Select Committee on Social Security Minutes of Evidence

Memorandum submitted by the Social Fund Commissioner, Independent Review Service (SF 24)


  1.  The Independent Review Service for the Social Fund (IRS) provides the independent grievance process, by means of a review, for applicants who are dissatisfied with the decision made at the Benefits Agency on their applications to the discretionary part of the Social Fund.

  2.  There are three types of payment the citizen can receive from the discretionary Social Fund—community care grant (non-repayable), budgeting loan or crisis loan (repayable). The Social Fund is a scheme of one-off payments intended to meet the needs of the poorest in society. To be eligible for a grant or budgeting loan the applicant must be receiving Income Support. The crisis loan provides a safety net and receipt of Income Support or any other benefit is not a criteria. The Social Fund has been in existence since 1988. The scheme was revised from April 1999 following the first major review since its inception. The revisions were aimed primarily at simplifying the budgeting loan strand. In our experience their effect has been wider. The IRS, as a single national body, is uniquely placed to monitor and identify the national picture on the wider impacts of the changes to the Social Fund.

  3.  The Secretary of State for Social Security, under the statutory powers conferred on him, appoints the Social Fund Commissioner who is the head of the IRS. The Commissioner's duties are set out in section 37 of the Social Security Act 1998 and include:

    —  Appointing Social Fund Inspectors, who conduct the reviews, and other staff.

    —  Monitoring the standards of Inspectors' decisions.

    —  Giving advice to improve the standards of Inspectors' decisions.

    —  Arranging training for Inspectors.

    —  Reporting annually in writing to the Secretary of State on the standards of Inspectors' decisions.

  4.  The review is paper based. Inspectors conduct a two-stage review of discretionary social fund decisions, which have been reviewed at the Benefits Agency. The first stage of the Inspector's review is a procedural examination, akin to that undertaken on judicial review, and the second an examination of the merits of the case. This also permits consideration of new evidence and changes in circumstances. Inspectors conduct their reviews on the basis that the Social Fund, and crisis loans in particular, provides a safety net for those with urgent needs who are without the resources to meet them. On review the Inspector has the power to make any decision the primary decision maker could have made, confirm the decision or refer the matter back to the Agency for a fresh decision. During 1999/2000 Inspectors dealt with 30,347 cases of which 27,086 related to applications made following the revisions to the scheme in April 1999. The table below shows the breakdown of cases dealt with under the revised scheme, by type of application.

Community Care Grants Budgeting LoansCrisis Loans
1999-200014,0984,999 7,989
April to Dec 200012,983 3,1975,783

  5.  The results of Inspectors' reviews vary depending on the type of case being reviewed. I have set out below the results of Inspectors' reviews for last year and this year to December by type of application.

Results of
Community Care Grants


Budgeting Loans


Crisis Loans


1999-200065%34% 1%91.6%8.6% 0.1%86.2%13.4% 0.4%

April to
Dec 2000










  6.  The turnaround time for Inspectors' reviews is quick. For example, this year where no additional information was needed, Inspectors cleared 99 per cent of cases within 12 days and all of the cases within 15 days. For urgent cases, such as those for living expenses, Inspectors cleared all of them within 24 hours.

  7.  Inspectors' decisions are binding on the individual case and provide a source of feedback to the individual decision maker. Individual decisions do not create a precedent but it is arguable that the Inspectors' consistent application of the law does create precedent. In the course of its work the IRS collects a wealth of information about how the Social Fund works in practice; what works well and what does not; the causes of dissatisfaction for applicants and geographical and national trends and issues.

  8.  There is neither an express duty for the IRS to provide feedback on these wider issues nor for the Department or Agency to take account of such feedback. However, it is a valuable source of information that can and does feed into the drafting of legislation, directions and guidance and into the quality processes within the Agency. The IRS has had structures in place for several years to feedback information to the Department and Benefits Agency at various levels. Through a series of regular reports and meetings the IRS provides information and comment to the Department on matters concerning policy and legislation (including directions and guidance), and to the Agency on a wide range of operational issues at Chief Executive, Directorate, Area and District levels. In addition the IRS provides practical help to practitioners through workshops, the IRS Journal and Digest of Decisions and comment on the Agency's Social Fund training material.

  9.  As part of our delivery of service it is essential to develop good working relations with a range of organisations; DSS, Benefits Agency, organisations that advise applicants and any others with an interest in the Fund and its grievance process.

