Social security agency in Scotland: outline business case

Annex B

11. Estimation of Costs

11.1 Estimated costs of option 1 - The agency centrally delivers social security in Scotland

11.1.1 High level parameters and assumptions under option 1

11. Function Coverage: Under option 1 almost all of the functions needed within the social security system are undertaken by the social security agency. Assessments would be delivered by agency staff, and not a separate organisation. Alongside this, the Scottish Government would provide a small number of policy, strategy and management information functions. The cost of this option in terms of costs and staff are outlined below. Excluded from these costs are the costs associated with the devolution for existing third and public sector services.

11.1. Benefit Coverage: The costs for option 1 are based on the agency centrally administering all devolved benefits, the existing benefits currently administered in Scotland by Local Authorities and others, such as the Scottish Welfare Fund, as well as an estimate of the additional administrative burden of changes to existing benefits e.g. extending eligibility and new benefits (See the technical annex for more information). In addition it includes the costs of DWP administering Universal Credit Flexibilities.

11.2. Estates: option 1 estate costs for a centralised agency are estimated based on modelling sites in the central belt providing accommodation suitable for generic office functions only ( i.e., there is no retail level space for engaging with social security clients). There are no additional estates costs in this option for face-to-face contact for people applying for or in receipt of benefits; services which require local presence, such as assessments and local fraud and error investigations, would be delivered by a mobile workforce travelling from their home base. These staff members would be allocated a small shared hot-desking space in the central office for report writing and other desk-based work.

11.3. Assessments: Paper based assessments would be undertaken by central agency staff. The costs of undertaking face-to-face assessments are based on a mobile workforce covering an area of Scotland within a 1 hour driving time from their home base.

11.4. For each option a similar methodology has been used to estimate digital costs of the enabling systems. In the DWP DABM data, there are costs for Costs Only IT lines. Those costs relate to the maintenance of existing DWP systems. Given the very varied IT landscape within DWP - and the connectedness of systems that relate to the benefits being devolved to other systems within DWP that relate to reserved benefits - the DABM costs for IT are not a useful comparator for the future on-going IT costs for the social security agency. Because of this, we have removed the DABM IT costs. We have done some early discovery work to understand at high level the type of modern, coherent IT architecture that would be required to support the administration of the devolved benefits. Cost estimates for the on-going operation of those systems have been used instead of the DABM costs.

11.5. The costs for the above are dependent on the number of staff and number of central offices and further locations, as those have a significant impact on some areas of IT cost ( e.g. numbers of licenses to access systems, or security costs for additional locations). In the point estimates below, VAT, and inflation have been excluded.

11.6. In addition to the above costs, estimates from the DABM model of IT Costs that include staff costs are included in the enabling systems costs. This includes staff IT support.

11.2 Estimated costs of option 2 - The agency delivers social security in Scotland through local offices

11.2.1 High level parameters and assumptions under option 2

11.7. Function Coverage: Under option 2 almost all of the functions needed within the social security system are undertaken by the social security agency. Assessments would be delivered by agency staff, and not a separate organisation. Alongside this, the Scottish Government would provide a small number of policy, strategy and management information functions. The cost of this option in terms of costs and staff are outlined below. Excluded from these costs are the costs associated with the devolution for existing third and public sector service.

11.8. Benefit Coverage: The costs for option 2 are based on the agency with local offices and a corporate headquarters administering all devolved benefits, the existing benefits currently administered in Scotland by Local Authorities and others, such as the Scottish Welfare Fund, as well as an estimate of the additional administrative burden of changes to existing benefits e.g. extending eligibility and new benefits (See the technical annex for more information). In addition it includes the costs of DWP administering Universal Credit Flexibilities.

11.9. Estates: option 2 estate costs for an agency with local offices and a corporate headquarters are estimated based on modelling sites in the central belt for the corporate headquarters and local offices across Scotland, based on the footprint for Jobcentre Plus, providing accommodation suitable for generic office functions and retail space for face-to-face contact with those applying for benefits. There are additional estates (and staff) costs in this option for face-to-face contact for people applying for benefits. Services which require local presence, such as assessments and fraud and error investigations, would be delivered through these offices and by agency staff traveling out from these local office locations.

