Every year, the Scottish Government is required to calculate and report on what the amount of each social security payment would be with an adjustment for annual inflation. It has a duty to up-rate the amount of some payments and a discretion to up-rate other payments. An important distinction can be drawn between the amount of a social security payment and its value. The purpose of the annual up-rating exercise is to ensure that the value of social security payments is maintained by increasing their amounts in line with rises in relevant prices.

By maintaining the value of payments as prices rise, up-rating contributes to social security principles. However, a contribution towards reducing poverty cannot be neatly captured by an average measure of price inflation, and changes in the external environment can affect costs and needs. There may be situations where equality and human rights considerations are needed in relation to up-rating specifically. The Scottish Commission on Social Security welcomes statements in the Equality and Fairer Scotland Budget Statement recognising the intersection between people with different protected characteristics and disadvantages, which can compound structural inequality.

This year the Scottish Government has decided to up-rate all social security payments by the September 2023 Consumer Prices Index (CPI) 12-month rate, 6.7%.

At a time when there are significant pressures on Scottish Government budgets, this commitment to maintaining the value of all social security payments is welcome.

There is no current requirement to up-rate earnings thresholds for social security payments, and no standard way of increasing the earnings thresholds year on year. There is a risk that the value of earnings thresholds would fall, just as the value of social security payments would fall if their amounts were not increased in line with the increase in prices.

As with up-rating the amounts of social security payments, which involves choices about different inflation measures, there are likely to be a range of options for an appropriate measure for the up-rating of earnings thresholds. Stakeholder engagement on this matter would be in keeping with principle (f), “the Scottish social security system is to be designed with the people of Scotland on the basis of evidence”.

The draft Section 86A report for this year’s up-rating exercise refers to a Multi Criteria Decision Analysis (MCDA) analytical report undertaken by the Scottish Government to evaluate potential methods of up-rating using various measures of inflation and different reference periods. This exercise led to a Scottish Government recommendation that September CPI remains the most appropriate method for up-rating.

External stakeholder engagement in the MCDA process was not undertaken. In line with principle (f), stakeholder engagement as part of an MCDA process can be beneficial in ensuring that multiple perspectives are included from the outset and should be included in future considerations of up-rating policy and processes.