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It is very important that the Government does all that it can to help people with the continuing cost of living crisis, which is exactly why the 2025-26 budget allocates more than £3 billion to policies that tackle poverty and the cost of living. We know that many of our constituents are still struggling with energy costs, food costs and rent, which is why the Government is determined to continue to provide that investment.

I recognise the point that you made, convener, in that the Scottish Fiscal Commission forecast in December 2023 that benefits would be uprated by 3.3 per cent in April 2025. However, given that inflation had fallen by September 2024, the CPI rate was 1.7 per cent, which is the rate that is in the regulations. The cost of the benefit change is about £110 million, which is lower than the forecast from December 2023 but is still a substantial investment.

In essence, that change does not ease the pressure on the social security budget. Clearly, we take the SFC’s forecasts very seriously and consider how they change over time. That is all taken into account in our discussions on what the budget that is eventually presented to the Parliament should look like. The budget that was presented to the Parliament contained the inflation rate that is set out in the regulations, so the changes were already taken into account during our budget deliberations before the budget was introduced.

The social security budget is demand led, so we appreciate that the Scottish Fiscal Commission’s forecasts are exceptionally important as we look to the Scottish Government’s budgets for future years. Clearly, the implications, which the committee has discussed previously, are stark. Expenditure on social security is rising, and the Fiscal Commission continues to expect that expenditure to rise. Much of that is due to UK changes that will also see an increase in social security benefits at a UK level, and which will therefore be covered by block grant adjustments.

However, we will also see additional costs coming to the Scottish budget because of the decisions that the Government has taken to support low-income families through the Scottish child payment, and the ability for us to handle child disability payment and adult disability payment in a different way. We need to take account of that as we move forward.

The committee will be well aware that the Scottish Government is required to balance its budget. Therefore, we need consider very carefully what the Fiscal Commission is forecasting and how we will deal with that in future years.

The Cabinet Secretary for Finance and Local Government has made clear through the work that she is doing on fiscal sustainability—on which I am working closely with her—that we will continue to keep those matters very closely under review as we move forward with future years’ budgets.

At this stage, there certainly does not seem to be a desire for or a move towards having a carers allowance supplement, as we do.

As we move forward, we will be changing the way that we actually provide the carers allowance supplement, once case transfer has concluded. However, it was the first change that we undertook under the devolution of social security, because we recognised that carers need that additional support.

Clearly, it would be up to the UK Government to take its own decisions on that, but we have laid out quite clearly the direction of travel in which we would like to move with regard to supporting carers in different ways, in addition to what the UK Government would do. As the committee knows, those ways would therefore have to be found within the Scottish Government budget and would not be covered by block grant adjustments. Therefore, what the UK Government does matters. I hope that it will consider providing that wider support for carers, but I am not aware that it is doing so.

We look very closely at what happens with all our benefits.

In December 2024, the Scottish Fiscal Commission published a revised forecast that showed disability payment increases from 2024-25 to 2025-26 of £94 million, or 18 per cent. That has been fully funded through the social security block grant adjustment that we received from the UK Government. Using that as an example, I again point to the fact that an increase in social security expenditure here might be covered by block grant adjustment.

CDP is one benefit. There are other aspects in relation to ADP, for example, which people are coming forward for. The evidence on that—I hear this directly from people on my visits—tells us that they are coming forward because the system is easier to navigate. It is still a robust system, but it is an easier-to-navigate system. People do not fear reporting a change of circumstance, as they did under the previous regime, because they feared that they might lose money, rather than get the additional money that they felt that they were entitled to.

Although we look at the amount that we are paying for CDP and ADP, there is another issue to consider. For example, when I made a recent visit to the Royal National Institute of Blind People, I spoke to a gentleman whose condition had deteriorated, but who had not come forward because he feared what would happen. His initial experience of coming forward had been so bad that he did not enter into the system and did not report a change of circumstance until he moved on to ADP. He is now on a greater entitlement, as he should have been for some time.

I hear directly from people—as I am sure that members do when they speak to their constituents—about people coming forward who did not come forward under the previous regime. I am very proud that we are delivering such a system. Yes, it has cost implications, but we must ensure that the benefits that are there are available for everyone who is entitled to them and that they are supported.

As Mr Balfour knows very well—this has become clear as we have gone on our journey with social security—there are different reasons for changes in social security expenditure. When it goes up, some of that will be due to changes at UK level and some of it will be due to changes here in Scotland. We need to be careful to separate that out, as the Fiscal Commission does in its forecasting.

We are not statutorily obliged to mirror any changes, but we have to face up to the financial realities of the implications of the UK Government’s decisions. We are also challenged by the speed at which the UK Government makes decisions. For example, the challenge with the winter fuel payment was that the changes were made in-year, so we had to make in-year savings, and money could not be found immediately because we were well into the financial year and budgets had already been committed.

