Welcome to the fifth meeting of the Welfare Reform Committee for 2015. Could everyone please make sure that the mobile phones and other electronic devices are silent or switched to airplane mode? The first item of business today is a decision on whether to take item 4 in private. Item 4 is a consideration of the work programme paper for the committee. Members agreed? Agreed. That brings us to agenda item 2, which is a consideration of the Council tax reduction Scotland amendment regulations 2015. They are subject to the negative procedure and will come into force on 1 April 2015. The regulations make further amendments to the Council tax reduction state pension credit Scotland regulations 2012 and the Council tax reduction Scotland regulations 2012. Before us today, we have two Scottish Government officials, Jenny Brough, the team leader at local government finance and local taxation unit, and Colin Brown, senior principal legal officer. Jenny, would you like to start us off by giving us a brief introduction to the instrument and what it sets out to do? Yes, of course. Good morning and thank you as always for an opportunity to appear before the committee. The purpose of the amendment regulations are to make a number of changes to the provision within the council tax reduction scheme for the 2015-16 year. Some of those amendments are routine amendments that we make on an annual basis, for example to apply the UK Government's annual uprating of social security benefits. Others are some minor corrections to the provision of the scheme regulations that relate in 2012. There are also some amendments that reflect evolving policy positions in Scotland, such as the introduction of same-sex marriage, whereby referencing in the regulations has to be updated. Finally, there are also some amendments to the provisions of the council tax reduction review panel, which is a review of council tax reduction decisions that was set up in 2013. Essentially, there are a number of different types of amendments within the regulations, but all of those have been designed to prepare the scheme for 2015-16. Does anyone have any questions from Margaret? Paragraph 6 mentions that amendments are also made to the council tax reduction scheme. It goes on to extending the classes of persons who do not need to be habitually resident in the UK in order to be able to qualify for a council tax reduction. I was looking for it in the actual paper that you have provided, but I could not find anything that explained that and what the changes were, so if you could tell us about that. There are elements within the council tax benefit regulations, which were the basis for adapting those to create the council tax reduction scheme. Part of those provide an interface between the social security system as it was then and the treatment of certain home affairs provisions such as persons who are entitled to publicly funded support or not entitled. A good example would be that persons who are subject to immigration control are not entitled to certain forms of publicly funded support. As far as we could, within the council tax reduction scheme, we sought to replicate those provisions for what would be termed persons considered not to be in Great Britain or not considered to be habitually resident and therefore are not entitled to council tax reduction. In that case, there were one or two examples of persons such as those supported by the Destitution Domestic Violence Concession, which we were not aware of. As part of the policy intention to replicate entitlement, as would have existed under council tax benefit, those persons should be included within the scheme as persons who can be entitled to support. That is a good example of where we were not aware of a particular provision that we should have made in this case around the Destitution Domestic Violence Concession that we have now reflected in the scheme to reflect that the restrictions do not apply to that category of persons and they can be entitled to CTR. There is nothing else that we need to do with it. I think that the committee agreed to note it, but thanks to Jenny Brough and Colin Brown for coming before us this morning. I will suspend for a couple of minutes while we prepare for agenda item 3. Agenda item 3 is a presentation from Steve Fothergill from Sheffield Hallam University. Welcome back, Steve. This is the third such report that Steve has completed for us to allow the committee and the wider public to gain a greater understanding of the impact of the welfare reforms in Scotland. In this report, Sheffield Hallam has been able to go a step further and analyse the impact at a household level. Steve, I will pass over to you to tell us what your findings are and any other information that the committee might benefit from. Over to you. Thank you very much, chair, and good morning, colleagues. Yes, this is not the first time I have been in front of this committee. It is always a pleasure to come up here, but the fact that I keep coming back is a reflection of the fact that myself and Christina Beattie at Sheffield Hallam have become the go-to people, if you like, who have the reputation of understanding and knowing about the impact of welfare reforms. Not just up here in Scotland, but across all parts of the United Kingdom. Let me say one or two words by way of introduction to this particular presentation and report. In particular, let me say what it's not. With a title like the cumulative impact of welfare reform on households in Scotland, you might expect that we're documenting some sort of tale of war about the hardship of individuals and households. That's not the case. It's not that sort of exercise. It is actually very much a quantitative exercise in assessing how much people in different sorts of households can expect to lose when the welfare reforms have come to full fruition. The other thing that I would say by way of introduction is that this is not an attempt to, in any way, pass judgment on the reforms. It's a hard-nosed, objective look. It's an attempt to trace through what the impact will eventually be when all of the reforms have come to full fruition. I'm sure that you have personal views about reforms. I do, but I hope that the sort of objective independent look at this that we've undertaken gives strength to the report. I will just add one further point. In rereading the report on the train on the way up, I became aware that there are one or two tiny inconsistencies between the revised numbers in the report and the text. If it's okay with you, chair, and the rest of your committee, when I get back to base, I'd just like to iron out those small inconsistencies and give you a slightly revised version of the report that you can mount instead on the website, because I'm a little embarrassed by some of the inconsistencies as they stand up present. Anyway, chair, you mentioned that I have been here before. On the first occasion, nearly two years ago, we came with a report which was the first attempt to quantify the financial losses arising from welfare reform in Scotland, and we did that for Scotland as a whole and for each local authority in Scotland. We came back last year with a report that drove those estimates down to the level of electoral wards in all of Scotland's local authorities. The new report does two things. First, it comprehensively updates all of the estimates, and let me say that some of the revisions are not minor. I will explain more as the talk progresses. But most importantly, the new report is the first attempt to estimate the impact on different types of households. This is a list of the eight reforms which the report has covered. The vast majority of those reforms are initiated by the present coalition government in Westminster, though there are elements of particularly the incapacity benefit reforms, which have been working their way through the system in the last two or three years, but which were initiated under the last Labour government. We have been looking at everything going on simultaneously over the past few years, not simply at those things triggered after 2010. What is not on the shopping list, the first two there, the housing benefit under occupation rules, better known as the bedroom tax, and the changes to council tax benefit. Of course, you reached arrangements up here in Scotland, which have made sure that the financial losses arising from those elements of the overall Westminster reform package are not being passed on to claimants up here in Scotland. Universal credit is not covered in our study either because it is a fundamentally different sort of reform to the others. It is not about reducing the amount spent on benefits, certainly not the amount spent directly on benefits. It is really a repackaging of existing benefits. Indeed, in the short run, there is a little bit more money put into the pot rather than taken out. I need to go through these steps to explain the basis of all our estimates. Everything that we have done starts off with the treasurer's own estimates of the overall financial savings arising from each element of the reforms. The work that we have brought to you previously was based on the treasurer's original estimates of how much they were expected to save from each element of the reform package. What has become apparent is that the treasurer has been very gradually revising some of its expectations about how much it thinks it will save from different elements of the reform package, and that is why we have had to go back and revisit some of the old numbers that I have shown you last year and the year before. These revisions that I must underline are really quite significant. In a number of instances, there are very big changes indeed. In order to work from the treasurer's estimates of financial savings down to the level of Scotland as a whole or individual areas within Scotland, we have to bring in local benefit claimant numbers. That allows us to make that transition. In order to work out the impact on different types of households, we have brought together a number of different data sources, in particular the Family Resources Survey, which tells us what is how much benefits different types of households draw upon. I will not go into the finer details of that, it is all set out in the report. What you also need to bear in mind, and I have said this before, is that some of the reforms target households, other elements of the reform package target individuals. The housing benefit reforms, for example, are about households. The changes to