2. The Social Fund – increasing support and developing responsibility

What is to be done?

2.1 The Social Fund continues to be a key element of the welfare state, as it has been since its introduction over twenty years ago. It must continue to make provision for those with no other resources: what is provided should facilitate people’s active involvement in society and they should be enabled to take responsibility for their financial situation and wellbeing.

2.2 We believe that the basic structure of loans and grants remains effective – this is discussed further below. However, the operation of areas of the scheme needs to be reviewed to make it more relevant for today and the future. We want to move away from a scheme which, for many people, functions simply as a sticking plaster and deals with their short-term problems, and address some of the main challenges that the scheme faces in delivering efficiently in today’s economy. The key policy challenges it faces are that:

it is a passive scheme which does little to encourage customers to tackle the underlying problems they face, improve their financial capability and move them towards financial independence;
it does little to prevent people from making repeat and frequent applications to Social Fund loans and grants; and
it is a complex scheme where eligibility criteria and rules for applying for and receiving an award can be confusing.

2.3 There are also a number of delivery challenges that reform of the Social Fund needs to address:

in recent years there has been a much bigger increase in the number of Crisis Loan applications than for Budgeting Loans, which reflects a problem in the structure of the loans scheme; and
additional pressure on Jobcentre Plus and associated costs.

Box 2 – Case study 1

This customer was made redundant and subsequently found himself homeless with his pregnant wife and two small children. On moving into permanent accommodation after living in a hostel there was no money left to furnish their new home. He stated “I’m a working person, I’d rather work and save up and use the money that I’ve saved up. It’s better than getting a loan”. However, Jobcentre Plus told him about the Social Fund and that he might be entitled to a payment.

He found the application process itself was straightforward, but through misunderstanding the system and desperation for the money he made an application to all three elements of the scheme. He did not realise that a Crisis Loan would not have covered his need or that he wouldn’t be eligible for a Budgeting Loan as he hadn’t been on benefit for long enough.

He received a Community Care Grant award and was satisfied with the support from the Social Fund “They gave me about a thousand pound which I was grateful for… That was fair enough, at least I got something. With the money I did up the house and with my wife and children I moved in”

He was particularly positive about the nature of the grant in that it provided him with an option to avoid more expensive loan options.

Outline of a reformed Social Fund

2.4 We believe that any reform of the scheme should result in a system which:

is active rather than passive, where we continue to provide individuals in need with help when they most need it, but where we also look to them to take more responsibility for managing their finances and planning for their future;
makes it simpler for customers to access one-off or occasional help to enable people to smooth the costs of variable expenditure and income;
offers more support to frequent users of the Fund to help them tackle the underlying problems they face and move towards financial independence – along with an expectation that they take up that provision; and
provides better value for money for the taxpayer by reducing the number of frequent applicants to the loans and grants scheme, and their reliance on the Social Fund.

2.5 We propose to achieve this vision by taking a phased approach to delivering our proposed package of reforms. We want to bring about a more effective scheme which offers better short-term support to address the immediate needs of our customers.

Box 3 – Case study 2

This customer was familiar with the Social Fund eligibility and application process, in particular the Crisis Loans scheme. With a relatively good employment history, but volatile home life, she had only used Crisis Loans for benefit alignment, food or travel expenses to get to her local Jobcentre. She had received two Crisis Loans in the past year, having previously approached close friends for money.

With a bank overdraft and outstanding store-card debt, the customer was referred by Jobcentre Plus to Citizens Advice, who suggested she attend a money management course at a locally-based organisation focused on helping women take control of their economic lives. Covering personal budgeting and saving, explanations of interest and relevant signposting, she felt the course had equipped her with the knowledge and tools to take control of her finances. She felt fortunate to have had the opportunity to attend the course and believed that money guidance should be available to all customers.

2.6 We will look to bring about a range of early changes to address some of the more immediate issues the Social Fund faces, and steer it towards its proposed role as an integral part of the wider financial inclusion agenda. However, we want to take our reforms further in the future, so we would like to hear your views on a range of medium-term reforms to the scheme to make it more suitable in today’s economy.

2.7 The early changes we propose are:

enabling access to Budgeting Loans from earlier in their claim. Allowing access from Day One of a customer’s benefit entitlement will reduce the need for people to apply for a Crisis Loan, making the application process easier for the customer and bringing about better value for money in terms of administration of the scheme. It will also reduce the need for some applicants to resort to high-cost or illegal lenders. However, the maximum amount a successful applicant can be awarded in their first six months of their benefit entitlement will be lower than the amount currently awarded for Budgeting Loans;
a requirement to attend an interview for those customers who make repeat applications for Crisis Loans, and more stringent checks on what the loan is required for. This will allow us to help some of our most vulnerable customers more adequately by offering the right kind of support at the appropriate time through better signposting to financial help and guidance;
help for students through the Funeral Payments scheme; and
providing goods and services instead of cash for grants. This could deliver better value for money through contracting with major suppliers and make the budget go further.