11.10. Under this option costs are presented for two types of local office model. In option 2a some Queries, General Enquiries and Claim Progress; Pre Claim, Support Services and all face-to-face assessment would be spread across the local offices, with all other functions being located at the headquarters. In option 2b, administration of the benefits is spread across local offices with only Corporate Functions remaining at the headquarters.

11.11. Assessments: The costs of undertaking assessments are based on a workforce covering an area of Scotland from the local office either with those being assessed travelling to the local office or the agency staff travelling out to do home or prison visits.

11.12. Digital: The digital cost of the enabling systems needed under this option are estimated in the same way as for option 1.

11.3 Estimated costs of option 3 - The agency delivers most benefits, but local authorities provide the face-to-face contact for the social security system and additional benefits based on local need

11.3.1 High level parameters and assumptions under option 3

11.13. Functional Coverage: Under option 3 a dual landscape would exist. Local authorities would, alongside the agency, receive and answer queries and general enquiries. Local authorities would also administer a pot of money to be allocated based on local need and for one off and crisis benefits at a local level (Application, processing/evaluation, award, payment) via their existing systems. They would provide a range of management Information to the agency and Scottish Government . They would also run a range of continuous capabilities (Evidence, Notification and Benefit Interaction) particularly between DWP and Scottish Government. For all other benefits the social security agency would undertake the functions relating to applications, processing/evaluation, award, payment and change of circumstances as well as all the other functions such as corporate and management functions.

11.14. The Scottish Government would provide a small number of policy, strategy and management information functions. The cost of this option in terms of costs and staff are outlined below. Excluded from these costs are the costs associated with the devolution for existing third and public sector services.

11.15. Benefit Coverage: The costs for option 3 are based on the agency administering all devolved benefits, as well as an estimate of the additional administrative burden of changes to existing benefits e.g. extending eligibility and new benefits (See the technical annex for more information). In addition it includes the costs of DWP administering Universal Credit Flexibilities. Local authorities would also administer a pot of money to be allocated based on local need and for one off and crisis benefits at a local level - this would build on the Scottish Welfare Fund and Discretionary Housing Payments.

11.16. Local Authorities would be the face-to-face contact for social security including for assessments in Scotland and would administer a pot of money based on a local needs and rapid response (for crisis and one off payments). The cost of administering this is would be part of a formal negotiation with local authorities. Therefore both a case study approach is taken to illustrate the costs of this part of option 3 and an estimated total cost based on this are included here.

11.17. Estates: option 3 estate costs for the agency are estimated based on modelling sites in the central belt for the corporate headquarters in the same way as option 1. A case study approach has been taken to illustrate the local authority costs of option 3.

11.18. Assessments: Local authorities would undertake assessments in this option.

11.19. Digital: The digital cost of the enabling systems needed under this option are estimated in the same way as for option 1.

11.4 Estimated costs of option 4 - The agency delivers cash and benefits in kind

11.4.1 High level parameters and assumptions under option 4

11.20. Function Coverage: Under option 4 what the agency does would be the same as option 1 and 2 the difference is that it would also be providing benefits 'in kind' as well as in cash in the form of goods, services and concessions). The only functions the agency would not undertake in their entirety under option 4 would be identical to those in option 1 or 2. Alongside this, the Scottish Government would provide a small number of policy, strategy and management information functions. The cost of this option in terms of costs and staff are outlined below. Excluded from these costs are the costs associated with the devolution for existing third and public sector services.

11.21. Benefit Coverage: The costs for option 4 shown below are based on the agency centrally administering all devolved benefits, the existing benefits currently administered in Scotland by Local Authorities and others, such as the Scottish Welfare Fund including in kind as well as cash, as well as an estimate of the additional administrative burden of changes to existing benefits e.g. extending eligibility and new benefits (See the technical annex for more information). In addition it includes the costs of DWP administering Universal Credit Flexibilities.

11.22. Estates: option 4 estate costs are either as set out in option 1 or option 2a or 2b but with the additional requirement to store and transport in kind benefits.