incapacity benefits are about individuals. The figures that I am going to present are for the impact when the reforms are fully implemented. That term fully implemented is important, because the reforms are by no means fully implemented at this stage. The incapacity benefit reforms in particular are now badly delayed. You will be aware that there has been an enormous build-up of appeals in relation to the work capability assessment and that the prime contractor, ATOS, walked away from its contracts. The cumulative effect of all of that has been to introduce quite a hiatus in the process of implementing the incapacity reforms. The work capability assessment element of the reforms has been delayed. That has knock on consequences for the implementation of the time limiting of non-means-tested entitlement for those in the work-related activity group. The whole timescale has been pushed back. What also needs to be noted is that the reforms to DLA, the change over from DLA to personal independence payments, is mostly something that is still in the future and won't begin to kick in in a big way until after the general election. I would say very roughly at this juncture in the spring of 2015, around about 30% of the total financial losses arising from welfare reform are still in the pipeline. We have not seen everything yet. The final statistical point that I would like to bear in mind is that, in all of the estimates that we have produced, everything else is held constant. In particular, we have made no assumptions about lower benefits leading to higher employment, although I will comment on that issue towards the end of the talk. Those are revised and updated estimates of the overall impact of the reforms on Scotland. We are now calculating that the total financial loss when all these reforms have come to full fruition will be a little over £1.5 billion a year. The original estimate was around about £1.6 billion a year. In terms of where the hits are coming from, there are quite significant shifts in the batting order there. We were estimating originally that the incapacity benefit reforms would lead to the by far the largest financial losses. The Treasury has revised down its estimates of the financial savings there. I think that it is because they have taken better account of the compensatory means-tested benefits that kick in. On the other hand, the savings now anticipated from DLA reform and from tax credits have increased. How does Scotland compare with other areas? We are now estimating around about £440 per year as the adult of working age has been the loss in Scotland. That is not very far from the GB average. It is less than Wales, less than Northern England or London but more than in much of Southern England. Of course, the hit in Scotland to clearments would have been somewhat higher. We think that it would have been around about £475 per year in the absence of the measures that you have introduced up here to offset the bedroom tax and the council tax benefit reductions. Those are just revised estimates of the impact by local authority in Scotland. The batting order has not changed very much. Glasgow was at the top originally and Shetland was at the bottom. There have been a few tweaks. Particularly the numbers in Glasgow have come down by about £40 per adult of working age per year. Let me now begin to move on to the impact on different sorts of households, which is the new element of the work. We've always known that different elements of the reform package impact principally on different sorts of households. We've known reform by reform benefit by benefit, which are the sorts of households that are most likely to be in the firing line. We know, for example, the first one on that list, that the housing benefit reforms in the private rented sector impact on low income households, mostly working age low income households. We know that they have a particularly sharp impact on the under 35s, particularly men under 35s, and that they kick in quite strongly for large families. I won't go through all of the different points. I won't go through them mechanically. Just if you cast your eye through, look for the buzzwords like low income, disabled, out of work, older. These are often the sorts of groups that we're talking about that are impacted by the various reforms. But importantly, of course, all of these reforms are happening simultaneously, and several of them impact at the same time on the same individuals or households. That's where the new report takes us forward, because what we've done is begin to look at how the reforms cumulatively have impacted on different sorts of households. Before we get into those numbers, first of all, let's just look at the numbers affected by the different elements of the reforms and how much the average financial loss can be expected to be. Some of the reforms, the 1% operating, instead of operating by inflation, affects large numbers of individuals. On the other hand, the financial losses are modest. The freeze that we had in child benefit rates up until 2014, that affected all families claiming child benefit, but to a relatively modest rate. On the other hand, at the other end of the scale, the household benefit cap affects small numbers in Scotland, although the average financial losses may be quite large. In the middle there, you've got incapacity benefit reform and disability living allowance reform affecting substantial numbers and substantial amounts. Around about £2,000 a year typically being the loss. But how does this all work out cumulatively in terms of impacting on different households? This particular table is probably the most important table in the presentation, because it shows how the reforms can be expected to work out in terms of their impact on different types of households. There are 15 different types of households in that list, and all of Scotland's 2.6 million households can be slotted into one or other of those 15 different categories. Towards the bottom of that list, there's quite a group which is other, relatively small numbers in those categories, I've got to say. They tend to be households with rather complex structures, for example, where you may have a parent and a child still living with the child's grandparents, or a way you've got, let me say, non-standard family units. But the significant point that emerges from this exercise in trying to trace through the impact on different types of households is that some types of households escape very lightly on average, and others are hit much, much harder. A number of points to note. Firstly, pensioner households are barely touched by the welfare reforms. The average financial losses are very small, and that's because the Westminster Government has deliberately designed the welfare reform package to hit working-age benefit clearments and to largely avoid an impact on pensioners. To be impacted by the reforms as a pensioner, you've really got to be either living in the private rented sector and claiming housing benefit, which relatively few pensioners do, or you've perhaps got to be in the slightly unusual position of being an overstate pension age and still claiming child benefit for a child. Another group that escapes unscathed from the reforms are student households because students really have very, very little, if any, entitlement to welfare benefits. On the other hand, what these figures expose are particularly that households with dependent children are hit hard. With one or two or more dependent children, average losses in excess of £1400 a year loan parents even larger financial losses. I've got to say before we undertook this exercise that it wasn't at all clear to us that there was such a large impact of the welfare reforms on households with children. That was really quite a surprise to us, and it's cause is to look at why this is actually happening. Here I'm contrasting in one column loan parents with one child, in the other column couples with no children at all. I'm looking at the share of households in those categories that are hit by each element of the welfare reforms. You look at the column there for loan parents with one child. They're all hit by the fees and the value of child benefit. They're all hit by the 1% operating. 81%, four in five, are hit by reductions in tax credits. The housing benefit reforms in the private rented sector hit 14%, that's one in seven. The incapacity benefit reforms hit one in 10 loan parent households with a child. The disability allowance, living allowance reforms hit a further 7% and so on. Whereas you can see that for couples with no children, the percentages of those types of households hit by each element of the reforms on average is significantly less. Now this is not to say that in those households that are hit, those couples that are hit by incapacity benefit reforms or disability allowance, living allowance reforms, it's not to say that those households don't face large financial losses. They do face large losses, but on average loan parents or indeed couples with dependent children are more likely to be hit by multiple elements of the financial reforms. Putting all this together, the figures suggest that around about two thirds or 960 million pounds a year of the total financial loss is falling on households with dependent children. About 40% or 600 million a year is falling on the sick or disabled via DLA and incapacity benefit reforms. Those groups also lose from other elements of the reform package 2 and around about half of the financial loss is falling on in-work households. Don't add up those figures together, there is overlap between those groups but it gives you some indication in very broad terms of the distribution of the financial losses between different sorts of groups. Two thirds hitting households with dependent children, about 40% hitting the sick or disabled, around half hitting in-work households. Are things worse in Scotland than in Great Britain as a whole? Not really. The social security regulations are of course the same in both countries. But if you look carefully down the Scottish column compared with the GB column you will see that in a number of categories the financial hit in Scotland is slightly less than the GB average. That reflects the fact that up here in Scotland you've found ways of averting the reductions in council tax benefit and indeed you've averted the impact of the bedroom tax. There are of course differences between places in Scotland as well. The appendix to our new report gives you figures for every local