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I read with concern some of the reports about what has apparently gone to the Office for Budget Responsibility. I accept that Governments make choices; this Government has to make difficult choices. The challenge is to not make those difficult choices on the back of the most vulnerable in our society, which is why I was concerned that some of the first savings that were made were against pensioners, with the taking away of the universal winter fuel payment. Of course, we will reintroduce that payment in Scotland. However, it would clearly be a concern if tough decisions in Government were to be made on the backs of disabled people and those on low incomes.

Any of the changes that the Chancellor of the Exchequer makes will have implications for the Scottish Government’s block grant. If changes are made in social security to those aspects that are devolved, there will clearly be an implication for our block grant in relation to the adjustments in social security. All that matters, because I am very conscious that many members—and many organisations—wish the Government to go further. We have to keep an exceptionally close eye on Rachel Reeves’s decisions, because they will have an impact on the overall Scottish budget, particularly if she makes changes to certain aspects of welfare. That would be extremely concerning but, most importantly, it is extremely concerning for those who rely on those payments.

I am pleased that Mr Balfour will support the regulations, particularly on the basis that, at stage 2 of the Social Security (Amendment) (Scotland) Bill, he moved an amendment that was very similar to what I am proposing, so I would have politely pointed out that there had been a slight U-turn, had he said that he would not vote for the regulations.

However, I take Mr Balfour’s point on the fiscal sustainability of social security. We recognise that a great deal of work needs to be done to ensure that we are fiscally sustainable. Social security is an investment in the people of Scotland, and we need to bear in mind that, when people talk about cutting social security benefits in Scotland, they are talking about taking money away from low-income families, disabled people or carers, so people would need to find the money for those areas.

Social Security Scotland officials are working alongside exchequer colleagues to feed into the fiscal sustainability work, and I am working closely with the Cabinet Secretary for Finance and Local Government on that. The delivery plan will be published alongside the medium-term financial strategy. As part of that work, we must challenge ourselves in relation to how to run the system as efficiently and effectively as possible, so there is work to be done that involves not cutting benefit expenditure but ensuring that our system is fit for purpose.

In 2025-26, 82 per cent of social security benefit expenditure was funded through block grant adjustments. Therefore, I note that, when we look at increases in the level that is spent on social security in Scotland, a substantial proportion of that will be covered, because the Scottish Fiscal Commission’s forecasts are based on things that are happening right across the UK. Not all of the increase in social security expenditure has to be found through the Scottish Government’s budget, without that money coming in.

The caveat is that there are two different areas here. When it comes to areas in which we make additional investment over and above the Scottish block grant adjustment, the easiest way for the Scottish Government to be able to review the costings that we have on social security would be for the Westminster Government to relieve us of the burden of mitigating some of the worst excesses of the UK Government’s system, such as the two-child cap, the benefit cap or the bedroom tax. If Mr Balfour is looking for an easier solution that would enable us to reduce our social security expenditure, that might involve the UK Government ending the need for us to mitigate, or at least reducing the amount of mitigation that we need to do, in order to protect people from the worst excesses of Westminster.

Good morning. I welcome the opportunity to assist the committee in its consideration of the draft Social Security Up-rating (Scotland) Order 2025 and the draft Social Security (Up-rating) (Miscellaneous Amendments) (Scotland) Regulations 2025.

The people of Scotland continue to face financial challenges in the economy. With energy and food bills continuing to rise, the support that the Scottish Government provides can be pivotal in helping people to make ends meet. The Government has taken a conscious decision to invest in social security for the people of Scotland. That investment is key to our national mission to eradicate child poverty, and to assist people with the cost of living crisis. Our commitment remains to help low-income families with their living costs, to support older people and unpaid carers and to enable disabled people to live full and independent lives. It is precisely because we know that that investment is working that we will continue to ensure that it has maximum impact.