2.8 Taking the reform further and ensuring that it meets the needs of our customers in the future, we want to consult further on medium-term reforms to the Social Fund:

to bring about more certainty and clarity for customers and address issues of complexity, we want to provide more straightforward and simple access to one-off or occasional loans to deal with immediate problems through a quicker and more streamlined application process;
to make the scheme more active and enabling, aligned with the wider welfare reform agenda, we want to bring about stronger support and conditions when customers make repeat applications for loans or grants, in order to address their deeper financial problems. For example, we could make it a requirement to take up a full financial health check, to see whether the claimant is receiving all the benefits they are entitled to and are being directed to financial advice, look at any debt they may have, and consider that they take up any additional help with, for example, housing issues or to return to work;
we will consider which organisation is best placed to provide this more personalised interaction and wider support to meet the needs of our most vulnerable customers, and at which stage it should be provided in the interaction the customer has with the Social Fund. We would like to hear views on whether more intensive support might best be delivered by Jobcentre Plus, local authorities or third sector organisations, or possibly a combination of providers;
as another option to reduce the passive nature of the scheme and respond to the longer-term needs of customers, we could require those customers who make repeat applications to develop and agree action plans with advisers, similar to those being made in jobseeker arrangements;
to align the scheme more with the range of services available to assist our customers, we could look at ways in which we can refer the minority of our customers who frequently use Crisis Loans and who have more complex needs – such as homelessness, mental health or drug and alcohol misuse problems – to other services, or require them to take up more holistic support; and
to provide better value for money through the removal of discretion, we aim to simplify the grants scheme and support those people leaving care or fleeing domestic violence with a regulated resettlement grant.

2.9 We would like to hear your views on these proposals, which are discussed further in subsequent chapters.

Historical context

2.10 The Social Fund was established over twenty years ago in an economic context quite different from that of today. Then, most people on low incomes lived essentially in a cash economy. Today it is difficult to manage finances successfully without access to credit. When credit is affordable, it can help people manage their lives better and open up opportunities which they may otherwise be excluded from.

2.11 The Fund was introduced as a replacement for the Single Payments Scheme in order to focus support on those facing the greatest difficulties managing their normal income, allow for a more flexible response to inescapable need and break new ground in the field of community care.

Box 4: The history of the Social Fund

The Social Fund was set up under the Social Security Act 1986 and was different from previous schemes, which made only non-repayable grants.

Its origins can be found in Exceptional Needs Payments (that ran from 1948 to 1980), a programme that was discretionary but not cash-limited. The intention was to meet expenses for essential items without which claimants would suffer hardship, not for regular topping-up, which would leave claimants with an advantage over other people on low incomes. It had originally been envisaged that payments would only be made in exceptional circumstances. However, by 1979 the scheme was no longer seen as an exceptional element to the Supplementary Benefits scheme, with every third Supplementary Benefit claimant receiving an Exceptional Needs Payment.

This was replaced by the Single Payments Scheme (1980–86) where the discretionary element of its predecessor was replaced by detailed regulations, which were designed to set clear boundaries of help and promote consistency of decisions, to ensure that customers and staff were offered greater certainty in delivery. The scheme was expensive and considered unfair, as those on Supplementary Benefits could get substantial amounts to meet expenses such as essential household items, whereas others on low incomes had to manage without this help. It was also an inflexible, complex scheme which failed to meet individual need.

Shortly after changes to the Single Payments Scheme were made in 1986, the Social Fund was brought in. Its main objectives, as outlined in the 1985 Green Paper, were to:

concentrate attention and help on those claimants facing the greatest difficulties in managing their normal income;
enable a more varied response to inescapable individual need than could be achieved under previous rules;
handle the arrangements in a way that does not prejudice the main income support scheme; and
break new ground in the field of community care.^[14]

The current scheme

2.12 The Social Fund, administered by Jobcentre Plus, complements mainstream social security provision in two forms: regulated payments – paid to all entitled claimants in a number of specified circumstances; and discretionary payments – paid following an assessment of eligibility and, for certain elements of the scheme, need.

