Memorandum submitted by Professor Gary
Craig, University of Hull (SF 35)
SUMMARY
S1. A comprehensive review of the workings
of the social fund is long overdue.
S2. Initial concerns about the social fund
were that it was largely based on discretion, would give help
mainly in the form of loans rather than grants, and that expenditure
would be capped, driving potential claimants towards the charitable
and informal and exploitative loan sector. These fears have all
been realised in practice.
S3. The fund also officially sanctions the
breaching of the Beveridge principle, taking claimants' weekly
income 15 per cent or more below already parsimonious benefit
levels. Wide-ranging research findings confirm that weekly social
assistance levels are inadequate for even modest standards of
living.
S4. In general, increasing pressure on the
fund's limited resources have been managed by increasing refusal
rates or by limiting eligibility. Refusal rates for community
care grants and for crisis loans almost doubled in the first 10
years of the fund, and refusal rates have only been maintained
at their original levels of about 40 per cent because of the effect
of recycled loans expenditure which appears to provide increased
levels of expenditure. In reality, net expenditure on budgeting
loans has dropped by almost 70 per cent whilst loan repayments
have increased ninefold.
S5. In all, almost 15 people have been refused
help in the life of the fund so far. Of these about three million
have been refused help because of "insufficient priority":
these claims meet the criteria of the fund but are not met because
there is inadequate money in the fund.
S6. The fund also operates to distinguish
between so-called "deserving" and "undeserving"
categories of claimant.
S7. The costs of the fund have to be judged
not simply in terms of net expenditure but in terms of a high
administrative and management costs, its inefficiency and its
unpopularity with staff who spend most of their time refusing
help.
S8. A carefully costed set of proposals
for reform suggests that key values of eg equity, consistency,
flexibility and dignity could be met by a structure largely based
on regulation with discretion at the margins and involving expenditure
of no more than about 0.5 per cent of current social security
expenditure.
1. PREAMBLE
1.1 I welcome the Committee's review of
the workings of the social fund; this is long overdue in my view
since there has been little effective Parliamentary scrutiny of
the fund since its early years. The Government itself has consistently
limited its reforms to minor issues, such as improvements to application
forms, streamlining the reviews process, or by further limiting
the eligibility of some families for loans, and has failed to
address the major structural faults of the fund, which have been
the subject of continuing and major concern throughout the lifetime
of the fund.
1.2 The social fund was established operationally
in 1988 as part of the 1986 social security reforms. With the
possible exception of the proposals for reforming pensions, the
social fund attracted the greatest levels of public, professional
and academic controversy. This was particularly remarkable given
the fact that the fund was likely to involve a relatively minuscule
proportion (considerably less than 1 per cent) of total social
security spending. The reasons for the controversy focused on
several key aspects;
— the return of the additional payments
scheme to a largely discretionary scheme (albeit with some limited
regulated elements for funeral, winter and maternity payments);
this led to fears that the fund would act particularly against
the interests of "unpopular" claimant groups such as
unemployed young people, lone parents and members of minority
ethnic groups;
— the new overwhelming emphasis on
providing financial help in the form of loans rather than grants;
and
— the intention to cap expenditure
and the likelihood that this would deflect demand onto other organisations
outside the sphere of government, and/or drive need underground.
These concerns have continued to be voiced as
strongly since the introduction of the social fund as they were
in 1988.
1.3 I have undertaken a detailed historical
and comparative study of the development of one-off social security
payments schemes since 1934 as part of my work towards developing
a proposal for the reform of the social fund. These proposals
for reform were published in association with the Joseph Rowntree
Foundation in 1992 and I append a copy of the report, and a copy
of the JRF Findings, with this brief memorandum. I have regularly
monitored the progress of the social fund since publishing that
report and see nothing which would fundamentally affect the general
conclusions of that report, which I take the liberty of commending
to the Committee. (Further copies can be obtained from the Social
Policy Research Unit, University of York, Heslington, York YO10
5DD). I believe that the need for a small degree of discretion
at the margins of a largely-regulated scheme, which my proposals
for reform address, would meet the more recent demands placed
on the fund by increased numbers of refugees and asylum seekers
seeking help since my proposals were drafted.
1.4 I am therefore limiting myself in this
memorandum to highlighting the key issues which have emerged over
the past years, in order to underline the conclusions of that
report, in relation to the operation of the discretionary part
of the social fund in particular.