authority district in Scotland. I thought it was worth pulling out the contrast between Glasgow and Edinburgh. In both cities on average couples and lone parents with dependent children face big financial losses but the financial losses are larger in Glasgow than in Edinburgh on average. That reflects the fact that the welfare benefit claimant rate is higher in Glasgow than in Edinburgh. This may look like a tale of war, I suppose in some respects it is. But will it be all right on the night? Are we really setting the alarm bells ringing unnecessarily? Of course Westminster ministers say that the welfare reforms will incentivise individuals to find work. If people look for work they will find work and therefore the loss of benefit income will be offset by additional earnings. You do need to bear in mind one or two points. Firstly it's always been the case that the vast majority of claimants were already financially better off in work than on benefits. There is nothing new about the incentive to be better off by working. There is no doubt that the welfare reforms do increase that incentive. You also need to bear in mind that out-of-work claimants tend to have low skills and poor health so they are not going to be employers first choice. Then there is the obvious question, where are all of the additional jobs that people are going to go to? I can perhaps see that in certain prosperous local economies, particularly in southern England, there may be in one or two parts of Scotland additional labour supply triggered by the welfare reforms that may lead to employers taking on extra individuals and the overall level of employment might be somewhat higher. However, as a generalisation, I suspect that that doesn't really fit Scotland very well and I'd be enormously surprised if the reforms did result in significantly higher levels of employment. Having said that, we have no hard evidence on this point as yet. As you chair well know, we are intending to pilot some work up here in Scotland to see whether there is any evidence that the reforms have led to higher levels of labour, participation and employment. So watch this space on that one. It's also worth raising the question whether or not these financial losses arising from welfare reforms are being offset by increases in personal tax allowance. I've heard this argument put forward on a number of occasions. Well, there's something in this argument, I've got to say, but you do need to bear in mind that only a proportion of benefit claimants do pay income tax. Clearly, full-time employees generally do pay income tax, but individuals in part-time low-paid employment are often below tax thresholds and if you're out of work on means tested benefits, you're generally below tax thresholds as well. The reductions or the increases in tax allowance, also in quantitative terms, have probably fallen somewhere short of offsetting the financial losses arising from welfare reform. If we make the assumption that the personal tax allowance is £1,500 a year higher than it perhaps otherwise would have been, that's worth about £300 a year to a sole earner or £600 a year for a double income household. By way of comparison, we're saying that the impact of the welfare reforms on a household with dependent children in Scotland is a financial loss a little bit over £1,500 a year. There's something in the tax allowance argument, but it doesn't go the whole way by any means to offsetting the impact of the welfare reforms. Finally, to conclude, it's clear from this evidence that some households are far more exposed to the downside of welfare reforms than others. In Scotland, as in the rest of Britain, pensioners and student households escape virtually unscathed, but on average, and I think that word average is important, on average families with dependent children are hit hard, and on average lone parents and the disabled are hit especially hard. Large financial losses are the result of the cumulative impact of the reforms. Looking at any one reform in isolation doesn't give you the full picture. Roll them all together and you begin to see that the impacts are really quite large for certain sorts of households. Thank you very much, chair. As ever, Steve, thank you very much for a very comprehensive explanation of the research that you've done. Thank you very much for doing it for us. I think that it paints a very disturbing picture. You said at the outset that you are now seen as the go-to people. You certainly are go-to people in terms of the information that you have provided, and it's always created a lot of interest. It's certainly given people who have general concerns about the impact of welfare reform, some real hard facts on which to base those concerns. Previously, I understand that the DWP has also seen you as the go-to people. They have relied on you to provide information for them, but in this case they have not been very supportive of your research. In response to the publication of the report, they said that you had failed to take into account certain changes that are in the process of introducing or have taken account of. Would you like to take the opportunity to respond to that criticism? What we've done in this report, as in the previous studies that we've done, is that we've held all other factors constant. We're just looking at one bit of the world that's changing, which is the welfare reforms, and we've tried to trace through their particular impact in terms of financial losses. I understand, and I've only heard this second hand, that what DWP has been saying is that you're not taking account of the fact that employment levels are increasing, and therefore people who were hit by the welfare reforms are fine. They're re-entering the labour market. Now, yes, I can see that if the labour market is expanding, it's easier for people to move off benefit and into work, but this is an exercise in looking at one bit of the jigsaw. Now, whether or not employment is expanding because of the welfare reforms is a separate question. I mean, it's certainly the case that at the present point in time, there is some revival in the level of economic activity and employment going on, but I wouldn't necessarily attribute that to the reforms themselves. I think that DWP are hiding behind an event that happens to be happening simultaneously with the welfare reform and perhaps arguing, therefore, that we're overstating the downside of the welfare reforms. I mean, if the economy had gone in the other direction, they wouldn't have been able to deploy that argument. It's very possibly the case, given other statistics that we're aware of, that some of the people who would be impacted in one column or one particular assessment at the present time, even if they went into a position where they were no longer considered to be unemployed, would still be in receipt of benefits and would only move to another area in which they're going to lose out because there's so much part-time employment zero hour contracts. The number of people who ostensibly have moved from being out of work to in-work doesn't necessarily equate into a reduction in the number of people that are no longer dependent on benefits. Is that right? That's certainly the case. You may move from out-of-work benefits into receiving in-work benefits. One of the big revisions that we've incorporated in the numbers that I've been presenting today is that the Treasury itself has recognised that some of the expectations that they first had about the financial savings arising from the welfare reforms didn't allow for the compensatory benefits which people might get if they lost one set of benefits. They might end up claiming other benefits instead, and that's particularly why I think that their original figures on the financial savings arising from the incapacity benefit reforms have been so radically reduced. They're now much smaller because they're taking account of the fact that if you've had your incapacity benefit taken away, you may find that instead you're entitled for more housing benefit, et cetera, et cetera. Another question in terms of the methodology that they used. You said that there were certainly two areas where you hadn't factored in because of council tax reduction and also the mitigation of the bedroom tax. They hadn't featured in your analysis here. One concern that's been raised by some people, especially people in local authorities, is that although the increase in the availability of discretionary housing payment to those who have been impacted by the bedroom tax, the DHP has to be claimed, it has to be asked for by the recipient. Is it possible that for those who haven't claimed discretionary housing payment that some of the statistics in here would actually be worse if those people were taken into consideration? If the take-up of discretionary housing payment is below 100%, then we're underestimating the impact of the reforms. I'm not close enough to the situation up here in Scotland to know whether you've got procedures in place that genuinely make sure that all the people that should be getting discretionary housing payment are getting it. I mean, I've spoken informally to one or two people who suggest that they've got the system in place, but whether or not it really is comprehensively in place, I'm a little unsure. But certainly it's the case that we've assumed that the full impact of the bedroom tax is being obviated, which it may not be. It's a fair assumption. The money is there for everyone who's been identified, but the DHP has to be applied for and there has been some anecdotal evidence that people are reluctant to claim it. It might not be huge numbers, but there might be people who, for whatever reason, have decided not to claim it. In that circumstance that's the question I'm asking, those people would actually be worse off because that hasn't been factored into some of these overall statistics. Oh, absolutely, because we've taken out the impact of the bedroom tax from these estimates and that's one of the reasons why Scotland looks marginally better than England in a number of the figures. I'll open up to committee members if they want to make points or ask questions of Steve. Professor, Father Gill, the UK Government has a band into quality impact assessments and refused to conduct a cumulative impact assessment on the welfare reform baggage. What's your view on the quality of the information published by the UK Government on the expected impact of the welfare reforms prior to their enactment? Right. Some of the work that