Option 1 – Do nothing
Under this option there are generally no direct costs arising for Scottish Government, Social Security Scotland or other businesses or organisations. However some of the potential benefits and savings identified under option 3 would not be realised.
Adopting the ‘do nothing’ approach would mean that the potential savings for SCTS arising from making a new determination of entitlement after an appeal has been lodged and stopping the appeal would not be realised.
Under this option Scottish social security assistance could not be recovered from compensation awards. The amounts forecast to be recovered in the coming years are shown in the table below:
|Child Disability Payment
|Number of cases
|Adult Disability Payment
|Number of cases
|Pension Age Disability Payment
|Number of cases
|Scottish Child Payment
|Number of cases
|Employment Injury Assistance
|Number of cases
|Number of cases
Recovery of compensation will be limited to accidents, injuries and diseases that happen after the provisions come into force, resulting in increasing case numbers each year before reaching a plateau.
Table 2: notes
- These are estimates only and there is a significant degree of uncertainty which should be acknowledged.
- Number of cases have been rounded to nearest 5. Recovery amounts have been rounded to nearest £5,000. Figures may not sum due to rounding.
- Calculations in this table have been made by using DWP figures for Scotland to calculate a proportion of claims in the total caseload for which a recovery is made. It is assumed that this proportion of recoveries will continue into the future, so it has been applied to the forecast caseload for Social Security Scotland (including new applications and cases migrated from the DWP) to estimate the number of Scottish recovery cases.
- Amount recovered has been estimated by considering the average amount of money recovered by the DWP. It is assumed that the average amounts will remain at the same level into the future. We have also included an assumption for inflation applied to reflect up-rating of benefits.
- An additional and uncertain assumption made to estimate the amount of time it is expected to take for claims to settle has been applied to account for the policy that only incidents that have occurred since the policy becomes active (assumed to be early 2025) being eligible for recovery. This is not underpinned by data due to it not being available; as such, there is a higher degree of uncertainty in this element of the estimate which should be acknowledged.
- That assumption forms part of a calculation which also uses DWP Compensation Recovery Unit performance statistics. The use of performance statistics assumes the types of claims for which a recovery is made is consistent across benefits.
- The table only includes compensation recovery for cases that would be administered by Social Security Scotland.
The Chief Executive of Social Security Scotland is subject to the specific Accountable Officer responsibilities outlined in Part 2 section 15 of the Public Finance and Accountability (Scotland) Act 2000 relating to regularity of payments and value for money. The Accountable Officer’s statutory accountability is to the Scottish Parliament and includes an obligation to understand the error and fraud levels prevalent in Social Security Scotland caseloads. They are also reasonably expected to take steps to address any potential loss to the public purse.
For the proposal to request information for the purpose of auditing the social security system there are currently provisions in place that allow Social Security Scotland to undertake estimation work in relation to official error but they cannot undertake evaluation that would meet the requirements under the specific Accountable Officer responsibilities outlined in Part 2 section 15 of the Public Finance and Accountability (Scotland) Act 2000. If option 1 were pursued, robust and reliable audit and reporting mechanisms could not be introduced and Social Security Scotland would not be able to provide adequate assurance that payments are correct, and where they are not, to accurately quantify rates of overpayment, underpayment and fraud.
Under option 1 Social Security Scotland would not incur costs or resourcing requirements as a result of development and improvement work, but by not implementing changes to make challenge processes more accessible and flexible, there would likely be resource and cost impacts over time.
Option 2 – Non-regulatory changes
There would be few immediate costs under this option but the majority of the proposals within the Bill could not be progressed without primary legislation.
Option 2 would involve Social Security Scotland making some light-touch reviews to public-facing communications for the limited improvements that could be made without legislative change. This is unlikely to have a significant impact on costs or resources for Social Security Scotland or for welfare advice organisations offering support to Social Security Scotland clients.
Option 3 – Legislative change
The Bill is likely to result in costs for the Scottish Government, Social Security Scotland, SCTS, the insurance sector and firms of solicitors. There may also be an impact on welfare rights advice services and advocacy services due to changes arising from the Bill.
The costs on the Scottish Government and Social Security Scotland are considered in detail in the Financial Memorandum for the Bill and as such the focus of this impact assessment will be on the potential costs to businesses and organisations arising from the Bill.
The potential costs incurred by SCTS as a result of the proposals included in the Bill are set out below with reference to the relevant proposal.
The costs to SCTS as a result of the proposal to allow appeals to be brought, with the permission of the Tribunal, beyond the one-year prescribed period on the basis of ‘exceptional circumstances’ are anticipated to be very low. The provision in the 2020 Act to allow late appeals for reasons related to COVID-19 was never utilised beyond a calendar year. In addition, cases will need to evidence exceptional circumstances and will therefore be very low in number. As a result, the Scottish Government expects that use of this measure will be so rare as to be insignificant in terms of ongoing running costs for SCTS.