  10.  The IRS budget spend for last year was £3.3 million. For this the IRS handles around 30,000 cases and provides a remedy for the applicant that is proportionate in the context of what is at stake, quick and inexpensive, as well as providing feedback to the Department and sharing its expertise with practitioners.

  11.  The IRS recognises that it sees only about 1 per cent of all applications to the discretionary Fund, although it sees a greater proportion of community care grant applications at around 2 per cent last year and 3 per cent this year. Inspectors are dealing only with cases where there is dissatisfaction. Nevertheless, the experience of those who are dissatisfied and the expertise of Inspectors provide a valid insight into the areas in which the Fund might perform better.


  12.  I was appointed Social Fund Commissioner from 1 December 2000 and am still familiarising myself with the Social Fund and the IRS. My predecessor rightly took an active role in identifying and reporting to the Department and Agency on a wide range of issues relating to the Fund and its operation. I have set out below a summary of the major issues he identified during the past three years. All of these have been raised with the Department and the Benefits Agency at various levels.


Budgeting Loans

  13.  Prior to April 1999 the budgeting loan scheme was based on need and took account of all the individual circumstances of the applicant, including the nature, extent and urgency of the need. In contrast the revised scheme is based on a limited number of factors and makes no assessment of need or its urgency. In essence it provides a formulaic approach to deciding the amount, if any, of the award and decisions at the Agency are automated through its computer system. The primary legislation, however, still sets budgeting loans in a discretionary framework, albeit the scope for discretion has been greatly reduced. The automation of decision making at the Agency does not allow for hardly any discretion to be exercised.

  14.  All eligible applicants have access to a maximum amount of budgeting loan. The maximum amount varies for different circumstances and from one district office to another. Within each district office the maximum amount will be the same for people with the same circumstances. Whether an award is made depends on how much existing budgeting loan debt the applicant has. Those that have no existing budgeting loan debt can have access to the maximum amount. However, where there is existing debt, the effect of the law is that it is taken into account twice. An example may help to illustrate the effect.

Maximum amount £500 Budgeting loan debt 2 (£400 x 2)-£800 Amount of award = NIL

  An applicant in the above situation would have no further access to a budgeting loan until his debt reduced by £165.

  15.  The way in which the budgeting loan debt is treated rules out payment for a significant proportion of applicants—362,000 (22 per cent of all applications) in the first year of the change. There is no information available about the proportions of those who have an urgent need. But clearly as urgency of need is not a consideration some urgent needs will be unmet. There is clear evidence, supported by information from our network of adviser organisations that some applicants, disappointed by the budgeting loan decision are seeking to meet their needs in other ways. Some by way of a crisis loan or community care grant and others by way of catalogues or moneylenders.

Crisis Loans

  16.  The Secretary of State amended the crisis loan qualification direction as part of the changes made from April 1999. The aim of this amendment was described by the Minister during the Committee debates on the Social Security Bill as "requiring appropriate officers [decision makers] to have regard to the refusal of a budgeting loan as part of the considerative process for crisis loans" (Hansard 19/11/97). The intention was clearly that crisis loans will pick up some of the needs that the budgeting loan scheme cannot meet. The Secretary of State commented in his 1999/2000 annual report (paragraph 7.15) "it is right that crisis loans should provide a safety net for those applicants refused a budgeting loan." However, the amendment to the direction makes no difference at all to the way crisis loans operate as a safety net.

  17.  Given the formulaic approach to budgeting loans some of those who are refused a budgeting loan are likely to have urgent needs which if not met, may cause real hardship. These are the types of needs that might have been met under the former scheme but for which, on the face of it, there is no provision under the revised crisis loan criteria.

Community Care Grants

  18.  Inspectors' casework suggests that the budget often plays a dominant role in decision making at the Agency. The scheme is cash limited and so it right that the budget is a key element of decision making. However, it is clear from the construction of the law and case law provided in ex parte Taylor that the budget is irrelevant in determining matters such as qualification and priority. The budget only becomes a relevant consideration after these matters have been determined, at which stage the decision to be made is whether, in the light of the state of the budget, the need can be met. Inspectors see cases where the budget has influenced the decision on qualification or priority. In some cases this is quite clear from the decision maker's reasoning. In others it is less obvious but can be inferred from the poor quality of reasoning against the weight of evidence. Such decisions usually take one of the following forms:

    —  Needs which, on a proper application of the law, are high priorities are given an artificially lower priority and refused.

    —  Applications are refused an award because they do not meet the grant qualifying conditions, when the evidence shows clearly that the conditions are met.