they've published is good. No question about that. But it generally falls a long way short of driving down the estimates of the impact, either to local areas, Scotland or local areas within Scotland, and it fails often in driving down the impact to different types of households. I think that's where our research moves at least two, if not three steps further on from what the DWP has produced. It's also become apparent to us that some of the DWP's estimates are now seriously in need of revision because, as I say, the Treasury itself has been changing its estimates of the financial savings. I don't think that's been translated into new estimates published in the impact assessments by DWP. We've done our very best to take on board those new revised Treasury estimates of the financial savings. Is there an explanation to the Treasury as to why they haven't made the initial expected savings? No. This is the sort of thing that they slip out in obscure tables in the back of the budget statement or the autumn financial statement. We're left rather surmising as to why they've changed some of the estimates. It would seem, as I say, in the context of the incapacity benefit reforms that they've now taken full account of the offsetting benefits that would kick in if you're losing incapacity benefits. With the DLA reforms, where the financial savings have gone up very substantially, reading across several different documents, it seems to us that they're now anticipating far more people to lose entitlement to the successor benefit, personal independence payments. Far more people will lose entitlement to that than was originally anticipated to be the case, but it's not set out in full. Where as much in the dark as anybody, we can only make an intelligent guess. Finally, my colleague touched on in-work poverty being of great concern to the committee in terms of the increase in in-work poverty that we've heard in evidence and from some of the presentations and representations that have been made to the committee. Do you see in-work poverty increasing as a result of the welfare reforms? I've put this slide back up again, the third of the bullet points. We're estimating, and it's hard to pin this down with precise accuracy, we're estimating that something approaching half of the financial losses arising from welfare reform do fall on in-work households. Insofar as those in-work households are skewed towards the bottom end of the income spectrum even before they lose benefit, you would expect that if you're taking money from those households that it will push them further down into in-work poverty. It's a little bit more complex than that. Some of the in-work households that are losing money are households with very high earners that lose entitlement to child benefit, so let's not jump to the conclusion that it's always the poorest of a hit artist. The largest part of that loss, that £730 million a year loss up here in Scotland, is falling on households in-work towards the bottom end of the income spectrum. For those people who are moving out of benefit into work, as the Government would say, one of the reasons for doing this is to encourage people into employment, that employment that they can achieve is likely to be at the lower end of the income spectrum. Given what we know about out-of-work benefit claimants, the fact that they tend to be relatively low skilled, that they tend to have worked primarily in low-grade manual jobs and that they've often been out of work for long periods, these are not going to be employers' first choice. You would expect them to be going into relatively modest paid employment if they can find employment. Once in that relatively modest paid employment, one of the effects of the welfare reforms is that they're not entitled to as much in-work benefit as they once would have done. The reductions in tax credits, which have really not received a lot of attention and public debate, are a very, very big part of the overall jigsaw. They're much bigger in terms of financial losses than, for example, the bedroom tax had it been implemented or several other elements of the reform package. In fact, I think that in Scotland there we are. It's the biggest element of the package in terms of the financial losses. Those tax credits go overwhelmingly to lower paid in-work households. I want to ask a supplementary to go back a couple of questions when you talked about the treasuries revising their estimates down in terms of certain savings, but then also predicting an increase in savings in terms of the migration from DLA to PIP. Given that you've said that the figures are quite difficult to tell why they've revised the savings down, how can they be so sure that they'll make the savings on PIP? To be honest, I don't think they can be so sure. In fact, I'm even slightly skeptical about the serving that they're now anticipating on PIP. If I can recall the figure correctly across the UK as a whole, I think they're now talking of £2.8 billion a year to be saved once the full transition from DLA to PIP has come into force. Again, if I can remember the figures correctly, I think the original anticipated serving was only £1.5 billion a year, so they've almost doubled their anticipated serving. What I do know when I look at some of the detailed figures underpinning that is that they've upped the numbers who they expect not to be eligible for PIP from 450,000 to 600,000. 600,000 people who would have been eligible under the old DLA system would no longer be eligible under PIP, but that doesn't quite get us right the way up to £2.8 billion. I'm a little skeptical. The more I look at some of the Treasury's figures, the more I think there's an element of back-of-the-envelope in some of them. Is there a supplementary on the supplementary, convener? If you forgive me for sounding a bit cynical, it strikes me that this might be an arbitrary figure in terms of the savings on PIP in order to make up for the fact that they have shortfalls in other areas and that rather than based on need, this increased figure of those who are not entitled could be completely arbitrary based on the Treasury's need. We have a footnote in the new report for you, which is our best assessment as to what the Treasury has actually done here. We think that when they're anticipating 600,000 people being taken off DLA, they've looked at that 600,000 as a proportion of the total number of claimants, and I think it's about a quarter or thereabouts. They've therefore cut the expected spending on DLA by a quarter. I can see why they've done that calculation, but it's a bit fanciful, I've got to say, because if the system is working as it should work, the people who will get moved off DLA, or rather will not be entitled to personal independence payments will tend to be the people towards the less disabled end of the spectrum who often are entitled to lower amounts of DLA than those with very high levels of disability who are on DLA now and will stay on PIP in the future. So, I think some Mandarin in Whitehall has probably made a simple assumption, which is a little bit wide of the mark, and they may be too optimistic about the savings. Whether or not it's been done for cynical reasons, I couldn't comment, I'm afraid, but I think technically they may have got it wrong. In everything that we've done here, we've worked, we've started from what the Treasury itself thinks it's going to save, and we've had to have very, very good reasons if we've tweaked those numbers. Thank you very much, Professor, for the girl. I think that your report has given us some very, very interesting and quite stark reading, if you don't mind me saying. On table six of your report, my attention was drawn to the impact on households with children and then drilled down a bit to lone-parent households with one dependent child. Or two or more dependent children. Sometimes, those households are the ones that are furthest away from the job market and would incur substantial childcare costs should they enter the job market. The Scottish Women's Budget Working Group in the Fawcett Society have both done a gendered analysis on some of those impacts, and I just wondered whether, I suspect that £170,000, if you join up the two lone-parent categories, with the biggest impact financially of £1,850 of a loss. Have you done any gendered analysis on that and whether the majority of them are women? Is that the real reason for not continuing with equality impact assessments? I think that it's a reasonable assumption that most lone-parent families are headed by women. It's not exclusively the case, but the majority will be. In so far as we are identifying a large impact on lone-parents with dependent children, there will be households headed by women. Absolutely the case. We haven't done any gender analysis, unfortunately. There are many different ways that the overall stock of households and the population out there could be divided up. In table six, we've used the 15 categories of different types of households that the census of population defines, but we could have possibly split up by gender or by ethnicity. Or age, or whatever else. But we've done what we've done now, I'm afraid. I'd be very keen to see the analysis to which you're referring. I think it may shed additional light. On the general issue of women, given that lone-parents are hit particularly hard and given that we also know that women often occupy a lot of part-time jobs and a lot of low-paid jobs, and part-time and low-pay do often go hand-in-hand, it's not difficult to hypothesise that a very substantial impact of the portion of the impact won't happen. The committee might be minded to, hopefully, in the future, look at some of those details and that's something that I would welcome. You said that around about 30 per cent of the overall welfare changes are still in the pipeline, and then the impact that would have again on the most vulnerable. One of the things that drew my attention was that I tend to do a lot of gendered analysis, but I've noticed that, in your report, the groups that are typically most affected in housing benefit in the private rented sector were under 35s, mainly men. I have to say that one of the things, even locally and anecdotally, and I believe some of the evidence that this committee has had previously, that that group are becoming a pretty vulnerable group in as much as they seem to be the group where there's the biggest rise in the access to food banks, they seem to be the group that's a subject much more to benefit sanctions and