11.23. Assessments: Paper based assessments under option 4 would be undertaken by agency staff as set out in option 1 or option 2.

11.24. Digital: The digital cost of the enabling systems needed under this option are estimated in the same way as for option 1.

11.4.2 Option 4 case study - storage, distribution and fitting of goods

11.25. In addition to the in-kind costs that form part of the estimate above, it is possible under option 4 to look at the costs of existing 'in kind' benefits provided by the Scottish Welfare Fund. Within this current benefit which is administered under the status quo local authorities provide goods, services and concessions. The costs of concessions are estimated within the costs for option 4 above however for good e.g. cookers or carpets their distribution and in some cases fitting are incorporated into a single cost which includes the goods themselves. It is therefore assumed that these costs would not lie within the admin budget of the agency but would rather be part of the procurement of these items.

11.26. However because of fluctuations in demand for some items of goods there may be a need to store a number of weeks supply of some items to ensure delivery is prompt. This is particularly important as items can be needed in crisis situations, There would be two ways to deal with this issue. The first would be to build into the procurement of these items that a stock level and delivery turnaround time is maintained by the supplier. The second is for an in-house or third party warehouse to hold a certain amount of stock and deliver this to ensure there was no gap in service provision.

11.27. Under this second option stock would be delivered by suppliers to a central location on pallets and held in ambient storage on behalf of the agency or in an agency national distribution centre then delivered. The cost of receipt handling and dispatch of the palletised goods into and out of the warehouse would be in the region of £3.20 per instance. Then the estimated cost for storage per pallet would be in the region of £1.75 per pallet per week based on 2016 prices. To deliver this stock around Scotland on pallets would range between £35 for the mainland to £55 in Highlands and Islands.

11.28. This second option is already used within National Services Scotland to ensure that items needed by NHS Boards are available and delivered when needed.

11.29. It is however difficult to estimate the amount of stock which would need to be held to ensure delivery and therefore the cost of this as part of this options appraisal. This case study however illustrates that this element of social security could be delivered either as part of the procurement of stock items and/ or by procuring then storing stock to ensure there is no delay in providing crisis items.

11.5 Estimated costs of option 5 - The agency provides governance but the delivery of social security is done by others e.g. via procurement or a Service Level Agreement.

11.5.1 High level parameters and assumptions under option 5

11.30. Function Coverage: Under option 5 a range of functions around pre claims support, enquiries, benefit processing and assessment would be undertaken by others via procurement or an SLA rather than by the social security agency. This would mean that the agency would be much smaller than under other options like in option 6. The agency would however undertake decision making, dispute resolution and some error management and investigations. It would provide a range of centralised functions (Corporate Functions, Business Development, Stakeholder Management/ Research/ Support Services, Learning and Development) with much larger procurement and audit divisions. It would also produce a range of management Information with Scottish Government . It would also coordinate a range of continuous capabilities (Evidence, Notification and Benefit Interaction) particularly between DWP and Scottish Government, see Figure A below. Alongside this, the Scottish Government would provide a small number of policy, strategy and management information functions. The cost of this option in terms of costs and staff are outlined below. Excluded from these costs are the costs associated with the devolution for existing third and public sector services.

11.31. Benefit Coverage: The costs for option 5 are based on the agency managing others via procurement or an SLA to undertake the administration of devolved and existing Scottish benefits, such as the Scottish Welfare Fund. In addition it includes the costs of DWP administering Universal Credit Flexibilities.

11.32. Estates: option 5 estate costs for a centralised agency are estimated based on modelling sites in the central belt providing accommodation suitable for generic office functions to provide corporate functions and the limited operational functions listed above only ( i.e., there is no retail level space for engaging with social security clients). There are no additional estates costs in this option for administering the benefits or face-to-face contact for people applying for or in receipt of benefits; services which require local presence, such as assessments would be delivered by others not the agency.

11.33. Assessments: The costs of undertaking assessments are based on this being done by others via procurement or an SLA. This is the same as that which currently happens under option 0 the status quo.

11.34. Digital: The digital cost of the enabling systems needed under this option are estimated in the same way as for option 1.