2.13 The table below provides an overview of the elements of the current Social Fund.

Regulated Social Fund

	Sure Start Maternity Grants	Funeral Payments	Cold Weather Payments
Description	One-off payment to help with the costs of a new baby	Contribution towards the cost of a basic, low-cost funeral	Help with fuel costs during particularly cold spells
Award	£500 per baby	Necessary costs of specified expenses (mainly burial or cremation) + up to £700 for non-specified funeral expenses Any other available private funding (except claimant’s savings) is deducted Recoverable from deceased’s estate	£25 for each week of cold weather (rate applies to 2009/10 only)

Discretionary Social Fund (cash limited)

	Community Care Grants	Budgeting Loans	Crisis Loans
Description	Support for vulnerable people in receipt of income related benefit living in, or returning to, the community	Interest-free loans available to people in receipt of an income related benefit for at least 6 months. A simple, automated, non instrusive scheme	Interest-free loans to help avert serious risk to health or safety following an emergency or disaster, where no other means available to the customer
Award	Discretionary Decision Makers must take account of all the circumstances of the individual case and decide the priority for payment based on nature, extent and urgency of need Generally only high priority needs are met Minimum award £30 (except for daily living expenses or travelling expenses) No maximum	Minimum loan £100 The maximum the applicant can be awarded is dependent on the budget position and the applicant’s personal circumstances which includes existing budgeting loan debt Repaid automatically from benefit where possible	Discretionary No minimum award. Amount awarded takes into account the customer’s circumstances, any savings and the overall individual social fund debt limit of £1,500 Repaid automatically from benefit where possible

2.14 In 2008-09, in addition to Winter Fuel Payments, the Social Fund provided payments worth over £1,152 million. These included:

around 1.1 million interest-free Budgeting Loans totalling £455 million to help people meet one-off costs and nearly 2 million Crisis Loans totalling £167 million to help people deal with emergencies;
over 252,000 non-repayable Community Care Grants to the tune of £139 million to help people handle the costs of, for example, resettling or remaining in their community;
£500 to help meet the costs of a new baby in around 263,000 families, paid through Sure Start Maternity Grants; and
over £210 million in Cold Weather Payments to help people meet heating costs during exceptionally cold periods.^[15]

Developing evidence-based proposals

2.15 In December 2008 we consulted on some aspects of reform of the Social Fund. Since then we have held further meetings with stakeholder groups that have helped us to develop our proposals. We are committed to continuing this engagement, listening to the views of stakeholders as part of a further consultation following the publication of this paper, and ensuring that the voice of the customer and the stakeholder is heard in any future developments.

2.16 In addition to the variety of research papers published in recent years that have set out proposals for the reform of the scheme^[16], we commissioned our own external research that is being published alongside this document. The main objectives of this work were to understand the possible effects on customers of the high-level policy options for reform of the Social Fund, and to identify ways of improving the Social Fund to maximise our customers’ awareness of opportunities to become more financially included. A summary of this research is provided in Box 5.

Box 5: Findings from external Social Fund research report

‘The Social Fund – customer experiences and perspectives: qualitative research with Jobcentre Plus customers’

The Department for Work and Pensions commissioned qualitative research from ECOTEC to explore Jobcentre Plus customers’ understanding and experiences of the Social Fund, particularly the discretionary elements, i.e. Crisis Loans, Budgeting Loans and Community Care Grants. Customers’ views were also sought on alternative ways in which the discretionary Social Fund could be administered.

Key findings from the report were:

Knowledge and understanding of the Social Fund varied across the research group – there was some misunderstanding about the different elements of the Fund and the ways in which it is administered.

Research participants were in favour of:

simplification of the loans and grants process;
a speedier loans and grants approval process;
no reduction in budgeting loan limits for families with children;
conditionality for those making multiple loan applications;
a more empathetic service from Jobcentre Plus to assist genuine applicants and tackle any misuse of the Social Fund.

Research participants had mixed views on:

the direct provision of goods rather than cash awards;
third party delivery of the Social Fund;
the provision of financial support and guidance to Social Fund applicants.

Criticisms were raised regarding Crisis Loan phone lines waiting times.

Recent changes to the Social Fund

2.17 We are clear that the unique support the Social Fund provides is valuable – more so in the current challenging economic climate – and should continue to play a vital role for millions of some of the most disadvantaged people in Britain each year.

2.18 In the informal consultation document we published in December 2008, we set out a range of proposals which, alongside other measures, were taken forward in the Welfare Reform Act 2009.