therefore pushed 12 weeks off benefits into quite difficult situations. Felly, in the area that I represent, there's a real correlation between that age group and the rate of suicide, which takes it another step further. It baffles me and it's very, very disconcerting that maybe again there's a headline figure there, but the impact of that headline figure is maybe something that we should be looking much, much more closely at, given the impact it was maybe having. On young men who probably react with difficulty to the system, but don't get the best out of the system either. All our statistics are here, our averages for the impact. Take single person households, we're giving you an estimate of the average impact on all single person households of working age, which is, I think, £490. That doesn't mean to say every single person household is losing £490. It actually could mean that some single person households are losing £5,000 and a great many are losing nothing at all. In fact, that's actually likely to be the case. These are all averages, and they hide enormous differences at the level of individuals, where circumstances vary such a lot. We haven't looked at it directly, but it seems reasonable what you're saying about the impact on under 35 males. They are a group that are exposed to the housing benefit reforms in the private rented sector. Yes, certainly. If they claim job seekers allowance and then have been subject to sanctions, they are seriously in the firing line. Sanctions have not been incorporated into our financial savings here, by the way. I think it's only really become apparent to us in recent months just quite what scale the sanctions are building up to being. I haven't got a handle on how much financial savings come through sanctions, but for the individuals affected, this is very serious indeed, because that means that they are losing their financial support entirely. I understand the premise of your report and the fact that it's averages. I think that some of the work that this committee has done speaking directly to people who have been affected by sanctions is extremely worrying. Your work complements that as far as backing up that evidence, but we've done some work in this committee on the impact of individuals on sanctions and we're continuing that work too. I hope that, with working together, we can drill down and look at that a bit closer. I'll follow on from the point that Christine MacDonald has made. Professor Fothergill, glad to see you again. In the report, in your concluding remarks, you say that average losses can of course still hide a great deal. What kind of things are we talking about that are hidden in terms of some of the big impacts that there are in certain households? All of these are average statistics. Let's go back to the key table. That's the key table in the whole report. The average losses for different sorts of households up here in Scotland. This is the basis of me saying that if you're a pensioner household or a student household, you're getting away almost scot-free if you've got dependent children and you're in the firing line. Take that line, couple no children. On average, a loss of £380 for those types of households. We didn't worry about couples with no children. Hang on a minute, that's not the case. That average probably reflects the fact that there are enormous numbers of couples with no children who are completely immune to the welfare reforms. They don't impact on them at all. But if you're a couple and you are perhaps both drawing on incapacity benefits and you do find some older working-age households have fallen into that category, and if one or more is also drawing on disability living allowance, then you are seriously in the pipeline. In the very worst instances, it's not difficult to conceive of some households where the financial loss might be £6,000 or £7,000 a year. The average is disguised a lot as well as informing you. Just as we shouldn't assume that all lone parents with one dependent child lose a large amount of money. Some lone parents with dependent children are in employment and in decently paid employment and may lose very little at all. Others may be losing much, much more than that figure that we've got of £1,770 a year. You have to treat those figures cautiously and understand what they're saying. They're not telling you that every lone parent loses that amount, that every couple with no children loses that amount. They are averages. They give you some indication as to which groups in the population are on average being hit hardest. I thank you very much for that. That's very useful. The same average scenario applies across local authority areas. Obviously, in my own local authority area in Aberdeen, some of the average impacts are pretty low, but we have fairly high employment rates in that neck of the woods. That average also has to take into account that high employment rate. There will be folks who are as badly affected in Aberdeen as there are in Glasgow. Absolutely correct. There will be folks who are as badly affected in Aberdeen as in Glasgow. The point about Glasgow is that, simply in relation to Glasgow's population, there are more of them. There are more of them in absolute terms in the Glasgow and relative to the population in Glasgow as a whole. The climate rate is higher. However, if you're hit by welfare reforms, the pain is going to be as great for an individual or a household in Aberdeen as it is in Glasgow. That's extremely useful. I thank you for the explanations that have simplified things, because sometimes some of that is lost when folks read reports that deal with averages. If we could look at the impact on subgroups, it makes shocking reading for many folks who have not probed into this in as much depth as we had. The fact that almost half of those impacts fall on in-work households is often a surprise to the general public. The fact that 40 per cent of the impacts fall on sick or disabled people also comes as a surprise to the general public. The fact that two thirds of those financial losses will impact on those households with dependent children would shock a number of people. If those levels are typical across Great Britain as a whole, are there any differences between Scotland and the rest of England and Wales in regard to the impacts on those subgroups? I can't give you a totally accurate answer there because we've not replicated this exercise across several different parts of Great Britain. We have replicated it in Sheffield actually. In fact, this exercise in Scotland has benefited from being done on the back of pilot work that we undertook for Sheffield City Council. I've got to say that in Sheffield, which in terms of the GB average is pretty average, the financial losses overall are not sky high nor are they particularly low. The pattern of losses is not fundamentally dissimilar to that that we were identifying in Scotland. In Scotland, the precise figures will be a little bit different because, of course, whereas in Sheffield they've got the council tax benefit reductions kicking in and the bedroom tax kicking in, you've averted those impacts up here. In detail, they would differ, but the general thrust is remarkably similar. It's households with dependent children losing out very heavily, not least because of things like the tax credit changes, the sick and disabled because of the big changes to DLA and incapacity benefits and in-work households because they're losing at several levels. I mean not least to the tax credit reductions. Scotland's not unusual, I don't think so, but I couldn't actually prove it. I'd have to go away and do some more numbers. We do have the advantage of having the council tax reduction and the bedroom tax mitigation at other places. Well, some places do have, if their council has dealt with the council tax situation, but most of them have passed on the cut, is that right? Scotland and Wales have both found arrangements not to pass on the council tax benefit reductions. A number of specific local authorities in England have gone down the same route as well, where they've absorbed the hit within their own budget. In England, the vast majority of authorities have simply passed on the reduction to tenants. This particular table that they put up on the screen is comparing the financial losses in Scotland and in Great Britain. Bear in mind that, overall, we're saying that the hit-up in Scotland is not very far off the national average. But when you look at individual categories of households, you see that Scotland is distinctly lower than GB on the hit on lone parents with one or two children. That's perhaps the most significant one in which it's below the GB average. I suspect that that owes a great deal to the decision up here not to implement reductions in council tax benefit. The orders of magnitude difference there probably are attributable to that particular decision here. You've not averted the whole impact on lone parents, but you've shaved £100 to £200 off it. First of all, I thank Professor Fothergill once again for the work that he's put in. I think that it's been extremely useful for us to have the opportunity to look at the areas of work that you're doing, particularly the specifics to Scotland. I can't imagine that the member of Parliament for Sheffield Allen will be particularly happy with some of the research that you're doing at this moment in time, but I hope that the Deputy Prime Minister does pay some attention to the work that goes on in his constituency in this regard. Obviously, we've heard from the convener already that there has been attempts to discredit some of your work from the Treasury, it seems. Can I ask you if other bodies are looking closely at your findings, particularly those bodies that are dealing with child poverty matters? I really do feel that the fact that two thirds of the total financial loss here are borne by households with dependent children is pretty sickening, it has to be said. Obviously, when we have made so many strides to try and eradicate child poverty, it seems that what we're doing is actually going to increase that in the future. I would say that when other people have replicated the sort of calculations that we've done, and we were there first, I've got to say, but when they have replicated our sort of calculations, they've generally come up with figures that are not fundamentally different to those that we've been coming up with. We publish figures for Wales at the same time as we publish the original estimates for Scotland