11.6 Estimated costs of option 6 - Social security is embedded in a range of existing public services with the agency providing governance.

11.6.1 High level parameters and assumptions under option 6

11.35. Functional Coverage: Under option 6 most aspects of the 8 functions outlined above would be undertaken by a range of existing public services in Scotland rather than by the social security agency. This would mean that the agency would be much smaller than under other options and provide corporate oversight and governance. For example the agency would undertake some error management and investigations. It would provide a range of centralised functions (Corporate Functions, Business Development, Stakeholder Management/ Research/ Support Services, Learning and Development, Policy) with much larger procurement and audit divisions. It would also produce a range of management information with Scottish Government . It would also coordinate a range of continuous capabilities (Evidence, Notification and Benefit Interaction) particularly between DWP and Scottish Government.

11.36. Other public sector organisations would receive and answer queries and general enquiries. They would also administer benefits (Application, processing/evaluation (including assessment), award, payment and change of circumstances). This would mean assessment being undertaken by others not directly employed by the agency with the potential for example this to be done by the NHS or Local Authorities.

11.37. Alongside this, the Scottish Government would provide a small number of policy, strategy and management information functions. The cost of this option in terms of costs and staff are outlined below. Excluded from these costs are the costs associated with the devolution for existing third and public sector services.

11.38. Benefit Coverage: Option 6 is based on the social security agency providing governance, guidance and consistency as well as liaising with DWP and Scottish Government, but existing public sector in Scotland administering all devolved benefits, as well as the additional administrative burden of changes to existing benefits e.g. extending eligibility and new benefits (See the technical annex for more information).

11.39. The cost of the agency and Scottish Government under option 6 is provided here, as well as an estimate of the cost of administering these benefits. As this would be part of the functions undertaken by the public sector in Scotland these costs will be further developed in the Full Business Case for social security. Therefore a case study approach is taken to illustrate the administrative costs to the wider public sector of option 6 based on Health and Social Care Integration as well as an estimate of the costs based on Health and Social Care Unit Costs.

11.40. Estates: Option 6 estate costs for a centralised agency are estimated based on modelling sites in the central belt providing accommodation suitable for generic office functions to provide corporate functions only ( i.e., there is no retail level space for engaging with social security clients).

11.41. Assessments: NHS Boards or Local authorities would undertake assessments in this option and are incorporated into the option 6 case study below.

11.42. Digital: The digital cost of the enabling systems needed under this option are estimated based on a service being provided to both agency locations and staff and locations in the wider public sector (see case study below).

11.6.2 Option 6 case study Health and Social Care Integration: The costs to wider public sector of option 6

11.6.2.1 Background

11.43. Should option 6 be taken forward, the funding provided to the wider public sector including Health Boards and local authorities to administer the parts of the new social security system outlined above would be determined in part through negotiation with local authorities and in part through legislative change giving responsibilities to the wider public sector around social security.

11.44. The case study below provides an overview of and the costs of health and social care integration to illustrate the costs of a similar scale of system change for the NHS and local authorities. In addition to this case study the case study outlined in option 3 is also useful here in order to understand the role local authorities currently play and might play in the future.

11.45. Health Boards and local authorities as well as the wider public sector already undertake a number of benefit and assessment related functions in Scotland. Therefore it can be assumed that asking the wider public sector to take on more responsibility in this area is more about transforming and building on what they do already rather than asking them to provide an entirely new service. Core to this would be firstly taking the existing benefit maximisation, advice and support services and Scottish Welfare Fund and building on these to provide some of the face-to-face support and local needs based service for the social security system. Secondly it would be to build on the functions already undertaken within the NHS in Scotland around primary care, maternity, end of life, occupational therapy etc. to provide access to social security and needs based assessments.

11.6.2.2 Overview of Health and Social Care Integration

11.46. The Public Bodies (Joint Working) (Scotland) Act 2014 ( PBJW 2014) received royal assent on 1 April 2014. The Act provides the legislative framework for integration of health and social care services in Scotland. It requires local integration of adult health and social care services, with statutory partners (Health Boards and Local Authorities) deciding locally whether to include children's health and social care services, criminal justice social work or housing within their integrated arrangements.

