Scottish Child Payment Regulations 2020: scrutiny report

The Scottish Commission on Social Security's scrutiny report on the draft Scottish Child Payment Regulations 2020 with recommendations for the Scottish Government.

Payment issues

Entitlement to the Scottish Child Payment will be calculated on a weekly basis, with payments made four-weekly in arrears, to households in receipt of one of the qualifying reserved benefits. In time, universal credit will become the qualifying benefit for the vast majority of SCP recipients. The need to demonstrate entitlement to universal credit for at least one day per week in order to receive the SCP in respect of that week, means that some aspects of the payment arrangements cannot change. Elsewhere, there may be more flexibility. Recommendations in this section concern issues relating to the payment of the benefit where there might be scope to explore whether alternative arrangements would benefit SCP recipients. These concern the cliff-edge withdrawal of the SCP for people whose incomes exceed the maximum for receipt of the qualifying benefit, the potentially linked issue of overpayments of SCP and the handling of post-application changes of circumstances so as to minimise any delay to commencement of SCP payments.

As currently envisaged, entitlement to the SCP is strictly tied to the qualifying benefit. A payment of £10 per child is made if any qualifying benefit is received – the minimum universal credit payment is one penny in a month – and no payment is made if no qualifying benefit is received. This would typically happen if income from other sources is too high. In contrast, the main UK working age benefits are withdrawn more gradually as income increases. Universal credit entitlement reduces at a rate of 63 pence per pound of earned income and one pound per pound of income from other sources. Legacy benefits, like income support or jobseeker’s allowance, are typically reduced on a pound-for-pound basis. Increasing earnings should not leave the claimant worse off, and in the case of universal credit should normally leave the claimant slightly better off. In the case of the Scottish Child Payment, there is a threshold at which a small increase in earnings could result in a substantial loss of income overall, particularly in households with multiple children under six. The Resolution Foundation calculates that a £1 pay rise could result in the loss of £1,600 in SCP over the course of a year.  Given the prevalence of recurrent poverty and fluctuating incomes in low-income households, it is likely that more families will dip in and out of entitlement from month to month than experience this extreme scenario.  It is therefore welcome that, further to comments from the Commission, draft Regulation 16(5) provides for a 12-week ‘linking period’ when a claim for a qualifying benefit is temporarily interrupted, during which the SCP can be restored without a new application.

Using the top-up power to deliver the SCP offers advantages in terms of speed of delivery and ease of establishing eligibility. Stakeholders have also suggested that payment of the SCP at a fixed rate brings welcome certainty to a part of a family’s income, when earnings and universal credit payments can be volatile.29 However, there is tension between the core objectives of the SCP and universal credit: reducing child poverty and incentivising paid work respectively. Depending on how in-work conditionality operates in the future, there is potential for some individuals to be pushed into a Catch-22 situation in which their claimant commitment for universal credit requires that they seek to increase earnings or risk financial sanction, while the potential loss of the SCP discourages them from doing so. Whichever course of action is taken, there is the potential for financial loss. Tapered withdrawal of the SCP as earnings approach the maximum for receipt of the qualifying benefit might mitigate this risk or make the cliff edge less stark, but this would come at the cost of greater complexity. The impossibility of paying the SCP in the absence of an entitlement to a qualifying reserved benefit means any taper would probably have to reach zero at the same point as that for the qualifying benefit. Whether such a step is seen as desirable might be influenced in part by how many households are projected to be affected by the potential cliff edge.

Recommendation 5: The Scottish Government should consider the desirability and feasibility of a tapered withdrawal of the SCP, as non-social security income approaches the upper limit for eligibility for the qualifying benefit. This would avoid the risk of a small increase in earnings resulting in a larger loss of benefit income.

People move in and out of entitlement to universal credit, for example, because of insecure work, fluctuating hours of paid work or mismatches in payment cycles. As universal credit entitlement ends, so does SCP entitlement. During the Commission’s engagement with stakeholders, there was concern about the impact on individuals of repaying overpayments and a call for the Scottish Government to be clear how the legal powers on liability would be exercised. The Commission understands that the Scottish Government is working on processes to avoid unnecessary overpayments. For example, there will be automatic notification the day after universal credit ends. Where overpayments do arise, the individual has no right to a redetermination or appeal about whether they are liable to repay the money – this is a feature of Scottish social security generally. Instead, the Commission has been told that there is to be an informal non-statutory review. It would be in keeping with social security principles to also offer an independent review or appeal stage. It would also be desirable for future decision maker guidance to offer clear examples of circumstances in which an overpayment would be regarded as not being the recipient’s fault, so recovery would not be pursued in accordance with section 64 of the Act.

Recommendation 6: The Scottish Government/Social Security Scotland should publish the clearest possible guidance on when recovery of overpayments will or will not be pursued. The Scottish Government should also make provision for an independent review of any decision to recover an overpayment.

Regulations do not specify whether Social Security Scotland, when carrying out a redetermination, or a tribunal considering an appeal should only consider eligibility on the date of the initial application or take into account any subsequent changes of circumstances. People waiting for a redetermination or appeal need to know whether a new application is needed if their situation changes. If a new application were required, this would mean a longer wait before SCP payments could begin.

Recommendation 7: The Scottish Government should consider amending the Schedule to the draft Regulations, or part 2 of the Act, to clarify whether a redetermination or appeal should take account of changes of circumstances subsequent to the initial application.

Draft paragraph 1(4) allows the initial decision maker to take into account changes of circumstances in the 14 days following application, but this is shorter than the assessment period for universal credit.  Extending this 14-day period so as to allow simultaneous applications for universal credit and the SCP could be advantageous to applicants and advice services.

Recommendation 8: The Scottish Government should extend the 14-day period during which a decision maker can take account of post-application changes of circumstances so as to allow simultaneous applications for universal credit and the SCP.

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