Social Security (Amendment) (Scotland) Bill: business and regulatory impact assessment

Benefits

Option 1 – Do nothing

No benefits have been identified by the Scottish Government if the option to do nothing was pursued and the status quo maintained. There would be no improvements to challenge rights processes and any existing ambiguity would be retained. Scottish Ministers would not have additional flexibility to make changes to the way Scottish Child Payment is delivered in future and would continue to be limited by delivering the payment using ‘top-up power’. Individuals would not have appeal rights if they disagree with an overpayment liability decision.

Under this option Scottish Ministers would not have the power to deliver financial assistance to people with care experience. Whilst there is already a package of support in place for people with care experience, including access to Continuing Care and Aftercare support and the Care Experience Bursary, the issues and financial barriers faced by those with care experience would continue to exist for the intended cohort. If action is not taken by Scottish Government to address these issues, there is potential for further issues to arise, which could cause additional pressure on the system at different points including housing support, social security support and mental health support.

SCoSS would retain their existing role as set out in the 2018 Act, as well as the requirement for external audit and their status as a Body Corporate. Dubiety would remain over whether ScoSS should comment on regulations outwith their formal scope leading to inconsistency about which regulations are considered by ScoSS. ScoSS would continue to be externally audited which is considered to be an arduous and disproportionate requirement.

If the Scottish Government decided to do nothing in relation to compensation recovery, Scottish Ministers would be unable to recover social security assistance such as Adult Disability Payment (ADP), Child Disability Payment (CDP), Pension Age Disability Payment (PADP) and Scottish Child Payment (SCP) from compensation awards. However the Scottish Government would still be required to supply information to other UK Government departments about assistance paid to injured parties while they were waiting for their settlement. This information must be shared because of the overlap between devolved disability assistance and ‘passported’ disability elements of certain reserved benefits known as ‘premiums,’ which DWP will likely recover. Failure to provide this information would cause disparity in recovery between Scotland and the rest of the UK and could impede the DWP in fulfilling its legislative duties.

If this approach were adopted, injured parties would receive payments from Scottish Ministers as well as compensation from liable third parties for the same accident, injury or disease, resulting in double compensation as they would receive payment to meet the same need twice.

Additionally, members of the insurance industry may benefit financially as they would not be liable to repay any amounts received by the injured party in relation to accident, injury or disease to Scottish Ministers. This is because regardless of the total amount of compensation agreed between compensator and the injured person, under the UK legislation, the compensator (insurer) is required to pay the full amount owed to the DWP. An example of this is shown below:

An award of compensation totalling £50,000 is agreed and broken down as follows: £30,000 in respect of general damages (pain and suffering), £10,000 in respect of loss of earnings and £10,000 in respect of loss of mobility.

A certificate of recoverable benefits lists Income Support totalling £15,000 and Disability Living Allowance (mobility component) totalling £12,500 received with the specific period.

The compensator cannot reduce any part of the general damages award as it is protected. Through the offsetting action, they can reduce the amount awarded for loss of earnings and loss of mobility to zero and pay this to the DWP. However, the insurer would still be obligated to pay the remaining £7,500 outstanding to DWP. As this is not the case for Scottish social security assistance, insurers can potentially financially benefit from this approach.

Under option 1 third parties could not be held liable in cases where the person entitled to social security assistance had not benefitted from the money. In cases where the entitled person has benefitted from the payments, the protections afforded under section 64 of the 2018 Act make recovery of an overpayment from that person unrealistic.

Option 2 – Non-regulatory changes

Fewer immediate costs would be generated by adopting this approach but the benefits achieved would be limited and many of the proposals could not be realised without primary legislation.

There would be fewer resource impacts and updates required to systems, guidance and communication. Adopting this approach would impact on welfare rights organisations and SCTS through failure to provide additional flexibility or clarity to existing processes. The social security system would not be more accessible or more person-centred as there is limited scope to implement improvements without amending the legislation.