11.47. In broad terms, the aims of the legislation are threefold:

11.48. To improve the quality and consistency of care for patients, carers, service users and their families;

11.49. To provide seamless, joined up care that enables people to stay in their homes, or another homely setting, where it is safe for them to do so; and

11.50. To ensure that resources are used effectively and efficiently to deliver services that meet the needs of the growing population of people with longer term and often complex needs, many of whom are older.

11.51. Key features of the Act are:

11.52. National outcomes for health and wellbeing, which will apply jointly and equally to the NHS and Local Authorities.

11.53. Health Boards and Local Authorities are required to establish integrated partnership arrangements. Two models of integration are available for Health Boards and Local Authorities to choose from: delegation of functions and resources between Health Boards and Local Authorities (Lead Agency), and delegation of functions and resources by Health Boards and Local Authorities to a body corporate (Integration Joint Board).

11.54. Where the body corporate model is used, a chief officer must be appointed by the integrated partnership to provide a single point of management for the integrated budget and integrated service delivery. In the delegation between partners model, this single point of management falls to the Chief Executive of the "lead" agency ( i.e., the partner to whom functions and resources are delegated).

11.55. An integrated budget must be agreed in each integrated partnership to support delivery of integrated functions, which will cover at least adult social care, adult community health care, and aspects of adult secondary (hospital) care that are most amenable to service redesign in support of prevention and better outcomes. Ministers have established in Regulations which functions (and therefore budgets) must be included in the integrated arrangement.

11.56. Each integrated partnership have established locality planning arrangements at sub-partnership level, which will provide a forum for local professional leadership of service planning.

11.57. Each integrated partnership has now put in place a strategic commissioning plan for the functions and budgets under its control - the joint strategic commissioning plans have been widely consulted upon with non-statutory partners, patient and service user representatives, etc.

11.58. The central focus of the Act, and much of the supporting policy work that sits alongside it, is on the importance of effective joint strategic planning and commissioning of services. This approach builds on the wealth of evidence for successful integration of health and social care from elsewhere in the UK and further afield, which demonstrates that, while no single organisational approach is required to deliver improvement, the following characteristics are consistently displayed by successful systems:

11.59. Local planning systems focus on population need, rather than historic structures. Health and social care systems must plan together for older people, for example - or for adults with chronic obstructive pulmonary disorder, or for children with complex needs, or for any other care group that is a local priority - rather than planning separately in terms of "health" provision and "social care" provision.

11.60. Resources across health and social care should be pooled to support delivery of the population-based plan. Resources reflect population need, and are managed to follow patient/service user need in order to deliver maximum benefit. This approach eliminates the risk of cost shunting, which can permit financial gain from poor performance on the part of one partner, at the cost of the other.

11.61. Mechanisms are in place to ensure the opportunity for leadership by local clinicians and professionals from across health and social care - and, particularly, GPs - in planning service provision. Clinical buy-in and leadership of integration is fundamental to improving outcomes.

11.62. Strong, effective, consistent local leadership retains a relentless focus on outcomes for patients and service users.

11.63. The integration of health and social care provides for a strong foundation of partnership working. Health Boards and local authorities are required to work alongside the third and independent sector, and to build a more strategic relationship in order to find joint solutions to meet the challenges of delivering sustainable care.

11.64. Integrated Partnerships will embed third sector groups, service users, carers and groups who represent them, at every level of the decision-making process. These groups will shape the planning and delivery of health and social care provision locally through their involvement in the strategic planning process.

11.65. On 1 April 2016 the 31 partnerships across Scotland took full responsibility for the functions and budgets that had been delegated to them from their local Health Board and Local Authority. Clackmannanshire & Stirling have formed a joint partnership which is why there is only 31 partnerships.

11.66. Each of the Partnership areas has opted for a body corporate model of integration, with the exception of the local authority area of highland which has chosen the lead agency model of integration. Highland Council is the lead agency for children's services, and NHS Highland is the lead agency for services to adults.

