Implications for strategic policy approach
In addition to the index to be used to measure price inflation, the Scottish Government’s response to our earlier report on uprating clarified a number of elements of its intended strategic approach to uprating, as discussed below.
Allowing for some flexibility in making annual uprating decisions is desirable. It would be wise to reflect that in the strategic approach. However, beyond a certain point, flexibility amounts to an absence of any clear strategic approach to policy. There could be a risk that it undermines credibility in policy positions that have previously been set out. Particularly in the early stages of a system’s development it could inadvertently be taken as setting precedents which may have unforeseen consequences for the future.
As previously stated, we welcome the fact that the Scottish Government has taken action in these uprating regulations to mitigate the impact of COVID on low income households. However, this could raise questions about its previously stated strategic, longer-term approach to uprating policy.
Recommendation 1: The Scottish Government is asked to clarify its strategic policy approach to uprating assistance, by explaining where, when, why and how flexibility in decision making is desirable and could be used.
In responding to a recommendation in our earlier report on its policy approach, the Scottish Government stated:
“Chapter 7 of the 2018 Act provides for uprating for inflation and makes clear that inflation is the change in the general level of relevant prices. Therefore, uprating relates purely to ensuring that the value of assistance keeps up with the change in the general level of prices over time. Increasing the value of assistance, to make it more generous, is a separate matter to uprating for inflation. If Scottish Ministers wish to increase the value of assistance, this would be done by bringing forward amending regulations which would adjust the rates of assistance. This would be separate to regulations made in fulfilment of the duty under section 78 of the Act.”
However, on this occasion, the overall value of assistance has been increased by double the rate of inflation according to the agreed measure, and this increase has been made as part of the uprating regulations, rather than through separate amending regulations. This either constitutes a policy change to the measure used for uprating to maintain value (i.e. the September rate of CPI) or it represents an uplift – an increase in value – above the inflation-adjusted level.
In the context of a catastrophic pandemic, where departure from the norm is clearly justifiable, this may feel like a semantic nicety. But, in view of this departure from the stated strategic approach, it would be helpful for the Scottish Government to confirm its intention concerning the meaning of uprating and its strategic policy approach. This would also improve accountability and transparency.
Recommendation 2: The Scottish Government is asked to clarify its strategic approach to uprating assistance, distinguishing between the maintenance of value and the increase of value.
The impact of the arrival of the current pandemic undoubtedly constitutes an exceptional circumstance. But it is currently not possible to say with certainly for how long this ‘exceptional circumstance’ can be expected to continue. Moreover, there have been other seismic shocks to the economy in the past and there could be again.
In our previous report on uprating SCoSS recommended that it would be helpful for the Scottish Government to “present plans to mitigate the adverse effects of volatile inflation on people receiving devolved benefits, should this occur”. While the Scottish Government could be said to have done so in the section 77 report, it should still be helpful to produce a more strategic and transparent approach to exceptional circumstances. We note that while an increase in the value of benefits may be a clearly justifiable response to a particular crisis (and there may anyway be a case for increasing value), that this higher value then becomes embedded as the value to be maintained for the future.
Recommendation 3: The Scottish Government is asked to clarify what might constitute an ‘exceptional circumstance’ that would justify benefits being increased beyond the September rate of CPI.