As the majority of the proposals could not be delivered through non-regulatory changes this approach is not considered to be a viable option or one that delivers any significant benefits.

Option 3 – Legislative change

Most of the measures in the Bill require legislation so this option will allow these proposals to be taken forward. The Bill will enable the Scottish Government to make changes in light of their experience of delivering social security assistance.

The proposal about withdrawing a request for re-determination will allow Social Security Scotland to stop working on re-determinations if clients no longer wish to continue with their challenge. It is anticipated that this will enhance efficiency and speed of processing for re-determinations, reducing the risk of re-determinations going out-of-time. However it is challenging to quantify savings for Social Security Scotland as it depends on the point at which re-determination requests are withdrawn.

There will be potential savings generated for SCTS by the proposal to introduce a mechanism for Scottish Ministers to make a new determination of entitlement after an appeal has been lodged and the appeal to stop as a result.

A process exists in DWP to ‘lapse’ an appeal which is where DWP change the decision in the client’s favour after an appeal was lodged but before it is heard at tribunal. The Scottish Government considered the DWP data on lapsed appeals in order to forecast how many appeals might be stopped for Scottish Government benefits. The data on lapsed appeals in the reserved system is constantly fluctuating for PIP and is extremely limited for other reserved benefits. For initial decisions (UK wide) following a PIP assessment between April 2013 and December 2022, 15.6% of appeals lodged were lapsed by DWP, and the decision changed.

Considering only people residing in Scotland, with their PIP claim administered by DWP, 13.7% of appeals lodged were lapsed by DWP over the same period. Based on this data, if approximately 14% of appeals to the Social Security Chamber were stopped as a result of this proposal then this could lead to a reduction in direct costs associated with appeal hearings, primarily Tribunal members’ fees. A 14% reduction in appeal hearings could amount to estimated savings for SCTS of between approximately £900,000 and £1 million per year from 2025-26, based on current appeal rate assumptions.

These indicative savings are based on several assumptions, including that stopped appeals would be communicated to the Tribunal sufficiently ahead of any scheduled hearings that cancellation fees would be unlikely to be incurred. Another assumption is that administrative input by SCTS would still be required ahead of any appeals stopping and that there would therefore be no impact on staffing requirements.

The main benefit of the proposal to clarify that liability extends to clients who have a representative acting on their behalf (except where the representative uses the assistance for a purpose which is a breach of their duties or responsibilities, in which case the representative will be personally liable) will be ensuring that Social Security Scotland will be able to recover money that was overpaid, in line with their wider duty to steward public funds responsibly. This proposal also provides protection for vulnerable individuals in the rare cases where the representative does not use the money to the benefit of that individual.

The benefits to businesses and organisations of the proposal to recover social security assistance from compensation recovery will depend on the eventual delivery method adopted. Scottish Government officials are currently working with the DWP to explore the possibility of the DWP delivering a service by agreement on behalf of Scottish Ministers. In the alternative, Scottish Ministers would require to set up a new standalone Compensation Recovery Unit (CRU) to carry out this function.

The Scottish Government has engaged with industry bodies representing the insurance sector, personal injury lawyers and insurance lawyers to better understand the potential impacts of the different delivery options. This engagement has highlighted that insurers and their instructed lawyers have a well-established set of procedures in place with the DWP CRU. The recovery of Scottish social security assistance through the DWP CRU would be their preferred option as there is an existing, successful infrastructure and process for the payment of monies recovered by the DWP CRU. The main benefit from the insurance sector’s perspective would be to continue with an established and well-understood system minimising potential disruption and additional training.

Insurers, insurance lawyers and personal injury lawyers were unable to identify any potential benefits of the alternative delivery method whereby Scottish Ministers would create a standalone Scottish recovery unit. Engagement with industry representatives revealed that the introduction of a separate and distinct process for Scottish social security assistance could create duplication and confusion, as well as generate additional costs and risks in the design and delivery of a new IT system.