LEGISLATIVE CONSENT MEMORANDUM
Welfare Reform Bill
Background
1. This memorandum has been lodged by Nicola Sturgeon MSP, Cabinet Secretary for Health and Wellbeing, under Rule 9.B.3.1(a) of the Parliament's standing orders. The Welfare Reform Bill was introduced in the House of Commons on 16 February 2011. The Bill can be found at:
http://www.publications.parliament.uk/pa/cm201011/cmbills/154/11154.pdf
A draft Legislative Consent Motion has not been provided. For the reasons set out in paragraphs 25-28 below, the Scottish Government does not intend to bring forward a motion in the current session of the Scottish Parliament.
Content of the UK Welfare Reform Bill 2011
2. The UK Government's stated objective for the Bill is to "radically simplify the system to make work pay and combat worklessness and poverty." These proposals flow from the Department for Work and Pensions' initial consultation paper, 21st Century Welfare, published on 30 July 2010 (to which the Scottish Government issued a response on 28 September), and a White Paper which was launched on 11 November.
3. The Bill gives UK Ministers powers to create Universal Credit (UC), a new integrated working-age credit which will replace Working Tax Credit, Child Tax Credit, Housing Benefit, Income Support, income-based Jobseeker's Allowance and income-based Employment and Support Allowance. The Bill also abolishes some other existing benefits, such as Council Tax Benefit.
4. The Bill makes provisions to enable the following:
- Introduction of Universal Credit (a basic personal allowance with 'add-ons' for disability, caring responsibilities, housing costs and children);
- Changes to benefits conditionality (including a increased level of sanctions);
- A change in lone parents' eligibility for Income Support;
- Powers to recover debt (including debt incurred as a result of overpayment);
- Changes to Housing Benefit;
- Abolition of Council Tax Benefit;
- A household limit on benefits (the benefits 'cap');
- Reforms to contributory benefits (e.g. time limiting of ESA). These will not be rolled into UC but will be changed to align with UC;
- Powers to enable data-sharing;
- Reform of the discretionary Social Fund;
- Introduction of the Personal Independence Payment (PIP) to replace the Disability Living Allowance; and
- Changes to the Industrial Injuries Disablement Benefit (IIDB).
5. The Bill will be developed further in Committee. It is likely that the Bill will not conclude its legislative passage until late 2011 (an indicative timeline shared by DWP shows that they hope to receive Royal Assent in November). The Bill is essentially a framework of measures which enable the main policy proposals of the UK Government's welfare reform programme, but do not specify the practical details. These will be set out in regulations (for example, the awards 'taper' and level of income disregard). These regulations will be made after the Bill receives Royal Assent, subject to parliamentary approval. It is unlikely that complete drafts of all regulations required for the Bill will be prepared before the Bill receives Royal Assent, i.e. it will be some time before the full details of policy proposals are known to us and the impact of the Bill on the people of Scotland and on devolved policies and services can be accurately assessed.
6. It is clear that the Bill will have some impact on devolved competency and as such the Scottish Parliament, in accordance with agreed procedure, will normally be expected to consider a Legislative Consent Motion before the Bill reaches its final amending stage in the House in which it was introduced at Westminster. The Bill will be developed further during its passage and it may well be that these developments trigger the need for additional legislative consent (for example, around the localisation of Council Tax Benefit). Bringing a Legislative Consent Motion forward in the next session of the Scottish Parliament could, therefore, have the added benefit of allowing amendments introduced at Committee stage to be included in the Motion.
Legislative consent
7. There are four areas where the Bill, as it is now, triggers the need for legislative consent:
- Introduction of UC (specifically; clauses 33, 42 and 43);
- Data sharing between DWP and certain welfare service providers (e.g. Local Authorities) in Scotland (clause 123);
- Introduction of PIP (clauses 89 and 91); and
- Changes to Industrial Injuries Disablement Benefit (clause 64).
Universal Credit
Background
8. The Bill makes provision for the introduction of UC. The Bill does as expected, in terms of setting up a new benefit - it sets out the structure of the benefit, entitlement conditions, claims and payments, decision making and appeals, conditionality, sanctions and the repeal of existing benefits.
9. As mentioned at paragraph 5 above, the Bill creates the legislative framework for the introduction of UC. The practical details will be set (and potentially varied) by regulations. Foremost amongst these are the awards 'taper' and the level of income disregards. The White Paper mentioned a taper of 65% and a disregards 'floor' of £2,600. Neither of these figures is fixed in the Bill.