11.6.2.3 The estimated recurrent costs of Health and Social Care Integration

11.67. In terms of health and social care integration as set out in the 'Public Bodies (Joint Working)(Scotland) Bill, which was introduced in the Scottish Parliament in 2013, there are a number of recurrent costs. 2015/16 is the first full year of implementation and Scottish Government are not yet in a position to establish the actual rather than estimated recurrent costs of the Bill. These recurrent costs are:

• the costs which would fall to Health boards and local authorities under two models i.e. either delegation between partners or delegation to a body corporate (including financial cost teams, clinicians' involvement in local planning and analytical support) which was estimated to cost between £4.55 -£5.6 million per annum from 2015/16 onwards.
• the estimated costs associated with staff transfer under these two main bodies of these two main models of integration (delegation to a body corporate or desegregation between partners)
  • A likely case, where all partnerships opt for delegation to a body corporate model (except Highland); this is also the lowest cost scenario. The cost under the first scenario is £nil p.a.;
  • A mid cost case where half of partnerships opt for delegation to a body corporate model and half opt for delegation between partners model; the cost in this case would be £13.5m.
  • A highest cost case, where all partnerships opt for delegation between partners model with functions delegated to Health Boards and adult social care staff transferring to Boards. The cost under the highest cost case is £27m p.a.
• the direct costs associated with the Bill (including financial cost teams, financial recording and reporting, analytical support, health and social care dataset and information system, clinicians' involvement in locality planning, scrutiny) which are estimated to be £6.27 million from 2016/17.
• the estimated cost implications to other public bodies from provisions in the Bill which is described below.

11.68. The Bill places a duty on the Health Board and local authority to achieve the nationally agreed outcomes for health and social care. The outcomes and the performance indictors will be prescribed by the Scottish Ministers. Where other functions beyond adult health and social have been delegated, the Health Board and/or local authority will be required to take account of other relevant outcome measures. The performance of partnerships in achieving the nationally agreed outcomes and other relevant outcomes in relation to the delegated functions will be assessed jointly by Healthcare Improvement Scotland and the Care Inspectorate. Healthcare Improvement Scotland and the Care Inspectorate undertook ‗pilot' joint inspection of integrated services in early 2013. Estimates based on the pilots from Care Inspectorate and Healthcare Improvement Scotland suggest a cost of £173,362 per joint inspection. It is anticipated that these bodies will undertake six inspections per year at an estimated cost of £1.1 million.

11.69. Additional resource, longer term, will also be required to fund the Care Inspectorate and Healthcare Improvement Scotland for scrutiny of strategic commissioning. The scrutiny bodies will review strategic plans as part of joint inspections, assessing whether the plan meets all statutory requirements and has been created within the statutory duties laid out in the Bill. It is anticipated the scrutiny bodies will carry out six joint inspections per year, with a recurrent cost estimated at £670k p.a., some of this work is already underway. This is based on an assessment by Care Inspectorate and Healthcare Improvement Scotland of the additional requirements being placed upon them.

11.6.3 Outline Business Case Estimate of Wider Public Sector Costs

11.70. As discussed above, estimates of wider public sector costs for option 6 are dependent on a large range of unknown factors. An estimate of funding that would need to be provided was determined for the purposes of this Outline Business Case as follows:

11.71. There are approximately 500,000 people (headcount, Q2 2016) employed in what is known as the "devolved" public sector in Scotland. The majority of these are employed in the NHS and Local Government. Assume that the core activities of queries and general enquiries and benefits processing that are to be delivered by the wider public sector are administered by staff members in two main roles:

• Social Security Champion (5% of the Scottish devolved publish sector, each providing 10% of their time)
• Social Security Administrator (1% of the Scottish devolved public sector, each providing 25% of their time)

11.72. Apply staff salary costs (including on-costs) to this staff time to estimate the core costs for administration. Further, add resource for assessments in the same way as for option 3, but using unit costs for community occupational therapists from the PSSRU cost book ^[35] .

11.73. Assume that enabling systems are provided to central agency staff and sites, as well as the social security administrators, located at 250 public sector locations across Scotland.