2. THE AIMS
OF THE
SOCIAL FUND
2.1 When the social fund was introduced,
it was described by the then-Secretary of State for Social Security
as a scheme, particularly through its loan provisions, by which
people on low incomes could be provided with "a sum of money
within which they manage [their finances] for themselves".
This was not the view shared by most commentators including those
on the front bench of the-then Opposition who expressed the concerns
of the overwhelming majority of those outside Government that
the fund was, most of all, and regardless of its potentially damaging
effects on the poorest in society, a device for managing expenditure
on one-off payments.
"up and down the country, the
Government's new social fund will mean sweeping cuts in the help
available to the poorest members of the community";[7]
"the social fund is a lottery
and the chances of winning depend on where you live . . . . [local
office] spending priorities have nothing to do with local needs."[8]
2.2 Nevertheless, the position taken by
successive Governments has been that the social fund continues
to provide appropriate help effectively to the poorest people,
and to do so in a targeted way.
"the social fund is solid evidence
of the Government's continuing commitment to providing help with
exceptional expenses for vulnerable people".[9]
"the regulated and discretionary
parts of the social fund contribute to this goal [of tackling
unjustifiable social and economic inequalities] by providing a
variety of help to those in greatest need".[10]
2.3 An overwhelming body of research evidence—perhaps
the most substantial and consistent body of independent research
evidence ever mounted in relation to a single element of Government
social security policy—has demonstrated that, whilst the
fund may be judged a remarkable success as an instrument of financial
control and of ideological discipline, in terms of providing help
for the most vulnerable and needy, it is an abject failure. It
is my view that reform is urgently needed, particularly in light
of the Government's clear demonstration of its commitment to addressing
poverty amongst adults and children.
3. CRITICISMS
OF THE
FUND
3.1 It is perhaps worth reminding the Committee
in a little more detail of the basic elements of the widespread
critique of the social fund. First of all, the fund officially
sanctions the breaching of the Beveridge safety net. Social fund
loans take claimants' income 15 per cent (and often more) below
the official poverty line. This might be acceptable where the
official poverty line were set at an adequate level. But a long
tradition of rigorous research, with much of which members of
the Committee will be familiar, has demonstrated the inadequacy
of basic social assistance benefit levels. Successive governments
have long refused to countenance any official review of the adequacy
of benefits. The only such review, in the 1960s, was suppressed
by Government itself because of its embarrassing findings (that
benefit levels were inadequate for the maintenance of an acceptable
standard of living). As a result, social assistance benefit levels
today are not judged in terms of their objective adequacy but
in relation to a series of politically expedient decisions made
shortly before and after the Second World War.
3.2 The work of the Benefits Research Unit
(Becker and Silburn 1990) and the Social Security Research Consortium
(1991), confirmed by later studies, showed that the social fund
generated increased indebtedness amongst the poorest claimants
and that it could be counted a policy success only in its (implicit)
policy objective of limiting expenditure on the poorest. The Social
Security Consortium's (1989) review of the fund's impact on voluntary
organisations demonstrated that the fund was shifting demand for
help onto charities and voluntary organisations or driving it
underground into the "informal" and exploitative private
loan sector. The DSS-funded official evaluation of the fund (Huby
and Dix 1992) found that "decisions to make awards were so
erratic that there was nothing to distinguish the needs of those
who received them from those who did not." Strangely, a subsequent
Secretary of State, Peter Lilley, apparently derived the opposing
conclusion from this rigorous study and other evidence, claiming
in 1993 that the "official" evaluation, the SSAC criticisms,
and those of all other research, provided "no evidence to
alter our belief that the basic principles of the discretionary
scheme are right."
3.3 Both Craig (1992) and the Social Security
Advisory Committee (1992) responded to the growing chorus of intense
criticism against the fund with carefully costed and details proposals
for affordable change. Cohen et al (1992) traced the impact of
the fund on the day-to-day lives of families in several cities;
claimants reported increased debt, enforced dependence on family
and friends, and growing inability to buy essentials. A consortium
of voluntary agencies, including the Children's Society, the Family
Welfare Association and the Family Service Units, returned to
look at the fund in 1996 (Cohen et al 1996), finding yet again
that "the fund is manifestly failing to meet need and . .
. creating confusion and despair amongst benefit claimants"
and showing, in a very detailed way, the process which drives
claimants away from the social fund towards charitable help. The
response of the-then Bishop of Liverpool to reading this report
was that he was "deeply shocked." Recent evidence from
charitable bodies shows that the fund continues to deflect demand
away from Government into the voluntary sector; Members of Parliament
will no doubt be very familiar with this phenomenon from their
own constituency work.
