Under section 77 of the Act, the Scottish Government has to report on the impact of inflation on all Part 2 Chapter 2 assistance currently being delivered; what it intends to do for the next financial year; and what it intends to do for the types of assistance where there is no requirement to uprate. While the Commission is not required formally to scrutinise the section 77 report, it is a critically important source of information and evidence that can be drawn upon to identify options, implications and risks, and so inform scrutiny of the Uprating Regulations, both ours and potentially that of the Social Security Committee and other stakeholders.

In our Uprating Measures Report referenced above, we made a number of recommendations concerning information that it would be helpful to include in Section 77 reports. We are pleased to note that the Scottish Government has taken into account some of the recommendations. As this is the first time we have gone through this process, it may be worth reviewing whether it would be helpful to include additional or different information in Section 77 reports.

Recommendation 2: The Scottish Government should review, in consultation with stakeholders, additional or different information that could usefully be included in section 77 reports. This would inform scrutiny, monitor risk and accord with the Scottish Government’s commitment to keeping its approach to uprating under review.

In our Uprating Measures Report we recommended that:

“CPI should be adopted in the short-term, but with scope to review it in the longer-term. Meanwhile, we invite the Scottish Government to actively monitor comparisons between CPI, CPIH and RPI and develop future projections” (Recommendation 3).

Our recommendation on CPI was largely based on pragmatic considerations, notably the need for consistency with DWP’s approach while agency agreements pertain and the current lack of robust alternatives (see our full report for further details of our reasoning).

Regarding the second part of recommendation 3 above, we note that the Section 77 report helpfully provides rates for the 3 indices in September 2019 (the basis for uprating):

• Consumer Price Index (CPI): 1.7%
• Consumer Price Index including some Housing costs (CPIH): 1.7%
• Retail Price Index (RPI): 2.4%

We further note that the UK Government proposes to consult in 2020 on aligning RPI methodology with that of CPIH. RPI continues to be used with respect to Government index-linked bonds, interest rates on student loans and rail-fare increases, despite its acknowledged methodological flaws and calls from the UK Parliament to cease using it for such purposes. The implications for poverty and inequality of using RPI in these instances, instead of CPI or CPIH, would merit further investigation, in accordance with social security principles (e) and (g)(ii).

Moreover, as we noted in our report on the draft Scottish Child Payment (SCP) regulations, some forms of assistance have specific goals to reduce poverty, and poverty may (as in the case of SCP) be measured with reference to median income. It would also, therefore, be helpful for the section 77 report to provide information on changes to median income as well as CPI, CPIH and RPI.

In its response to SCoSS’s recommendation that CPI should be used in the short-term, the Scottish Government committed to keeping developments in inflation measures under review and to consider alternatives approaches should there be a ‘material change’. We welcome that the Section 77 report specifically states the alignment of RPI with CPIH methodologies would constitute a material change.

Recommendation 3: The Scottish Government should consult with stakeholders on any implications for devolved assistance of the UK Government’s consultation on aligning RPI methodology with that of CPI.