Legislative Consent
10. Clause 33 of the Bill gives Scottish Ministers the power to make consequential provisions, by regulations, in relation to the introduction of UC, where such provisions fall within the competence of the Scottish Parliament. This will enable Scottish Ministers to make such amendments to Scottish legislation as might be necessary, for example, to remove references to existing benefits and replace these with references to UC. Clauses 42 and 43 support this general power and provide further detail and procedure for those regulations. This conferral of functions on Scottish Ministers amounts to an alteration of their executive competence and will therefore require the consent of the Scottish Parliament.
Financial Implications
11. UC is a reserved benefit. Costs incurred as part of the roll-out of UC will be met by DWP as part of the transitional arrangements for the introduction of the new benefit. The UK Government has set aside £2.1 billion to fund the implementation of the universal credit over this spending review period [1] (this was made explicit in the White Paper: "If there are any new administrative burdens on Local Authorities they will be funded by the Department of Work and Pensions in the usual way" [2]). There should, therefore, be no immediate financial implications with the introduction of UC. However, we have yet to see the full terms of any transitional arrangements or a firm commitment specifying the costs which DWP will cover and the period for which transitional support will be available. This is an issue which will require further, detailed analysis. UC impacts upon a wide range of interrelated policies and services and the full cost of the changes is unlikely to known for a period of years.
Data Sharing Between DWP and Welfare Services in Scotland
Background
12. The Secretary of State for Work and Pensions wishes to be able to supply information to Scottish Local Authorities and others for them to use for devolved purposes. For example, the Secretary of State wishes to be able to share information with LAs in order that they will be able to judge if a particular individual qualifies for housing support.
13. Clause 123(11)(g) of the Bill also gives the Secretary of State power to prescribe the Scottish Ministers as a "qualifying person" to whom "relevant information" may be supplied for "prescribed purposes relating to welfare services". Although not activated by the Bill as it stands, this power is likely to be used and Scottish Government officials are listed at clause 124(8)(a) in anticipation of this use. It would be sensible, therefore, to include this provision when considering the legislative consent requirements of the Bill.
Legislative Consent
14. This data sharing between the Secretary of State and LAs is to an extent something that could be effected within existing devolved competence, it requires LCM cover because it is not being effected using devolved powers but by UK legislation instead. The Secretary of State's power to prescribe amounts to a (potential) extension of the executive competence of the Scottish Ministers (the Secretary of State has no powers to prescribe in this way, at the moment) and will therefore require the consent of the Parliament.
Financial Implications
15. DWP already shares information with Local Authorities in Scotland (e.g. on Housing Benefit) in more or less the way provided for in the Bill. Therefore there are no financial implications for this part of the Bill. Any costs incurred in taking up to option to prescribe Scottish Ministers under clause 123(11)(g) would be covered by the transitional arrangements for devolution of the Social Fund. Again, therefore, there should be no immediate financial implications although the caveat at paragraph 11 above, regarding the basis and period for transitional support applies here as well.
Introduction of Personal Independence Payments
Background
16. The Bill abolishes the Disability Living Allowance (DLA) and makes provision for its replacement with the new Personal Independence Payment (PIP) scheme. Clauses 89 and 91 give Scottish Ministers similar powers to make consequential provisions by regulations in relation to the introduction of PIP, as clause 33 does with UC, where such provisions fall within the competence of the Scottish Parliament. As with UC, this will enable Scottish Ministers, to make such amendments to Scottish legislation as might be necessary, for example, to remove references to the existing benefit (DLA) and replace these with references to PIP.
Legislative Consent
17. As with the introduction of UC, this amounts to an extension of devolved competency, as no such powers exist at present, and will require the consent of the Parliament.
Financial Implications
18. The introduction of PIP should be covered by transitional arrangements on the same basis as the introduction of UC. Paragraph 11 above applies here also. It is worth noting that the introduction of PIP is a clear example of where changes to a UK benefit will have a consequential impact on the delivery (and therefore the cost) of devolved services - in this case, in areas such as social care, health assessment for benefits and passported benefits such as the Blue Badge parking scheme. It is unlikely that regulations governing entitlement to PIP will widen entitlement beyond the existing DLA claimant group; it is much more likely that the number of people currently entitled to claim will reduce. This will lower the cost of the benefit to the UK government but may lead to an increase in devolved costs as services in Scotland may have to commence providing support which claimants were previously able to pay for from their DLA. As above, the full cost of these changes is unlikely to be quantifiable for a period of years.
