The Redress for Survivors (Historical Child Abuse in Care) (Scotland) Act 2021 and relevant secondary legislation: BRIA

4. Scottish Firms Impact Test

4.1 Discussions with former and current care providers and local authorities

The Scottish Government has held meetings with a wide range of Scottish and UK-wide organisations, including current and former care providers, to discuss potential proposals for the statutory redress scheme and their interests as prospective contributors.

Many potential contributors were largely supportive in principle of the intention to create a redress scheme and understood the moral and practical case for doing so. However, there are challenges to making contributions, in principle and in respect of practical and financial concerns.

Financial impact

Potential contributors to the scheme represent a wide range of organisations. This includes those which continue to provide care and other services to vulnerable children or others; those which no longer have a connection to the provision of care but which hold legacy responsibility for the past; and other organisations which hold residual responsibility for organisations which no longer exist in the form they did during the period covered by the redress scheme.

The range of organisations includes large and small scale bodies, with varying financial positions. Some potential contributors emphasised the challenge they faced in providing a financial contribution to the scheme at all, given their ongoing financial position and potential need to prioritise and maintain current services. Some said that they may not have sufficient assets or reserves to draw upon, particularly taking into account outstanding liabilities including pension debt.

Some potential contributors said that they may be reliant on assistance from their insurers in order to make a contribution to the scheme. Concerns were expressed that such insurance assistance may not be forthcoming given that the redress scheme is not dependent on findings of liability (by contrast to litigation), and that insurance provision may not automatically consider contributions to the redress scheme to be an insurable loss (again as litigation may be under some policies), even if the overall costs would be lower in doing so.

The financial impact of civil court claims against contributors was also discussed, including the potentially high costs associated, with the volume of such claims. It was acknowledged by some potential contributors that the making of financial contributions to the redress scheme, thereby securing a waiver from civil action in respect of survivors who accept redress payments, may reduce costs and claims associated with future litigation.

Some potential contributors also suggested that a major risk of the scheme is the potential for an unexpectedly large number of applications. They felt that the financial impact on current care service providers was likely to be underestimated. GAD has been carrying out analysis to help refine our estimates of the potential number of applications we may receive. However, significant uncertainties remain about how many applications the scheme may receive due to the nature of childhood abuse and the lack of data available on prevalence of abuse in specific care settings.

Reputational damage

Some organisations raised the concern that making a financial contribution might be seen as an acceptance of responsibility for historical abuse, negatively influencing those considering whether to make donations to the organisation, or whether to commission services. This could also result in a loss of faith in the organisation among current service users and their families even though current standards of care might be high (in turn, affecting the organisation’s ability to fundraise).

Some organisations expressed concern at the level of contribution being perceived as too low and representing an evasion of responsibility for the past. The risk of the contribution being perceived as being too high was also raised by some - as not making financial sense in the circumstances of the organisation. Some organisations indicated that relying on the traditional remedy of litigation, and meeting the costs thereof, would be preferable.

However, some potential contributors accepted the positive reputational benefit of participating in the redress scheme, recognising that acknowledging the harms of the past and contributing to the provision of redress to survivors could bring reputational benefit, in addition to being the right thing to do.

Local economic impact

Depending on the size of the care provider, it was noted that financial contributions could result in staff redundancies, thus affecting local employment. In addition, care providers are purchasers of local services (e.g. food, furnishings and other services) and therefore local businesses might also be affected by a reduction in a care provider’s funding.

Impact on other services

If care providers choose to make financial contributions towards a redress scheme, this could result in a reduction in the amount of budget available to develop and deliver any other services they provide.

Workforce impacts

Care providers raised the potential for the redress scheme to have an impact on their workforce. Firstly, possible increases in workload for social workers and other local authority employees to support survivors to apply to the redress scheme, as survivors may need assistance with tracing and providing evidence, as well as writing application forms. Social workers might also need to arrange other support services for applicants. Secondly, there was the potential for staff redundancies due to budget cuts. Thirdly, there was a risk of additional negative psychological impacts on staff involved in supporting redress applications (for example, vicarious trauma and burnout), caused by being exposed to stories of abuse and neglect of children in care.

4.2 Development of proposals

Care providers suggested a range of measures to assist in making contributions to the redress scheme:

• Taking into account current financial circumstances and provision of services by potential contributors.
• Ring-fencing vital funding which supports other areas of need.
• Facilitating engagement with the insurance industry in relation to the redress scheme.
• Revising legal restrictions on the proper use of charitable funds to make it possible for third sector organisations to contribute without losing their charitable status.
• Issuing a formal public statement that the payments made by organisations relate to historical issues that they accept and have learned from.
• Highlighting more generally the systems and procedures which currently exist to monitor service quality and standards.

All proposals have been given careful consideration in the process of formulating policy. Negotiations regarding financial contributions are currently being undertaken with a range of potential contributors.

Under section 15(1) of the Act, the Scottish Ministers are required to publish a statement of principles which will guide their determinations about adding and removing a public authority, voluntary organisation or other person (other than an individual) from a list of contributors to the scheme. In accordance with section 15(2), this statement must include the matters which Ministers will take into account in determining whether a contribution is fair and meaningful. It is recognised that in certain circumstances, it may be fair and meaningful for a potential contributor to make a contribution over a period of time for affordability reasons or that it may be appropriate to consider the sustainability of the services they provide in weighing up whether the proposed contribution meets the “fair and meaningful” threshold.

The Scottish Ministers may also agree a maximum contribution amount with a scheme contributor if appropriate, which will provide financial certainty. In setting a cap, the Scottish Ministers will look to take into account everything known about the potential scheme contributor, including considering any relevant affordability and sustainability issues that it faces, and its historical legacy. The Scottish Ministers will also take into account the level of uncertainty regarding how many survivors may come forward to the scheme.

The Scottish Government will take into account the views of care providers and other potential contributors when formulating the communication strategy for the statutory scheme.