will allow the Scottish Fiscal Commission to do further forecasting, which will assist the Scottish Government. A lot of those developments impact on the ability of the Scottish Government to make forecasts about what we will get through the BGA and, therefore, what the impact will be on our budget.

I absolutely appreciate that the UK Government needs a private space to make its own decisions, but we have asked it to find a better way of doing that. We need to find a way in which it can give us advance sight of material, because we are still at the point where I am reading about adjustments on social media before we have had the courtesy of a call from the UK Government. Indeed, I continue to read about what might or might not happen with the two-child cap as Social Security Scotland spends money this financial year to mitigate that policy. We have to speculate about what will happen. We are already spending money on mitigating the two-child cap. We will deliver that mitigation in March—we were right to make that arrangement—but I will have to wait to see whether there will be a change in the UK Government’s policy.