The Government recognises the importance of maintaining the value of all social security payments. Payments such as the Scottish child payment, best start foods and best start grants are integral to the First Minister’s mission to end child poverty. That is why, this year, we amended the Social Security (Scotland) Act 2018 to require that all payments delivered under the act be increased in line with inflation every year. That is a significant divergence from the UK Government’s approach, whereby, in addition to pensions, only disability, carers and industrial injuries benefits are required to be uprated each year, with other payments uprated at UK ministers’ discretion.

Even before the legislative change, we frequently chose to uprate all benefits, not just those that we were legally obliged to uprate, despite tremendous budgetary pressures. We made those decisions because we understand the difference that those payments make and the positive impact that they have on the lives of people who receive them. For example, best start foods payments are designed to tackle the impacts of child poverty by improving access to healthy food for families on low incomes; best start grants help to give children the best start in life by providing eligible families with additional money at key stages in the early years; and winter heating benefits provide targeted and reliable financial support to those who are most in need of help with their energy costs every winter. Those payments matter to those who receive them and, as such, increasing all payments in line with inflation helps to protect their purchasing power as prices rise in the economy.

The main purpose of the uprating regulations and order is to increase all social security payments by 1.7 per cent, in line with the 12 months to September 2024 rate of the consumer prices index, which is a leading measure of inflation. The exception to that is the industrial death benefit, which will increase by 4.1 per cent, in alignment with the DWP’s approach, to reflect the growth rate of average weekly earnings in the UK from May to July 2024.

The regulations make other much-needed changes, such as increasing the earnings limit from £151 to £196 for the carer support payment and carers allowance. That means that carers will be able to earn an additional £45 per week while still receiving the payments, which will help to remove barriers to work and provide more stable financial support.

Another amendment contained in the regulations reflects a new UK entitlement that will be introduced from April 2025: neonatal care leave and pay. The amendment will allow neonatal care pay to be treated as earnings for the purposes of entitlement to the carer support payment—in the same way as is the case for maternity, paternity and adoption pay—and that treatment of the new entitlement will be mirrored in relation to carers allowance.

Finally, a small change is being made to the Scottish adult disability living allowance regulations to make a correction after a word was unintentionally omitted, in order to bring the provisions in line with those for disability living allowance, as intended.

Subject to parliamentary approval, in addition to the increases to the rates of all social security payments, those changes will commence from April 2025.

I thank the committee for its scrutiny of the instruments today.

That is a very fair point. I will break the issue down into two areas. The Scottish Fiscal Commission’s work is clearly set out, including its role in forecasting social security and tax. Over time, as we all gain more experience of the devolved social security system, the nuances of aspects of that are changing. We work very closely with the SFC to understand the assumptions that underlie its forecasting.

The work to which Mr Doris refers does not have to be done by the SFC. Clearly, if we in the Scottish Government have concerns about an area—heaven forfend that we might at some point feel optimistic about a change by the UK Government—we would be able to do such work internally. People might not feel that that work would be as robust as work by the SFC, but that does not stop our analysts doing such work, nor does it mean that it would not be robust.

There is a specific role for the Scottish Fiscal Commission to play, but there is also a role for the Scottish Government to play, and I reassure Mr Doris that we can do that work within the Scottish Government.

As we set out in the debate on Tuesday, the draft budget prioritises much of the work on child poverty, whether that is the increased investment in breakfast clubs and employability services or mitigation of the two-child cap.

Due to the Government’s mission to eradicate child poverty, and in recognition of the on-going cost of living crisis that many people are feeling across the country, we are continuing to allocate more than £3 billion per year to policies that will tackle poverty and the cost of living.

As we have done previously, we will publish a detailed analysis of the breakdown of that as part of our annual progress report, which is due to be published at the end of June. The estimates at this point suggest that we will allocate more than £3 billion to assist low-income families amid the cost of living crisis.