The proposal to introduce a right to a review (followed by a right to appeal to the First-tier Tribunal for Scotland (Social Security Chamber)) against a finding of liability for an overpayment is likely to generate some additional running costs for SCTS. This proposal formalises an existing non-statutory process and is not expected to have a significant impact on the overall number of appeals heard by the Tribunal .
Since February 2022 there have been an average of less than 2 cases per month where people have challenged Social Security Scotland’s decision using the current informal process. While it is reasonable to assume, based on wider trends within the devolved social security system, that only a proportion of challenges made would reach the appeal stage, the Scottish Government has based its forecast on 100% of challenges going to the appeal stage in order to estimate the potential costs to SCTS.
Based on an assumption that 2 cases per month will arise and assuming 100% of these go to the appeal stage, additional running costs for SCTS might be expected to be £19,000 per year. The Scottish Government currently knows of no reason to expect this number to increase significantly as a result of the process being formalised but there is a degree of uncertainty around the effect that it may have, and it should be recognised that running costs for SCTS may increase further if uptake increases.
The proposal to recover Scottish social security assistance from compensation awards has the potential to generate additional costs for SCTS, as the Bill will create a right of appeal against disputed certificates of recoverable assistance. The Scottish Government estimates that between 5 and 10 additional appeals per year are likely as a result of the introduction of appeals for recovery of value of assistance from compensation payments. This is not enough to have a significant impact on SCTS’ running costs, likely less than £10,000 per year, although it is anticipated that members training will be required in order to administer this new type of appeal.
The Scottish Government considers that the proposal to give Scottish Ministers powers to require individuals to provide information when reasonably requested in order to review their social security entitlement for the purposes of audit may result in a very small increase in the number of appeals. It is anticipated that there could be a small increase in the number of unscheduled reviews which could occur if people do not participate in the process without good reason. These could in turn lead to appeals; however, these numbers are expected to be small enough – in single figures – to have no impact on the overall running costs of SCTS.
The costs to SCTS arising from the Bill should be considered in conjunction with the potential savings to SCTS of £900,000 to £1 million a year previously outlined as a benefit of Option 3.
The proposal to recover Scottish social security assistance from compensation awards could have potential costs for the insurance industry, in particular insurers, insurance lawyers and personal injury lawyers. The costs to businesses and organisations of this proposal will depend on the eventual delivery method adopted: whether the DWP deliver a service by agreement on behalf of Scottish Ministers or if Scottish Ministers set up a new standalone CRU.
The representatives from the insurance industry that have provided insight and feedback to the Scottish Government during policy development have, without exception, voiced their preference for a Scottish compensation recovery service to be delivered by DWP CRU on behalf of Scottish Ministers. There are likely to be costs to insurers and personal injury lawyers should this delivery method be adopted but they are anticipated to be significantly lower than if a new Scottish standalone CRU was created.
The costs highlighted by the insurance industry for this delivery method include ongoing training costs to train staff on Scottish social security assistance and potential implementation costs for changes to computer systems. Scottish Government officials received feedback that costs relating to any required changes to computer systems were likely to be incurred before the commencement of recovery of Scottish social security assistance. The insurance industry would require sufficient notice of any deadlines for the implementation of system changes but this was not considered a major concern by industry representatives.
Of greater concern to representatives of the insurance industry were the potential costs to business if a new standalone Scottish CRU were to be created.
Insurers, insurance lawyers and personal injury lawyers all highlighted during engagement the potential for duplication and confusion if a new CRU were created and a dual system operating. They advised that any potential confusion could be exacerbated in a situation where an injured party is resident in Scotland but suffers an accident in another part of the UK.
The costs to the insurance industry of adopting this delivery method for the recovery of Scottish social security assistance from compensation awards would include additional IT expenditure and overheads for insurers as well as additional and separate training requirements for staff handling claims. Insurance industry representatives anticipate that significant capital expenditure would be required to implement a separate Scottish system of compensation recovery.
It was also felt that this delivery method would lead to additional administration interacting with a different CRU and that there may also be a requirement for transitional arrangements between DWP CRU and a new standalone Scottish CRU. It was highlighted that were a Scottish CRU to be created it could take many months to test systems, train staff and prepare for implementation.
Insurance industry representatives also advised that there could be unintended consequences if the Bill seeks to change the rules on legal liability or significantly alters the benefits landscape. They warned that increased costs may be an inflationary factor for insurers to consider in the pricing of cover for customers in Scotland.
The Scottish Government’s intention is to create a Scottish compensation recovery scheme which takes an approach to the recovery of social security assistance consistent with the rest of the UK. This consistency is intended to reduce complexity for the personal injury and insurance industries while also limiting the impact on the injured persons involved.
It is expected that the changes made to the re-determinations and appeals processes and the introduction of formal challenge rights for overpayment liability decisions as a result of the Bill could cause additional requests for information and support from existing advice and advocacy services. During the passage of the Bill the Scottish Government will continue to engage with advice services to increase understanding of the changes being introduced and to support them to provide independent and informed advice for people receiving, or enquiring about, social security payments. The Scottish Government does not anticipate that the Bill should require a significant change to their operations or resources.
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