back in April 2013, and the Welsh Government undertook its own study of the impact of the welfare reforms. Once you allow for differences in what we put in to what they put in to the pot, the figures that they came up with about nine months behind our figures were remarkably similar, and that gives me confidence and gives us confidence that we've got it right. If we are being challenged by DWP or the Treasury, I think it's not because we've somehow got the figures wrong, but rather that they don't like what they're hearing, or they perhaps are trying to take a broader view of what's going on in the world, than we've done here, which is to quantify one element of what's happening out there in the world, and not sort of simultaneously just for changes in tax levels and employment levels and benefit levels all at the same time, but just look at one element of the jigsaw. Margaret Cackett, thank you for your report and presentation. It has been a bit of an eye-opener, and it's certainly quite devastating for a lot of families here in Scotland and across the UK, as you know. Let's ask a question on tax credit. Is that all of your figures based on 100 per cent of the people who are entitled to claiming? Particularly in tax credit, where people are perhaps in zero-hour contracts and they've maybe got 20 hours one week and 10 the next, so there'll be a huge variance in the actual amount of tax credit that they would be entitled to and have to reclaim, which is very difficult for many people who are in that situation, haven't continually fill in claim forums. I just wondered if you have taken 100 per cent of those entitled to in your figures, so in actual fact the figures could be worse than they appear because not everyone who is entitled to the money is claiming it. Let me explain how we get to that figure of 350 million a year lost to Scotland through tax credits, and this should answer your question. What we do, we start off with the Treasury's revised estimates of how much they expect to save through the tax credit changes, and there's a whole raft of them. You have to add endless numbers to get to a GB-wide estimate of the savings. Then we look at where tax credit claimants live across Britain, and we get the figures on how many tax credit claimants there are in Scotland. That allows us, when we look at Scotland's proportion of the GB total, to derive a figure for the financial losses in Scotland. That 350 million that we're estimating for the financial losses in Scotland reflects Scotland's share of tax credit claimants. Given the method we've followed, we're basing our statistics on people who actually claim tax credits. It may be the case that some people are not claiming the tax credits that they're entitled to. I'm not sure what that would do to the numbers. If they're not getting the benefits, they're not going to be losing the benefits, are they? It's not really going to affect the numbers. If, let's say, it's the same proportion not claiming tax credits up in Scotland as in other parts of the United Kingdom, it's not particularly going to affect the estimates that we've generated for Scotland. I recognise the process that you're talking about, but I don't think that it distorts the numbers that we've got here. To lose tax credits, you've got to claim them in the first place. That's perhaps the easiest answer. Is the Treasury assuming that everyone claims—well, they're just going on the figures of historic claims, I presume, and that's how it's done? I would assume so. I'm not privy to the workings of the Treasury on this, but I would assume they look at how many people are claiming tax credits, how much they claim, and then they do a calculation. If we take 10% off, what does it mean in terms of financial savings? Maybe somewhere behind the scenes they do have calculations of households that are entitled but not claiming, but it wouldn't impact on these figures, would it? Because these are losses to people who are claiming. The more people who are in work, and perhaps for one reason or another, find themselves not getting the benefit that they were previously getting and find that they've got to accept a zero-hours contract job, they are not being counted anywhere, are not being actually considered in any of these figures. If you're not claiming something, you wouldn't be counted in this, even if you really should be claiming something. If you're coming off an employment benefit, for example, and going into zero-hours contracts, work and tax credits, you would—there's that change in benefit. You should be entitled to claim tax credits, whether people actually do consistently. I couldn't give you an accurate answer in terms of the proportion that failed to claim. That's not territory, I know well, but there will be some people who are not getting the benefits they're entitled to. That applies to any benefit that you've got to claim for, of course. We can't assume that everybody gets the housing benefit that they're entitled to. Some people may not claim, but yes, there were people not getting money. It's not in the report, it's around benefits and something that I had read somewhere that, when you become a new pensioner claimant, currently pensioners say, for example, a 70-year-old lady in a council house, three bedrooms, she's not affected by the bedroom tax. Someone who becomes a pensioner now and is still living in a three-bedroom house on their own, they would not be affected by the housing benefit bedroom tax. They wouldn't get that allowance that the current—so new claimants, pensioner claimants, have to pay the bedroom tax. I'm not an absolute expert on that, but what you're saying to me sounds very logical that some of the impacts of welfare reforms that have been implemented for the working age population will eventually transmit into the population above state pension age. That does seem logical. I've certainly thought of this in the context of the disability living allowance reforms, because the change over from DLA to PIP is being implemented only for those people of working age. Of course, a 55-year-old, 10 years on, becomes of state pension age, so eventually you would expect that to feed through to the numbers above state pension age who are entitled to PIP, the DLA successor. However, I would really have to dig down and look at the fine details, and I'm not familiar with those, but it seems a reasonable expectation that that's what will happen. The pensioners will eventually be affected by the DLA reforms. I notice in the report at page 7 that, in estimating the impact of welfare reforms, the report holds all other factors constant. Is that a reliable assumption to make? It is the case, for example, in Scotland. We have seen, thankfully, falling unemployment and rising employment. I think that the figures that were last quoted were, since 2010, about 187,000 new jobs. Is that not of some relevance to the calculations and the extrapolations that you make from the calculations in your report? There are several things going on simultaneously out there in the world, and we've just been looking at one bit of the jigsaw. I did try to say earlier, but I may be rather failed to get the message across, is that we recognise that employment has been increasing. There has been an upturn in the economy, but whether or not that increase in employment is, in any sense, triggered by the welfare reforms, there's a question mark there. We don't know. There's lots of other things that have triggered the increase in employment. The work that we're going to undertake next, where I'm able to bring some university resources to bear to support a small contribution from the welfare reform committee, is to look very closely at whether or not there is any evidence that the welfare reforms specifically have led to increased levels of labour market engagement and increased levels of employment. There's a lot happening simultaneously all the time in the world. It's a fair comment that you haven't taken account of x or y. We've just looked at the impact of reforms, but I do want to explore and I think we all need to explore whether the welfare reforms are indeed feeding through to higher levels of employment, or whether the higher employment, which we can now see out there in the economy, there's been something of an upturn over the last couple of years. We can't deny that. Whether those higher levels of employment have nothing at all to do with the welfare reforms, they may be to do with increasing amounts of credit or exports or whatever else, but we need to probe as to whether or not there's some substance in that argument that welfare reforms will encourage people to look for work and therefore they will find work and therefore employment will be harder. A higher, that's what we need to explore, whether that really is happening. On the treatment of the up-rate, the 1 per cent up-rate, and I think that you observe that against falling inflation that's not delivering a saving, but is a converse of that not that the up-rate in that context is a benefit to a welfare claimant because it's a benefit to a welfare claimant because it's a benefit to a welfare claimant. The alternative would have been a lower rate of inflation being applied. We have, this is one of those instances where we've actually gone and we have revised the Treasury's own figures because the Treasury has not come out with a new figure for the expected financial saving arising from the 1 per cent up-rating, but it's not difficult to calculate because the operating of welfare benefits is determined by the annual inflation, rate in the September preceding the April when benefits are operated. So there is an operating due next month, which is based on last September's CPI inflation rate. We know what that was. I think that it was 1.2 per cent in the last September if the figure is correct. Perhaps it was a little bit lower. I'd have to double check on the figures, but we can look at what the actual inflation has been and compare that with what the expected inflation was on the OBR statistics. What the expected inflation was at the time the Treasury said, oh, we're going to save X from all of this. We've revised down the expected savings to the Treasury arising from the 1 per cent up-rating because of lower inflation. Now, if inflation goes well below 1 per cent and stays below 1 per cent, then a 1 per cent up-rating is actually an increase in the real value of benefits. But over the three-year period that the 1 per cent up-rating has at least initially been put in