If I can put it simply, we base our budget on the Scottish Fiscal Commission’s forecast, and the only way that the benefit forecast will go up is if the assumptions that we are looking at in that work suggest that more people will be entitled to and claim the benefit, meaning that benefit take-up will go up. Those are the reasons for that.

We can certainly provide the assumptions that underlie the Scottish Fiscal Commission’s forecast for that increase. In essence, our budget is based on the assumptions in its working.

Good morning, convener. This budget will protect and build on the substantial investments that this Government has already delivered for the people of Scotland. In total, the budget will deliver almost £64 billion of funding in 2025-26.

The budget protects the social contract at the heart of this Government’s approach, continuing free prescriptions, ensuring that no Scottish student pays tuition fees and providing access to free bus travel for almost 2.3 million people. It continues to deliver a social security system that is based on dignity, fairness and respect, and a national health service that is free at the point of use.

It will also go further, renewing and reinvesting in Scotland. The draft budget allocates an additional £1 billion for social justice, which will take our budget to £8.2 billion in 2025-26. The budget mitigates where United Kingdom Government policies undermine our efforts to tackle poverty. We will reinstate a universal pension-age winter heating payment and provide funding to begin work to develop the systems to deliver the mitigation of the two-child cap, which could lift 15,000 children out of poverty.

In line with Scottish Fiscal Commission forecasts, we are investing a record £6.9 billion for benefit expenditure in 2025-26, providing support to around 2 million people—that is one in three people in Scotland—and the money will go directly to those who need it most.

We are investing around £750 million more than in the 2024-25 budget, supporting disabled people, supporting older people to heat their homes in winter, and helping low-income families with their living costs. That investment is £1.3 billion more than the level of funding forecast to be received from the UK Government through the social security block grant adjustment.

The budget invests an additional £172 million in affordable housing, which will help to keep rents lower and will benefit around 140,000 children in poverty each year. That investment contributes not only to tackling the housing emergency but to our target of 110,000 affordable homes by 2032. Although individual projects require to be identified locally by councils, the budget provides enough for around 8,000 homes.

We invest more per person than any other UK nation in measures to help people remain in their homes. We will provide approximately £97 million in discretionary housing payments in 2025-26, which is an increase of £7 million, to enable councils to offset the UK Government’s bedroom tax and benefit caps and to cover shortfalls between housing benefit and rent. That is in addition to homelessness funding provided through the local government settlement.

I recognise the financial pressures on the third sector and the additional pressure that the UK Government’s decision to make changes to employer national insurance contributions places on many organisations in the sector. The 2024 programme for government commits the Scottish Government to making improvements to grant making, including greater clarity and consistency of existing arrangements.

I thank the committee for its pre-budget scrutiny and look forward to its questions.

We must ensure that the system is based on the right decisions being made. If people are staying on the case load, it is because they are entitled to be on it. Nobody stays on the case load if they are not entitled to be part of it. That is a very important aspect of our work.

In the past, under DWP systems, the review process was exceptionally onerous and a barrier to people continuing to receive money to which they were entitled. We have reviewed our review process for child and adult disability payments, so that will have an impact.

However, we should get back to first principles. The important aspect is whether people on the case load are entitled to their benefits. If they are, they should not come off it.

As Liz Smith knows, the Government must produce a balanced budget every year, so budget decisions will need to be taken every year to ensure that that commitment is met. We are continuing to make that important investment in families that are in deep poverty. There is much evidence and research from stakeholders that demonstrate that lifting the two-child cap would be the single biggest policy change that we could make to lift children and their families out of poverty.

With respect, I am talking about the priorities that the Government is setting and the fact that what anti-poverty campaigners have said is the reason behind the Government stating that we will invest in that policy, and we will need to make changes to the budget to ensure that it is delivered. As Liz Smith knows, we are required to have a balanced budget every year. We know that the policy will result in an additional cost to the Government, but it is an investment in people, and it is therefore important that we consider that cost as part of our balanced budget process.