Ministerial Foreword

The Social Fund is an important part of the welfare state. It makes provision for those on very low incomes to help them deal with problems getting affordable credit, sudden unexpected costs and crises. This is vital now in an economy and society which has changed greatly in recent years, and of course even more important in difficult economic times.

The issues of credit and debt in modern society are complex. Access to credit can enable people to deal with fluctuations of income and spending and manage their lives better; it can open up opportunities. But the level, terms and conditions matter. If credit is too costly or borrowing is excessive, people can be driven into a vicious circle of debt which traps them financially. This can have profound effects on their health and wellbeing; limiting the options for them to move into work and develop their own and their children’s lives.

Everyone should have their basic needs met and the reforms we have made to the welfare state recognise this. But we want to go further than this: we want to build an inclusive society where everyone is able to play a full and active part. With citizenship come responsibilities, as well as rights, and the modernised welfare state acknowledges this.

We believe that now is the time to review the role and design of the Social Fund to maximise its impact. We want to move away from the short-term role it has for many people – functioning as a sticking plaster to their immediate financial problems and recycling them through the system. We envisage a sustainable scheme which helps people both deal with short term crises and also addresses the longer-term challenges faced by those who need financial support. In particular, we want a scheme which:

• is simpler for customers to understand and use and simpler for our staff to deliver to ensure better value for money;
• plays a more active and sustainable role in helping people resolve their longer-term financial needs and supports them to become more financially independent, as well as dealing with short term crises; and
• is set within the wider context of financial inclusion and education, and is aligned with the range of products and services that the Government delivers for people with complex and enduring needs.

We will look to bring about this vision in a phased approach. In this consultation document we propose a range of early reforms to bring about better help now for some of the most vulnerable members of our society. However, we want to go further, so we are consulting on a range of proposals for medium-term change which will align the Social Fund more effectively within the wider Government strategies of financial inclusion, capability and welfare reform, making it more responsive to the demands of a modern economy.

A reformed Social Fund will provide more effective support to those who need it most. However, we strongly believe that a reformed scheme should encourage people to take greater responsibility for their own futures and make full use of this support. The scope of available provision ranges from debt advice and money guidance to more support to move into work, building on the successes delivered by Jobcentre Plus through the recession in restricting unemployment to levels much lower than those predicted.

We believe that work is the best form of welfare and it represents the most effective route out of poverty. Whilst work is the objective for most people on benefits, we recognise that for some this isn’t an option, either in the short or longer term. This group includes the most severely disabled people, others with full-time caring responsibilities and many older people who are above state pension age. Many people in these circumstances have little or no opportunity of increasing their income over time beyond benefit levels. At times of the most extreme pressure many may need additional support. We also recognise the needs of those experiencing unemployment, particularly in the current economic climate, in managing fluctuations in income and spending. The Government has a responsibility to support those who are struggling to make ends meet.

We also want to do more to build on the Government’s financial inclusion and capability strategies to help more Social Fund customers make the transition to financial independence, and ultimately to employment. However, it will be important to make sure we also do more to help tackle longer terms problems. That also means ensuring we have more and better support alongside greater responsibilities. We will therefore explore how we can best enable those who access the Social Fund to take more responsibility for their financial situation and wellbeing in future. This will help them to minimise further financial crises.

This document looks across the piece at the way our proposals can benefit people on low incomes and how they can be more effectively connected with the Social Fund. We believe that taken together these proposals will make a very substantial difference to the financial environment experienced by many people.

I look forward to hearing your views on our proposals for the role of the Social Fund as part of a modern welfare system, and working with you to bring about these improvements.

Yvette Cooper
Secretary of State for Work and Pensions