Up-rating devolved Social Security assistance: multi criteria decision analysis - January 2024

Defining Criteria

33. This section will define the criteria used to score the defined options.

Factors that determine the uprating decision

34. The following factors determine the Scottish Government’s uprating decision:

a) Legislation.

b) Measuring inflation.

c) Delivery.

d) Transparency.

e) Consistency with UK Government uprating approach.

f) Outcomes for clients.

g) Government expenditure.

h) Maintaining real value.

Legislation

35. There are three key legal restrictions on the Scottish Government’s decision.

• The Act provides a duty under section 86A to consider the effects of inflation as it relates to the value of certain types of devolved social security assistance made under the Act before the end of each financial year. The Act requires Scottish Ministers to prepare and lay a report before Scottish parliament each year outlining the inflation-adjusted rate of each relevant social security payment, how the figure was calculated and how the decision was made.
• The Act instructs the inflation adjusted rate for each relevant social security payment should reflect the change in the general level of relevant prices. It is for Scottish Ministers to decide what prices are relevant prices.
• Section 86B of The Act also sets out a number of devolved social security assistance made under the Act that must be uprated each year by law (see the “Mandatory" column in Table 7 below). There are also other forms of assistance under the Act and out-with the Act’s framework so not covered by this duty (see the “Discretionary” column of table 7 below.) This report does not set out a view on which assistance should be uprated as that is a decision for Scottish Ministers.

Table 7

Mandatory:

• Disability related assistance^[26]
• Carer related assistance^[27]
• Funeral Support Payment
• Scottish Child Payment
• Employment-injury assistance^[28]

Discretionary:

• Best Start Grant
• Best Start Foods
• Child Winter Heating Payment
• Winter Heating Payment
• Job Start Payment

36. Legislation will not be included as a scoring criteria but options that do not meet the requirements set out in this existing legislation (e.g. wage inflation cannot be used as this would not reflect the change in prices) have been ruled out as potential options.

Measuring Inflation

37. Under existing legislation it is necessary for uprating to accurately reflect changes in prices, as set out in Section 86A of the Act. Therefore the analytical robustness of the option we choose to represent inflation is important (e.g. the UK Statistics Authority have advised RPI should not be used to measure inflation in the economy). This aspect will be included as a scoring criteria and referred to as robustness.

38. It is also important how well the measure of inflation reflects the changes in prices experienced by clients (e.g. The Producer Price Index would not be used to reflect the price changes experienced by consumers in the economy). This is included as a scoring criteria and referred to as relevance.

Delivery

39. There is an established process for implementing uprating which includes allowing time for the implementation and scrutiny of regulations, for inclusion of the uprating decision in the Scottish Budget and for Social Security Scotland to update systems prior to new rates coming into force. It is essential that uprating does not impede Social Security Scotland’s ability to pay clients in time and therefore delivery will be included as a scoring criteria.

Transparency

40. The Scottish Government’s approach to uprating should be transparent, so easily understandable and unambiguous to clients and other stakeholders, including the general public. Transparency will be included as a scoring criteria.

Consistency with UK Government approach

41. It will take time for the devolution of social security assistance to Scotland to fully complete and some forms of devolved social security assistance are still delivered to clients in Scotland by the Department for Work and Pensions via agency agreements, while the rollout of the Scotland-specific version is ongoing (e.g. Adult Disability Payment and Personal Independence Payment). It is a priority of Scottish Government to prevent a two-tiered system where clients paid by Social Security Scotland are paid differently to Scottish clients whose assistance is administered by the Department for Work and Pensions. Therefore for the forms of assistance where this applies, maintaining a consistent approach between uprating decisions made by the Scottish and UK Governments is an important consideration until these benefits are fully transferred over. Despite this arrangement, the decision of how to uprate these benefits is solely for Scottish Ministers to make.

42. Divergence from UK Government uprating approach could also create fiscal sustainability issues for devolved social security assistance which have a Block Grant Adjustment if the Scottish Government’s uprating policy is more generous and the Scottish Government pays out more than it receives in funding.

43. These considerations do not apply to all benefits, and also relate to delivery impacts and therefore consistency with the UK Government will not be considered as a scoring criteria but will form part of the consideration for the delivery criteria.

Outcomes for Clients and Government Expenditure

44. It is imperative the Scottish Government consider the impact of uprating on both benefit client and government finances. However, this has not been directly included in the scoring criteria of options. This analysis considers the potential uprating options that best deliver the Government’s legislative uprating obligations and policy objectives and explicitly including financial outcomes for benefit client and government finances in the scoring criteria would be inconsistent with those obligations and objectives.

45. Uprating approaches are not intended to either save Government money or maximise benefit income for clients but to maintain the true value of payments as prices rise in the economy. Although the cost to government of benefit expenditure is a crucial factor in Ministers’ decision whether to uprate discretionary benefits or not, this analysis is concerned with the method to uprate benefits rather than which benefits to uprate, so financial considerations will not be included as a scoring criteria.

Maintaining Real Value

46. Uprating aims to protect the true value of devolved social security assistance as prices rise in the economy and ensure parity between financial years. Ministers are required to consider the effects of inflation on payment rates. This means the extent to which an option maintains the true value of devolved social security assistance is a key consideration and it is important this is assessed both year to year and in the long term. Annex A provides estimates of the real value impacts of each uprating option, taking into account Scottish Government uprating decisions since April 2021.

47. The change in real value is only known once inflation has occurred. As such we cannot accurately evaluate each option’s effectiveness at maintaining real value in advance, this is a particular issue for approaches that use forecast inflation figures. Maintaining real value is not included as a separate scoring criteria but is considered in the scoring for relevance.

Scoring Criteria

48. Following the above discussion, the following four criteria will be used to score options:

Table 8

Criteria: Robustness

Description: How analytically robust is the methodology and data used for the option (e.g. quality and reliability of data)?

Criteria: Relevance

Description: To what extent does the option reflect inflation experienced by clients, including real terms value changes over time?

Criteria: Delivery

Description: Does implementing the option cause any operational problems? (e.g. Social Security Scotland needs to implement changes to systems to make payments to clients).

Criteria: Transparency

Description: How easily is the option understood by stakeholders? And how easily accessible is the information? (e.g. Is the approach clear and accessible to the general public?)

Scoring

49. Each potential uprating policy option will be scored on the extent the criteria is met as: Very High, High, Medium, Low or Very Low.

50. There is a degree of subjectivity to this assessment and an explanation of scores for each option is provided. Sensitivity analysis has been carried out to assess how different scoring would affect the recommendation.

51. The potential options will be ranked by highest score to determine which option scores most highly against the scoring criteria. The highest scoring option will be the recommendation this analysis provides.

Weighting

52. Weighting is often applied across criteria when scoring options to account for their relative importance. An equal weighting has been applied in this analysis because it has been judged to be equally important each criteria is satisfied.

53. Sensitivity analysis will be undertaken to examine the extent the weighting affects the overall results.

Double Counting

54. It is important double counting is not present as criteria with double counting are likely to be given more weight in the final overall decision than they should. Double counting is a risk within a Multi Criteria Decision Analysis because it is possible for a single factor to influence more than one scoring criteria. For this reason, some factors have not been included as an individual criteria due to their influence on other criteria (e.g. maintaining real value is considered within relevance).