place, it still represents a reduction in real terms in benefit payments, not as large as the initially anticipated reduction. Have I explained that well enough? It's an explanation, yes. Have I gone through the logic of whatever we've done? Can I ask you further about another constant that you've observed? That is the difficulty issue of what it means if people are in work and they're getting increased benefit from higher personal tax allowances. I noticed that you used a figure that you said you thought that for those in work and therefore receiving the benefit of tax credits you thought the benefit from the increase in the personal tax exemption was probably about 1,500. I'm just interested, Professor, for the girl where that comes from. The 1,500 is very much a finger in the wind figure. You've got to ask yourself what would personal tax allowances have been if there had not been the pressure from the Liberal Democrat part of the coalition to increase personal tax allowances to their personal level. It's a counterfactual question that we can't answer accurately, but just speculatively here we're saying that if personal tax allowances are 1,500 pounds a year higher than they otherwise would have been, then you can trace that through in terms of the amounts of financial savings. It would have been 300 pounds a year for a solar and a household, 600 pounds a year for a double income household at the standard rate of income tax. Then I can set that against the losses arising from welfare reform, which vary according to type of household, but for household with dependent children it's about 1,500. So your 1,500, is that where there's one parent or two parents? That's an average loss for all households with dependent children, that 1,500. It's averaging the lone parents with dependent children and the couples with dependent children. It's the average loss for all households with dependent children, 15, 50 a year, compared to tax allowance benefit being worth 600 pounds for a double income household, 300 pounds for a single person household, if we're assuming that personal tax allowances are 1,500 higher than they otherwise would have been. I'm just a couple of questions, convener. I notice on page 12 of the report at table 3, which is entitled groups typically most affected by individual welfare reforms. You come to child benefit and you see all households with children a little, households with higher earners a lot. I just was interested to know where does your higher earner figure start? We're working from the rules on this. If there is a household with an earner whose income is £60,000 a year, then they lose all their entitlement to child benefit and it's tapered between £50,000 and £60,000 a year. Those are the treasury regulations on child benefit, so it starts disappearing at 50 and above 60. The average loss for a higher earner household in terms of child benefit is £1,500 a year. It's not negligible. It's 90,000 households in Scotland. That's in table 4. For those earning between 50,000 and 60,000? For those earning above 50,000. That's including not just the partial losers between 50,000 and 60,000, but above 60,000 you lose all your child benefit. It's all now means tested for the higher earners. These are significant losses. It's a very different reform from the other ones. When we've mapped out the geography of these and produced lovely coloured in maps on so many of the welfare reforms, you get dark areas where the hits are hardest, which are in the most deprived areas in Scotland or indeed across GB. You map out the impact of the child benefit reforms and, in particular, the withdrawal from higher earners. The map is absolutely the opposite. It's the better off areas that are hit hardest by that particular element of the reform package. I was interested in table 1 professor, which is in page 7. I wasn't quite clear if this was just an arithmetical extrapolation from all the data of which you had gathered, because when I looked at the heading, lost per working age adult, and a list of figures detailed bring out a total of £440, I mean... Could I go and meet such an adult in Scotland? Does such an adult exist or is that just a consequence of arithmetic? It is a consequence of arithmetic. There may be an adult that actually fits that average, but, like all averages, there is a spread around it. But when the welfare reforms impact differently on different places, you need some yard stick against which to measure their impact. The way we've measured the impact in Scotland, or indeed in its constituent local authorities and wards, or indeed the way we've measured it in other parts of the United Kingdom, is we've measured the impact averaged across all adults of working age. That gives us a handle on how intensively Scotland is hit compared to South East England, or South Wales, or wherever else. So 440 is the average financial loss spread across everybody between the age of 16 and 64 here in Scotland. Many people will lose nothing. A lot of people will lose a lot more than 440. It's the average loss. I don't think... Well, look hard enough you will always find someone who is on the average, but it is a statistical concept. I'm just wondering though how meaningful a statistical concept is. Please don't misunderstand me. I think your report is fascinating, and I think there's very useful data in it. But what I didn't quite understand when I read table 1 was, what does that tell us? What does it do to help us? There's two columns in table 1, isn't there? There's the column telling you how much in absolute terms Scotland can expect to lose from each of the welfare reforms. We're coming to a total of just over 1.5 billion, 1,500 million a year when everything has come to full fruition. If we have that figure in isolation, what does that mean? How do you compare Scotland with other parts of the United Kingdom? You've got to say per something or other, per head of population, or in this instance per adult of working age. We've scaled it all against per adult of working age, because the welfare reforms impact overwhelmingly on adults of working age, not pensioners. We've found that to be the best guide, so that then enables us to move on further in the analysis and say actually the losses in Scotland are about the same as the national average, the national GB average, but less than the average hit in Wales, less than the average hit in Northern England or in London, but substantially more than the average hit in parts of South East England outside of London. We've got to be able to scale those absolute losses against something, but you won't necessarily find that person who suddenly has lost £440 from their back pocket. It was back to the child benefit reforms. Obviously, great concerns about how that was implemented in terms of a household may have an income of £98,000 a year, but an individual between £50,000 and £60,000 derning that will be impacted in the same way. Did you do any analysis or could you comment on what the impact of single parent families are in the higher categories? I think there is a table in table 5, which is one of those great big matrices. We have estimates of the number of households of each type affected by each element of the welfare reforms. With child benefit, we've split it up into its two component parts, the freeze, which affects everybody, and then the withdrawal from higher earners. There were about two thirds of the way, three quarters of the way along the columns there. You can see that loan parents with one dependent child, we estimate that there were 101,000 households in Scotland who were affected by the child benefit freeze, but only 2,000 loan parents with one dependent child who actually lose because of their higher earner withdrawal. It's also a further 2,000 loan parents with two or more children affected by their higher earner withdrawal. If you look a little bit further up in that column, the withdrawal from higher earners is much bigger numbers for couples with children. 47,000 couples with one child, 40,000 couples with two or more dependent children, losing because of the higher earner withdrawal. As a generality, it would be the case that the withdrawal from higher earners does not, by and large, fall on loan parents. It falls on couples. For an individual household, and as we've already talked about, that's likely to be a woman, that could impact severely on that household in terms of a comparison of a couple's income in that situation. In the grand picture of things, those are better off households. Even if they are loan parent households, the loan parent will still have to be earning more than £50,000 a year for the withdrawal of child benefit to begin to kick in. We're not on about the very poorest. We should log that point. I appreciate that. It's just another example of what I think might be a gender issue in terms of women being more affected in general by welfare reform than others. As you see, we're only estimating in table 7 that loan parents with one child only 2% of the financial loss. We've got that big financial loss of £1,800 a year for loan parents on average. We only think that 2% of that is attributable to the withdrawal of child benefit from higher earners. Whereas we look at couples with one child, 27% of the overall financial loss is attributable to that withdrawal from higher earners. I think that it's down to the numbers involved in that category again, and the individual impacts. That appears to have concluded the questions. Steve, thanks again for a very comprehensive run-through of your findings and thanks again for providing those findings for us. I'll wait with interest the future work that you're doing. I'm sure there's more to be drilled down into as we see these benefits changes rolling out. There's a lot more that we will have to look into.  I'll just say, chair, that I hope in covering some old territory that must be familiar to you in this report that I've helped to bring some of the members of the committee up to speed on the previous estimates, albeit they are now revised, but the previous estimates we've been producing of the impacts in Scotland and you understand the basis of those. We are into new and unknown territory now in exploring the impact of all of this on labour market participation and employment levels, and I'm as fascinated as anybody to try to get to the bottom of that. You can see that we have hunches as to what we may find, but there's nothing better than evidence, and we believe very strongly in hard, quantified evidence, which is what we keep trying to bring to you. We do appreciate that, and we've taken hard evidence on a number of areas, such as sanctions, food banks, the actual direct impact of welfare changes. Unfortunately, those who are behind those figures on creating those changes are in denial of the information that we're receiving, but we'll keep plugging away and trying to convince them that the evidence is there to show just exactly what's happening, and the contribution you've made to that is very welcoming on behalf of the committee. I'd like to thank you for that. I'll close the meeting to the public at the present time. Before doing so, just to point out that our next meeting on 24 March, we expect to take oral evidence from the chair of the Social Security Advisory Committee, Paul Gray.