3.4 Early evidence showed that the operation
of discretion was inequitable in practice and that decisions were
shaped often by prejudice and discriminatory attitudes. For minority
ethnic groups, the evidence suggests that structural discrimination
played an important part in deterring applicants although the
failure of the DSS to engage in effective ethnic monitoring makes
it difficult to be conclusive about this; there is some evidence
that black and minority ethnic groups find the structural features
of the social fund at odds with their own cultural and collective
traditions for providing financial support and therefore make
little use of the fund. The structural discrimination built in
to the social fund is reflected in the distribution of grants
and loans between different groups of claimants (see below). Although
more recent changes have apparently limited the degree of discretion
open to local officials, social fund officers still have a strong
influence on the way in which claimants needs are "shaped"
and (although this has not been publicly made known), on the size
of loans which may be made available to them, in order to discourage
claimants from applying (Community Care, 25 March, 1999).
3.5 The fundamental criticisms of the social
fund have always been—and remain—that it is discretionary
and cash-limited, elements of the scheme which have required social
fund managers to juggle with budgets in the face of unpredictable
demand in such a way that the notion of a lottery is inescapably
built in to its workings. The description of the social fund as
a lottery continues to be particularly appropriate. It remains
the case that the chances of obtaining help vary significantly
from area to area, from month to month, and between differing
population groups in ways which can bear no fundamental relationship
to logic or need. As noted above, the concern that the fund would
be a means of driving expenditure into the charitable or voluntary
sector, or towards local authorities (under their S.17 provisions)
continues to be raised as a result of the experience of charities.
For example, both national charities such as the Family Welfare
Association and the RC Glasspool Trust, and small local charitable
bodies such as the Dr Edwards and Bishop Kings Trust of Fulham
(established to respond to local need), report that their grant
resources continue to be under considerably enhanced pressure
from people refused help by the social fund. Many such charities
have been forced to take defensive action by, for example, requiring
evidence that claimants have approached the fund and been refused
before providing help, a procedure which in itself leads to increased
hardship.
3.6 An analysis of the first 10 years of
the fund, seen from the perspective of a lottery, suggests that
there are some safer "bets" than others in terms of
the likelihood of getting help. The fear amongst social fund managers
of reprisals against them for overspending (following the near
management disasters of 1990 when some social fund officers had
spent their whole budgets by late summer), balanced by the desire
to spend up to the prescribed limit in order to avoid loss of
budget for subsequent years, means that February and March are
always better months to get an application in: in some years almost
twice as much spending has gone on pro rata in March as it would
do on a steady spending basis. For both grants and loans, the
traditional menu of exceptional items is always the best bet:
cookers, beds and floor covering. Clothing scores higher with
budgeting loan applications than for grant applications or crisis
loans. This kind of statistical detail has increasingly been obscured
by the DSS annual reports.
3.7 The fear that need would effectively
be driven underground by the working of the fund has also been
realised. My own study in Bradford (1989-91) of income support
claimants of both white and Pakistani origins, and subsequent
research by the Children's Society and others revealed large numbers
of claimants who were unwilling to approach the social fund either
because they were uncertain of their chances of getting help,
because they judged that they would not be able to service even
an interest-free loan from their already inadequate benefit income,
or, in the case of claimants of S Asian origin, that the loan-based
focus of the fund was alien to their own culture.
3.8 The fund's inability to meet more than
a fraction of the demand placed on it has led, equally inevitably,
to the fund fully justifying its sobriquet as the "fund that
likes to say no". All that has changed in essence in relation
to the social fund over the past 12 years has been that pressure
on budgets has grown and that more poor people have suffered as
a result. Year on year, many of the changes introduced by the
Government and the DSS have essentially been attempts to manage
that pressure more effectively by, for example, limiting the scope
of eligibility, attempts supported, at times, by statistical distortion.
3.9 For the community care grants budget,
for example, although gross expenditure has risen from £41
million (1988-89) to £98 million (1998-89), a fourfold rise
in the rate of applications from just over 300,000 to almost 1.2
million over the same period, means that the refusal rate has
risen from 48 per cent in its first year to 81 per cent in 1998-89.
That is one million people refused help in the last year of the
regime covered, and a total of about eight million refused grants
in the 11 years since the fund began work to 1999. During this
period, 700,000 people have been refused grants not because they
were ineligible but because of "insufficient priority",
that is, not because their needs were not covered by the fund
but because there was not enough money in the fund to meet those
needs. In 1999, the Government introduced new arrangements for
filtering applicants before they reached the stage of formal application.