Changes to Industrial Injuries Disablement Benefit
Background
19. The Bill makes several changes to the Industrial Injuries Disablement Benefit. Most of these are reserved matters. However, clause 64 inserts a new section 95A into the Social Security Contributions and Benefits Act 1992. This will have the effect of extending IIDB coverage to anyone who incurred an injury while on "an employment training scheme or employment training course". Previously, IIDB has been paid to qualifying trainees in Scotland via an anomalous, scheme. In Scotland this applies to trainees on the Training for Work programme. Given the small number of claims this applies to, DWP through Job Centre Plus administer and make the payments and have not recovered these from the Scottish Government. In effect, we have not exercised these powers. The Bill dissolves this anomalous scheme and re-routes payments through the principal, reserved benefit. This should not have any negative financial impact on qualifying claimants, in terms of the amount of benefit they receive.
Legislative Consent
20. This will require the consent of the Parliament because this change reduces Scottish Ministers' executive powers under section 11 of the Employment and Training Act 1973 (a shared power under section 56 of the Scotland Act).
Financial Implications
21. This change amounts to a re-routing of an equivalent level of support, through the principal UK benefit rather than through the anomalous, Scotland-only scheme. Costs incurred will be met by DWP who will be providing the benefit in future. As mentioned at paragraph 19 above, DWP currently administer these payments and does not recover them from the Scottish Government. There are no financial implications associated with this reform.
Consultation
22. The UK Government consulted on the proposals for the Welfare Reform Bill as set out in its White Paper, Universal Credit: Welfare That Works, in a consultation document, 21st Century Welfare, published on 30 July 2010 and closed for consultation on 1 October 2010:
23. On 11 November 2010, the UK Government published its analysis of the consultation responses, Consultation Responses to 21st Century Welfare:
24. A full consultation with Scottish stakeholders has not taken place because the Bill deals almost exclusively with reserved matters. However, as noted above, there are wider implications beyond the requirements for legislative consent and it would be in the Scottish interest to gather feedback on these. The Scottish Government and COSLA have established the Welfare Reform Scrutiny Group to lead discussions with stakeholders regarding the Bill. The Group first convened on 11 February and its next meeting is scheduled for 15 March. It is expected that the Group will play a key role in gathering responses to and analysis of the Bill and in making this information available.
Conclusion
25. The Scottish Government has made clear that, in terms of general principles, it supports the simplification of the welfare system where this will shorten the journey from unemployment to work, make it easier for the most vulnerable to access benefits, and increase efficiency. However, we also have real concerns about wider issues raised by the Bill. Our expectation is that the real value of these benefits will be driven down prior to roll-out, through a narrowing of entitlement for benefits such as PIP (replacing DLA) and housing support. This is likely to lead to additional costs being incurred for devolved services. Although, we are not currently in a position to estimate the extent of this cost increase, work is in hand to draw this out using case studies generated by the Welfare Reform Scrutiny Group.
26. Standing orders require that the Scottish Government normally lodge an LCM within ten working days of the UK Bill introduction and we have sought to meet this. Normally, the Scottish Government, where possible, tries to ensure the passage of an LCM through the Scottish Parliament by the time the Bill reaches its last amending stage in the House to which it was introduced at Westminster (which is not expected before Autumn this year). We are also conscious of our obligation to ensure that any Memorandum lodged is accurate. At present, the Memorandum can only accurately reflect the fact that the full policy implications are not yet clear and any Legislative Consent Motion would therefore necessarily be framed too generally. Delay in bringing forward a motion would allow time for the policy implications of the Bill to be considered more fully whilst still complying with the desired legislative timetable.
27. Additionally, there is little time left this session for the Parliament to consider an LCM and it is unlikely that scrutiny could be concluded before dissolution. The Scottish Government considers that the subject matter of the Bill is such that scrutiny should not be rushed, therefore, the Scottish Government believes that the start of the next session of the Parliament would be the appropriate time to bring forward a new LCM which will include a motion. In the intervening period, we will engage further with the UK Government and stakeholders in Scotland, to tease out the detail and policy implications required in order to fully and correctly inform the Parliament of the Bill's implications. We would also be able to address any changes made to the Bill by the UK Parliament.
28. For the reasons given above, the Scottish Government has lodged this Legislative Consent Memorandum, without including the text of a draft Legislative Consent Motion, on the basis that the appropriate time to bring forward such a Motion will be at the start of the new parliamentary session when the wider implications of the Bill have been analysed and are better understood in the Scottish context.
SCOTTISH GOVERNMENT
March 2011
[1] Iain Duncan Smith MP
http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm101111/debtext/101111-0001.htm#10111155001329
[2] Universal Credit: Welfare That Works; pp 47, para 13, 11 November 2011