Introducing a power to make payments in advance of a customer’s first benefit payment, to be known as payments on account. These payments will bridge the gap between making the claim and the first benefit payday where the person is in immediate financial need, which will remove the need for people to apply for Crisis Loans to bridge this gap. This means that the Social Fund is not put under pressure by those awaiting benefit payments. Customers in these circumstances will apply for a payment on account.
Changing the way that Community Care Grants are awarded so that individuals will receive quality goods or services instead of money (discussed further in Chapter 4).
Taking the power to work through outside organisations who can offer social loans instead of the Social Fund. The Welfare Reform Act 2009 sets out the types of factors which could be included in arrangements with these organisations and during the passage of the Act through Parliament we made it clear that we would only consider proceeding with these arrangements if and when the time was right. We also made it clear that we would consult further before doing so. We do not believe that this is the right time to take forward these measures and, as such, have no current plans to develop the detail of these powers or to consult further through this document or in the immediate future.

Increased pressure on the Social Fund

2.19 The combined effects of the recession; and a tightening in the home credit market , changes to the way some Social Fund loans applications are made (over the telephone) and rising basic commodity prices, which make budgeting on a low income more difficult; has seen increased pressure on the Social Fund.

2.20 Applications to the discretionary Social Fund have increased in the past year. Budgeting Loan applications received have increased in 2009-10 on the same period last year by around 9 per cent and Community Care Grant applications received have also increased by around 13 per cent.

2.21 However, the main pressure on the Social Fund is currently Crisis Loan demand. In 2008-09 there were twice as many Crisis Loan applications received as in 2006-07, an increase from 1,448,000 to 2,895,000. Applications received per working day have continued to increase this year. Gross expenditure, how much we lent out, has increased by 70 per cent over the same timeframe.

2.22 Multiple applications for Crisis Loans are adding significantly to the pressures on the Fund. The majority of people only make a call on the Social Fund during an exceptional crisis, or to help meet a one-off unplanned cost. However, during 2008-09, just over half of all applicants for Crisis Loans – over half a million individuals – made two or more applications during the year. Over 30 per cent made three or more applications, and around four per cent made ten or more applications. We believe that the Social Fund as currently structured doesn’t provide the help and support needed by those customers experiencing significant levels of Social Fund dependency.

2.23 The introduction of telephone applications for Crisis Loans has increased the pressure on the budget but the 0800-number claim line has also, inadvertently, put up the cost for some applicants who call from mobile phones.

2.24 However, the Department for Work and Pensions has now negotiated a deal with six of the UK’s largest mobile phone companies which means that customers of these firms have been available to make free Crisis Loan calls from January 2010. Taken together, these six firms account for around 90 per cent of the mobile phone market. We are now seeking to reach a similar arrangement with the smaller mobile phone companies.

2.25 In recognition of increased demand on the Social Fund, Budget 2009 announced that the Government will allocate the Fund an additional £125 million in 2009-10 and £145 million in 2010-11 for the loans scheme.

2.26 Whilst we are showing our clear commitment to the Social Fund, we have introduced processes that will enable us to focus provision more effectively on people in genuine crisis.

2.27 Since December 2009 Jobcentre Plus has required customers making their third or subsequent application for certain Crisis Loans for living expenses in a rolling twelve-month period to do so by attending an interview. This allows for a face-to-face conversation which can be extended to discuss the applicant’s range of needs and signposting them on to effective financial guidance and support.

2.28 In the light of the benefits this could bring to the customer and the improved targeting of the finite fund, we intend, from late 2010 in locations where the process can be effectively supported, to pilot extending these arrangements to customers making their second application.

2.29 As now, we shall exclude those customers who find themselves in need pending their award of benefit. In addition, we shall consider whether this interview should be focused on either particular customer groups or those reporting particular sets of circumstances.

2.30 We are also preventing anyone from receiving a second Crisis Loan for living expenses for the same period as covered by a previous award unless a disaster or emergency beyond their control has occurred since the previous award.

2.31 Jobcentre Plus is continually seeking to improve the administration for both applicants and the tax payer. In response to the rise in Crisis Loan applications, Jobcentre Plus has increased the number of decision makers working on the Social Fund. A range of other administrative improvements mean that the experience for the customer is simpler and more effective, whilst streamlining the service means that we can deliver better value for money.

2.32 We believe that these proposals are based on a much more clearly defined deal – in much the same way as we have successfully taken forward our wider welfare reforms – that in return for improved, simpler and more easily accessible provision, customers take more responsibility for their own personal finances.

2.33 The proposals in this consultation document set out a new, positive path for the Social Fund. It is vital that the new framework is informed by the views of the public and all of our stakeholders and we therefore welcome responses to the questions laid out in this document.

Department for Work and Pensions

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