Thus significant numbers of those who might have applied for grants
are now "discouraged" (ie prevented) from doing so;
as a result applications for community care grants in the year
1999-2000 were 45 per cent down on the previous year.
3.10 Looking at the crisis loans budget,
a similar pattern emerges. Despite the extremely tight regime
under which a crisis loan can be made, the refusal rate has climbed
from 12 per cent in 1988-89 to 27 per cent last year. Net expenditure
meanwhile dropped from a peak of £11 million (in 1991-92)
to only £3 million in 1998-89 but rose steeply last year
to £9 million, as a result presumably of exceptional demands.
That is, the crisis loan part of the social fund has come to be
virtually self-replenishing, with income from recoveries replacing
expenditure on new claims. The Government might regard this as
an administrative triumph and proof indeed that the virtues of
careful budgeting which it champions amongst poor people by use
of the fund's loans mechanisms are manifest in the fund itself.
The darker side of the crisis loans sector however is that about
60,000 people have been refused in the life of the fund to date
for one or other of two categorical reasons, the first for "insufficient
priority" again; that is, people formally acknowledged as
facing a crisis in their lives because of having no money are
rejected because the fund itself has not enough money to help
them. The other reason is "inability to repay", that
is that people are too poor even to service an interest-free loan.
This data suggests that the social fund managers are driven by
the need to meet financial targets and budget constraints rather
than with meeting needs identified even by their own tight criteria,
of the poorest people in society.
3.11 The budgeting loans budget is, however,
the operational heart and soul of the social fund: it is the largest
part of the fund and the part where the disciplinary role of social
security expenditure is clearest. By the end of 1999-2000 financial
year, almost 15 million people will have applied for budgeting
loans and almost six million will have been refused help, one-third
of those because of "insufficient priority", a total
of about three million applications for help from the fund have
been refused help on these grounds alone. The DSS has now ceased
publishing details of reasons for refusing help for budgeting
loans applications for reasons which are not clear. Net expenditure
has fallen from £68 million (against gross expenditure of
£108 million) in 1987-88 to £23 million last year, against
gross expenditure of £396 in 1999-2000; to put it another
way, loan recoveries have risen dramatically from £40 million
in the first year of operation to over nine times that much, £373
million, last year. As a result, the budgeting loans part of the
fund appears not to be under pressure and its refusal rate has
dropped slightly from the initial figure of 41 per cent to 40
per cent, whilst gross expenditure has risen steadily to almost
three times its original level. This is a statistical sleight
of hand which allows successive Secretaries of State to present
the social fund as responding to demand and meeting the needs
of the most vulnerable: actually, it is largely the previous cohort
of applicants which is meeting the needs of the next cohort, whilst
the demands on social security expenditure generally fall year
on year.
3.12 In the first year of operation, the
net total call on the discretionary part of the fund in terms
of "awards" was £118 million; last year it was
£130 million, some £33 million less than if the spend
on the social fund had increased year-on-year by a (very modest)
inflator of 3 per cent. This extraordinary tight financial line
is underpinned in part by the absolute refusal to help those dressed
up in official language as a bad risk, the almost 300,000 claimants
(so far) refused because of being adjudged unable to repay even
an interest-free social fund loan.
3.13 The disciplinary function of social
security expenditure is also reinforced by the division between
the loans and grants sections. The proportion of grants expenditure
going to pensioners and the disabled (the traditionally "deserving"
categories of claimant) has risen since the fund opened for business,
from 31 per cent to 43 per cent, whilst the proportion going to
lone parents and the unemployed has dropped from 59 per cent to
44 per cent—the latter are the groups now even more strongly
"directed" towards the loans section of the fund where
they have received between 65 per cent and 85 per cent of the
budget compared with the 10 per cent-22 per cent going to pensioners
and the disabled.
4. THE COSTS
OF THE
FUND
4.1 The costs of the social fund have not
to be judged simply in terms of the net expenditure incurred every
year which has, as data cited above shows, fallen steadily over
the years. It has to be judged most of all in terms of its contribution
to the hidden immiseration of literally millions of people and
the social division and exclusion to which it contributes, quite
at odds apparently with the present Government's stated policy
objectives of removing poverty and social exclusion. Helen Dent,
Chief Executive of the Family Welfare Association, for example,
has been quoted as saying that families rejected even for loans
from the social fund for cookers, were told that they could buy
sandwiches; "these were families with children who were on
the child protection register for failure to thrive". (Community
Care, August 24, 2000, p.12).