Welcome, everyone. My name is Lindsay Smalling. I'm the producer and curator of SoCAP. I have the best job in the world because I get to invite people like Hunter, who have been leading this field for a long time, amazing artists like Bumuti and Sonya, and all of the amazing speakers that you're going to hear over the next few days. And we know that there's just as much insight and wisdom and energy coming from this crowd, so I'm so excited you're all here. SoCAP is my favorite three days of the year. That's why this is my job. And the work that we do here needs to be more than three days, because you'll find that over the next few days you make so many amazing connections. There's so many people that you had no idea you needed to be working with that are really the next step in what's getting you to what you're trying to achieve. We wanted to, we're 10 years old now, continue doing that more throughout the year. And so earlier this year launched the Good Capital Project, which is a two-year initiative from the SoCAP group to continue the amazing work that happens here throughout the year and really find a more intentional way of taking this collaboration platform that we've built. You've all helped us build over the last 10 years and asked you to help us build this field together over the next two years. So I'm really excited to welcome to the stage John Morris, who's going to rally this crowd and get you all involved in the Good Capital Project. Welcome, John. Thank you. Lindsay is amazing, as most of everyone here knows, and she never stops. It is so amazing to be in this room with this group at the 10th anniversary of SoCAP. We're not only celebrating 10 years of vision and hard work of our founders, Rosalie and Kevin Jones, but 10 years of curated conversations by many of you around so many topics that challenge, inspire, or exemplify an approach to empowering capital for better outcomes. Bob Caruso and I are so grateful that Kevin and Rosalie invited us to get on board the SoCAP train. It has been an amazing journey so far, and there's so much ahead of us. This room is incredible. It's the only place I know that is made up of investors, lenders, givers, builders, artists, entrepreneurs, engineers, and imagineers that are all values based and purpose driven. The brain power in this room and the experience base of the people who gather this week is inspiring. Earlier this year, the SoCAP team brainstormed around the best way to harness that power as a force for change beyond the SoCAP week to fully realize the impact economy. This led to the launch of the Good Capital Project. The fact is, Wall Street, from its beginning, was built around transactions. And therefore, capital has followed transactions, and a supply chain has been created that has created a really efficient capital market system. Consumers are now calling for a better system, one that includes purpose and sustainability and can turn our world's human challenges into our human investment opportunity. For us to accomplish this, it calls for the efficiency of the traditional financial markets but embracing an impact lens to ensure that purpose and sustainability are embedded into the capital market system to create the world impact we're looking for. We are all here with a shared desire to apply human and financial capital to create a more just, more sustainable, and more inclusive empowering world around us. But it can be frustrating. If, imagine, impact investing as a restaurant. Food is essential to life as capital is to business. There would be healthy and fresh ingredients sourced from local producers to serve various preferences. There would be culinary experts to turn those ingredients into mouthwatering solutions that fit many personas. The menus would be designed to give clarity around those options and the waiters would be trained to make that very best dining choice for you personally. We would all leave this restaurant happier and healthier. We need systems, an efficient supply chain, an investment taxonomy, the plumbing or connective tissue that unifies our common passion and intentionality with our ability to succeed. We need common curriculum, shared databases, online product catalogs, templated legal documents, a unified industry lexicon, advisor certification, impact research that fits different customer profiles and asset classes. We need open source directories of failed and successful case studies and on and on and on. So how do we create a better restaurant with happier and healthier outcomes? What's missing? How can we change this? Is there anyone stopping us? Is there a law stopping us? Is there a set of cultural norms that's holding us back? Our view, this is not a supply and demand problem. This is not a terminology problem. It's not a concessionary versus ROI debate problem or a perception problem around the term impact. This is a design problem. And here in the room are the designers. The design thinking movement, like Socap, also has its roots in this town. Tim Brown, founder of IDEO, which came out of Sanford Design School, has been a leader in bringing design thinking mainstream. Tim Brown spoke at the first Socap ten years ago. Kevin Jones had the foresight to see impact investing as a design problem. Therefore, it's very fitting we launched the Good Capital Project, a two-year design thinking approach to aligning the capital markets with the human needs of tomorrow during this tenth anniversary. Our design approach starts with empathy to understand the key pain points and finding right questions to ask, the definition to those questions by identifying the most crucial to ask and to who. Then ideation by asking those questions to all stakeholders and get the best ideas. We want to hear every possible solution to those questions, making this not an either or but a yes and approach. Then we'll curate those ideas to launch prototype solutions that can be achieved as the most viable projects within our two-year timeframe. These projects will undergo testing and measurement, leading to a self-sustaining future and have a life of their own. The purpose of the Good Capital Project is to use design thinking and cross-sector collaboration to bring increased clarity, structure, and efficiency across the impact economy for full industry maturity. Most of the systematic changes needed in the industry are underway. Most of the systematic changes need to improve the capital markets of the future will undoubtedly come from the efforts being made by leading organizations in the room who have led this impact movement. You will be able to hear about a number of these initiatives over the next few days and we feel the Good Capital Project can amplify these efforts by reaching beyond the known leadership to the whole community to other sectors to be inclusive in connecting the dots. We feel a dot connected is a network. Unconnected, it's an island. Impact of scale requires networks, not islands. So we welcome everyone in the room to participate and they're looking forward to making sure we connect the dots to other networks globally and one of you may just have that amazing differentiating idea that creates the first Impact Unicorn described at the Global Steering Group conference last July as an effort that improves a billion lives. The likelihood is that by designing the future together and connecting the dots we will create a herd of Impact Unicorns that populate our new economy and achieve the sustainable development goals and surpass our wildest and most impactful dreams. The Good Capital Project has asked that those people who want to get involved to self-select into six working groups focused on solving the grand challenges to mainstream impact investing. The teams will use their collective expertise to bring the best ideas to bear while the GCP design team will facilitate the collaboration research specific solutions and prioritize deliverables. We've had over 10 events since the launch in June have produced over 20 reports and interviews. The GCC website has continued to evolve as a place to make all of this work available. We currently have close to a thousand people who have signed up to be part of this design process. This project needs you. We're now in the ideation process and there are a number of issues that we need help answering the questions and coming up with the best solutions. Please come by or both, sign up for the project, help to provide your best ideas and discover how you or your firm can get involved. When we dreamed up The Good Capital Project we saw it as a way to invest back into our community and accelerate impact but we could not have done it alone. We're grateful to the courageous sponsors who helped us get this started two or three months ago. Deval Patrick and Bank Capital felt that this was needed for the impact industry and the Board of Investor Circle were very supportive of this effort as well as leading participants across the supply chain who provided this project critical resources. We're also grateful to see so many of what I would call the impact pioneers come to support this effort. We will now be reaching out to a broader audience to support this effort hope to engage as many partnership discussions with as many dots to build an amazing global network to design a better capital market system. Lastly, we celebrate the last ten years of purpose and shared vision in this room. Please join me at Marveling at the leaders that make up this community. Like a vintage champagne, this vision has fermented and this impact economy cork is about to pop. The fruits of your labor have turned the Kool-Aid that we've all been drinking into a robust California sparkling wine.  Let's design a world of good together. Thank you.