Social security assistance - effects of inflation: report

4. Policy position on uprating of Social Security Assistance

4.1 The Scottish Government will use CPI as the measure of inflation to uprate devolved social security assistance in the short-term.

4.2 CPI is a National Statistic and has a reliable track record as a measure of inflation serving as ONS's headline measure of inflation until March 2017. CPI is used for inflation targeting by the Bank of England and also complies with the EU standard Harmonised Index of Consumer Prices.

4.3 CPI and CPIH are broadly similar measures, the only difference being that CPIH includes owner occupier housing costs. CPIH only regained its National Statistic status in 2017. As a result it has not yet established a reliable track record as a National Statistic and official forecasts are not available making policy planning and informed decision making more challenging.

4.4 RPI is recognised by experts as a poor measure of inflation and has been proven to be a more erratic measure than CPI.

4.5 Finally, to complete the safe and secure transition of existing cases for carer and disability benefits, agency agreements with the Department for Work and Pensions (DWP) will be required. While there is an agency agreement in place for DWP to administer existing claims, the Scottish Ministers are committed to annually uprate the assistance at the same rate as applied by the DWP which is the September CPI rate.

4.6 As a result, we consider CPI rate as the most appropriate inflation measure for uprating assistance. However, the Scottish Government is committed to keeping our policy on uprating under review and will consider alternative approaches if there is a material change to inflation measures.

4.7 Examples of a material change would include:

• The development of robust household and region specific measures by ONS. Currently these measures are being developed but it could take considerable time before they became National Statistics.
• CPIH establishing a reliable record as National Statistic and official forecasts becoming available.
• Methodological improvements to RPI that would align its methodology with that of CPIH following the UK Government's consultation. UK Government has announced that consultation will begin in 2020.