We have made the point to UK Government ministers that making such changes at speed has implications, particularly for devolved budgets, so we need to find a better way of working. I fully respect that the UK Government can make decisions in whichever way it wishes, but it needs to bear in mind that such decisions, particularly if they are taken at speed, have implications for what happens in Scotland.

I remain concerned about Rachel Reeves’s plans. What we are hearing are still rumours, so a bit of guesswork is involved, but it appears that much of the cuts will be to reserved benefits, so there might not be implications for PIP and, therefore, CDP and ADP. However, the chancellor might choose to look at benefits that have been devolved to Scotland.

We would not be obligated to make such changes, and I would in no way wish to make them, because I know the difference that the benefits make to people. The Scottish Government has no intention to change its approach to CDP and ADP. We worked very hard with people who were on DLA and PIP to make the changes that we made, and I know that people wish us to go further with changes. We do not intend to follow Westminster’s approach, because that would be exceptionally detrimental to people who receive those payments and are entitled to them.

Clearly, if there were implications for the Scottish Government’s budget, we would need to consider those at the time and work out our strategy for dealing with them, but we would not do that on the back of disabled people.

Good morning. I welcome the opportunity to assist the committee in its consideration of the draft Social Security Up-rating (Scotland) Order 2025 and the draft Social Security (Up-rating) (Miscellaneous Amendments) (Scotland) Regulations 2025.

The people of Scotland continue to face financial challenges in the economy. With energy and food bills continuing to rise, the support that the Scottish Government provides can be pivotal in helping people to make ends meet. The Government has taken a conscious decision to invest in social security for the people of Scotland. That investment is key to our national mission to eradicate child poverty, and to assist people with the cost of living crisis. Our commitment remains to help low-income families with their living costs, to support older people and unpaid carers and to enable disabled people to live full and independent lives. It is precisely because we know that that investment is working that we will continue to ensure that it has maximum impact.

The Government recognises the importance of maintaining the value of all social security payments. Payments such as the Scottish child payment, best start foods and best start grants are integral to the First Minister’s mission to end child poverty. That is why, this year, we amended the Social Security (Scotland) Act 2018 to require that all payments delivered under the act be increased in line with inflation every year. That is a significant divergence from the UK Government’s approach, whereby, in addition to pensions, only disability, carers and industrial injuries benefits are required to be uprated each year, with other payments uprated at UK ministers’ discretion.

Even before the legislative change, we frequently chose to uprate all benefits, not just those that we were legally obliged to uprate, despite tremendous budgetary pressures. We made those decisions because we understand the difference that those payments make and the positive impact that they have on the lives of people who receive them. For example, best start foods payments are designed to tackle the impacts of child poverty by improving access to healthy food for families on low incomes; best start grants help to give children the best start in life by providing eligible families with additional money at key stages in the early years; and winter heating benefits provide targeted and reliable financial support to those who are most in need of help with their energy costs every winter. Those payments matter to those who receive them and, as such, increasing all payments in line with inflation helps to protect their purchasing power as prices rise in the economy.

The main purpose of the uprating regulations and order is to increase all social security payments by 1.7 per cent, in line with the 12 months to September 2024 rate of the consumer prices index, which is a leading measure of inflation. The exception to that is the industrial death benefit, which will increase by 4.1 per cent, in alignment with the DWP’s approach, to reflect the growth rate of average weekly earnings in the UK from May to July 2024.

The regulations make other much-needed changes, such as increasing the earnings limit from £151 to £196 for the carer support payment and carers allowance. That means that carers will be able to earn an additional £45 per week while still receiving the payments, which will help to remove barriers to work and provide more stable financial support.

Another amendment contained in the regulations reflects a new UK entitlement that will be introduced from April 2025: neonatal care leave and pay. The amendment will allow neonatal care pay to be treated as earnings for the purposes of entitlement to the carer support payment—in the same way as is the case for maternity, paternity and adoption pay—and that treatment of the new entitlement will be mirrored in relation to carers allowance.

Finally, a small change is being made to the Scottish adult disability living allowance regulations to make a correction after a word was unintentionally omitted, in order to bring the provisions in line with those for disability living allowance, as intended.

Subject to parliamentary approval, in addition to the increases to the rates of all social security payments, those changes will commence from April 2025.

I thank the committee for its scrutiny of the instruments today.

That is a very fair point. I will break the issue down into two areas. The Scottish Fiscal Commission’s work is clearly set out, including its role in forecasting social security and tax. Over time, as we all gain more experience of the devolved social security system, the nuances of aspects of that are changing. We work very closely with the SFC to understand the assumptions that underlie its forecasting.