4.2 It also, incidentally, has to be judged
in terms of the costs of managing the fund. There is ample evidence
that social fund staff broadly dislike the stress and tension
generated by a scheme which is predicated largely on refusing
help. Despite the persistent defence of the fund by Governments,
the management of the fund has in reality presented enormous financial
and administrative problems for the DSS and for the relevant Minister.
Formal accounts have been sent back twice by the Auditor General
amidst accusations of mismanagement, and other sets of accounts
qualified; reported costs of administering the fund have sometimes
exceeded 50 per cent of actual expenditure. In 1998-99 the total
cost of administering the fund was £215 million, ie about
35 per cent of gross expenditure, but considerably in excess of
net expenditure that year of £184 million. Much administrative
and managerial time has been spent in coping with, initially,
an ineffective computer system, then with attempting to manage
underspends, then managing overspends on inadequate budgets, recently
in attempting to move money between offices in response to models
of predicted demand and in order to keep the fund as a whole within
national spending limits, and more recently still in administering
a complicated set of arrangements for calculating local eligibility
from a complex set of criteria. These issues have continually
led to a tension between consistency of policy and practice within
offices and consistency between offices and have fed into the
image of the fund as a lottery. The process of managing reviews
and complaints has itself also become extraordinarily complex
and resource-consuming and public resources have also been committed
to a series of expensive judicial reviews.
5. CONCLUSION
5.1 The existence of one-off payments schemes
is itself a formal—though tacit—acknowledgement that
social assistance benefit levels are inadequate for even the most
modest day-to-day living. The evidence summarised above and reported
in greater detail in the accompanying report suggests that Government
has only dealt with one of the recurring problems of one-off payments
scheme—that of containing expenditure—but that the
cost of doing so has been met overwhelmingly by the poorest people
in our society. The costs of removing the one-off payments scheme
altogether—by providing social assistance recipients with
a weekly income which is adequate to live on—has however
been beyond the political will of all Governments since the first
additional payments scheme was introduced in 1934.
5.2 The best hope for reform at present
is probably to re-establish a scheme based primarily on grants.
My original detailed proposals for reform in 1992 were costed
at about £675 million. Allowing for some modest inflation
in expenditure since that date, the present gross cost of a scheme
based on my proposals would be of the order of £800 million,
or less than 1 per cent of the current social security budget.
This should be set against, at least, net expenditure last year
of £184 million and the possibility of additional savings
in administrative, appeals and computing expenditures. Overall,
then, a reformed scheme might "cost" not much more than
one half of one per cent of existing social security expenditure;
the "savings" would be a political recognition that
the present Government was indeed committed to the reduction of
poverty and elimination of social exclusion. Any Government committed
to the abolition of poverty may care to recall the words of a
less-politically committed organisation:
"We make no apology for repeating
our firm conviction that the poorest and most vulnerable people
in our society should be protected, whatever sacrifices have to
be made by the rest of the community".[11]
The overwhelming conclusion of a huge range
of rigorous research evidence is that the social fund exacerbates
rather than ameliorates the position of the poorest in society.
The Government is, at present, alone in denying this.
REFERENCES
Becker, S and Silburn, R, (1990), The New Poor
Clients, Final report of the BRU on the social fund, Benefits
Research Unit, Nottingham.
Children's Society, (1996), Out of pocket, Children's
Society, London.
Cohen, R, Coxall, J, Craig, G. and Sadiq-Sangster,
A, (1992), Hardship Britain, Child Poverty Action Group, London.
Craig, G, (1992), Replacing the social fund:
a structure for reform, Joseph Rowntree Foundation/Social Policy
Research Unit, York.
Huby, M and Dix, G, (1992), Evaluating the social
fund, HMSO, London.
Social Security Advisory Committee, (1992),
The social fund: a new structure, HMSO, London.
Social Security Consortium, (1989), Your flexible
friend?, SSC, London (ed. G Craig).
Social Security Research Consortium, (1991),
Cash limited: limited cash, SSRC, Lancaster.
17 January 2001
7 Robin Cook, Shadow Health and Social Security Spokesperson,
December 1987: "A New Assault on Poor". Back
8
Paul Flynn, Shadow Social Security Spokesperson, September 1990. Back
9
Peter Lilley, Secretary of State for Social Security, July 1993. Back
10
Harriet Harman, Secretary of State for Social Security, July 1997. Back
11
Social Security Advisory Committee, Second Report, 1994, para.
1.5. Back
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