The work to which Mr Doris refers does not have to be done by the SFC. Clearly, if we in the Scottish Government have concerns about an area—heaven forfend that we might at some point feel optimistic about a change by the UK Government—we would be able to do such work internally. People might not feel that that work would be as robust as work by the SFC, but that does not stop our analysts doing such work, nor does it mean that it would not be robust.

There is a specific role for the Scottish Fiscal Commission to play, but there is also a role for the Scottish Government to play, and I reassure Mr Doris that we can do that work within the Scottish Government.

This is the first opportunity that I have had to pay tribute to Liz Smith in a public setting. I am incredibly sorry to hear the news that she will be standing down at the next election. She and I may disagree on a number of political issues, but I have watched her in the chamber over many a year and have certainly felt that she genuinely added to the debate in the Parliament. I therefore pay tribute to her for the work that she has done, and I am sure that she will keep scrutinising me up until the last moment of this parliamentary session.

The measurement of inflation is a very important issue, and we are committed to continuously reviewing it. We recently undertook another review of the rate that is used in social security. When we were initially starting out, of course, we had to bear in mind that we used the same measure as the UK Government, because of case transfer and not having a two-tier system. Regardless of that, however, I think that it is the right method for us to use at this stage, as we move to the point at which case transfer will be reaching its conclusion.

It is important that we keep that under review. I know that people have alternative views. There are views on other measures that are not yet classed as official statistics but that people think are a better measurement of inflation. However, if they are not official statistics, they would not be used. I mention that simply to note that we are looking not only at RPI and CPI but at a range of inflationary measures. We will keep that continuously under review.

We very much welcomed the UK Government’s decision to increase the earnings threshold to the level of 16 hours at national living wage. That was similar to the approach that we proposed in our 2022 public consultation, so it was certainly a welcome change. The regulations that are before the committee would increase the threshold in line with what the UK Government is doing.

Once case transfer is complete, we have the opportunity to make further improvements. We will clearly need to do that in consultation with carers, but the consultation that we have already carried out pointed us in the direction of a number of changes that we will make, including introducing a new extra payment for people who have multiple caring roles, extending support for carers when a caring role ends due to a bereavement and changing the way that we pay carers allowance supplement, as I mentioned to Marie McNair, so that carers get the extra support more regularly.

Those are the changes that we will make and the further assistance that we will provide to carers through the devolved payment. As Paul O’Kane rightly pointed out, once case transfer is complete, we can consider a different approach to setting the earnings threshold than the one that the UK Government takes. We have had public consultation and people have different views on that, so it is important that we look at it.

I know that I say this for every benefit but, for carers support payment in particular, there are exceptionally complex linkages with the DWP and His Majesty’s Revenue and Customs. We would want to go through those in extreme detail to ensure that there would be no unintended consequences from a change that might look like the right thing to do but would leave carers worse off or no better off. We would have to carry out those in-depth discussions.

In the short term, our concentration is on the aspects that I mentioned. Over the longer term, we can consider expanding the earnings limit.

You asked whether it matters if the UK Government makes changes. It matters in so much as, if it makes changes that increase the support to carers, that will clearly increase the block grant adjustments and assist the Scottish Government to determine whether we wish to use that money in the same way. If the UK Government does not make any changes but we look to make changes to the earnings threshold, that would be something else to come out of the Scottish Government budget that is not covered by block grant adjustments. In that way, it matters because it has an impact on the Scottish Government’s overall financial envelope. Therefore, those things would need to be considered in the round.

The further improvements and changes that I have mentioned are based on a consultation a few years ago in which we laid out our immediate priorities for change. I reassure carers and carers organisations that we are not set on making just the three changes. We know that carers organisations would like us to go further on some aspects, which we will consider, as Mr Doris would expect us to.

We have been able to make other helpful changes to the way that the benefit is set up through Social Security Scotland. For example, we are making the information on earnings rules clearer; we can average out carers’ earnings to provide more stable support, which is helpful when compared with the previous DWP system; and we are using HMRC data and scheduled reviews to check and track earnings. We have already improved our system to help solve the real difficulty, which is, as Mr Doris rightly pointed out, the cliff edge of earnings thresholds.

That said, the carers support payment rules around earnings were designed to mirror the carers allowance rules, which is in line with our commitment to avoid a two-tier system. We need to bear in mind the complexity of our relationship with things that remain reserved. However, we are keen to get feedback from carers who are going through the new system. Having gone live, the carers support payment is still in its very early stages, but we continue to get feedback from carers and stakeholders on how the benefit and the improvements that we have made are working in practice so that we can determine what more we can do on information, guidance and processes.

As is the case with all our social security benefits, I am exceptionally proud of what we have introduced, but I am always conscious that it is the payment at the point of introduction. Everything to do with the benefit, which includes its administration, must be open to scrutiny and continuous improvement.