    —  Crisis loans being awarded on grant applications when clearly a grant should have been awarded.

  19.  The cases that come to the IRS contain information about the level of priority a district budget can meet. There are 16 districts that tell us their grants budget can only meet the most compelling of the high priorities (or similar). Most other districts tell us they can meet all high priorities. But our evidence leads us to conclude that not all of these districts can meet all high priority needs.


Application forms

  20.  A recurring issue for many years has been accessibility to Social Fund application forms, particularly those for crisis loans. Applicants and their representatives regularly tell the IRS of instances of the Agency refusing to give applicants application forms, particularly crisis loan forms. Often the applicant is told that he will not be eligible for a loan so is refused a form. Such verbal decisions are a real cause for concern. They are often taken on scant information by staff who are not Social Fund decision makers. They deny the applicant's right to apply to the Fund and receive a written decision, against which he has the right of review. The Agency tells us that no-one is denied a form but may be given advice by counter staff as to the likelihood of success to avoid raising false hopes. We are not convinced that the applicant always receives the best advice.

Reasons for decision

  21.  The quality of explanation given for decisions is a long-standing issue. Decisions are issued centrally from the Agency's computer system and do not explain the reasons for the decision in a way that enables the applicant to see how the decision has been reached. If the reasons for the decision are unclear then the applicant's ability to make an informed decision about whether to pursue a review is impaired. We are aware that the Agency is currently reviewing the contents of all of its computer-produced letters with a view to improving clarity and quality of explanation. In response to the Commissioner's views on this topic some offices send the applicant a copy of their decision, which does record the reasoning.

Applications for independent review

  22.  Applicants who wish to seek an independent review are required to make their application to the Agency, who forwards it to the IRS. The IRS has expressed concern that this may deter some applicants from seeking a review by an Inspector. The applicant has to apply to the same Agency, who made the original decision and carried out a review of that decision, for the second tier of review. Some applicants may perceive that they are simply repeating the same process or, that the same organisation will carry out the review or, that the IRS is simply another part of the Agency. The Agency is not required to make a submission to the Inspector, as it is, for example, in the case of an appeal to the Social Security Appeal Tribunal, and so there is no compelling reason for applications for Inspector's review to be made to the Agency. If review applications were made direct to the IRS we believe there would be greater confidence that the second review is independent. We understand that there are no plans at present to amend the regulations which prescribe the way in which applications for review are to be made.

Simplicity of the process

  23.  The changes to the scheme were intended to provide a simpler process, simpler forms and ensure that the applicant only has to complete one type of application form. The IRS recently began some applicant research to establish the effects of the changes on the make up and volume of IRS work. In particular the IRS had experienced a substantial increase in its crisis loan review activity, most of which was in relation to requests for basic household items. Although in its early stages the indications are that some applicants are having to complete more than one form for the same need. Of the 207 applicants who took part in our research up to October 2000 over half had completed two forms and a quarter had completed three forms. Of those who completed more than one form, 78% had done so because the earlier application(s) had resulted in a refusal or an award that was insufficient to meet the need. These findings are also reflected in the feedback we get from our network of adviser organisations. For such applicants the process can be lengthy at a time when they may be without essential needs.


  24.  In the short time since my appointment I have formed some initial impressions and identified some issues that concern me, some of which were also concerns of my predecessor. I intend to examine these more closely in the coming months. The issues may be of interest to the Committee who may wish to investigate them further.


  25.  The absence of consideration of urgency of need and discretion in the budgeting loan scheme raises questions for me about how effective the scheme is in meeting the needs of those in greatest need. The double counting of the applicant's budgeting loan debt rules out payment for a sizeable proportion of applicants, some of whom are bound to have urgent needs. Added to this the crisis loan scheme does not appear to have picked up many of the needs that cannot be met by way of a budgeting loan. The Secretary of State's annual reports on the Social Fund show that spending on crisis loans for items was down slightly in the first year of the new scheme as was the average award size.


  26.  The rate at which applicants are asked to repay loans seems to me to be rather high, particularly since most are receiving Income Support. I understand that repayment rates are set at five per cent to 15 per cent of income with many being at the highest rate. This represents a significant reduction in what is already a low income. The IRS frequently hears complaints form applicant advisers about the rate at which loans are recovered and report a reluctance on the part of the Agency to reconsider the terms of repayment. These terms are not within the Inspector's jurisdiction and so the applicant's only recourse to independent scrutiny of such decisions is to the High Court on judicial review. This does not appear to be a proportionate remedy for grievances of this nature.


  27.  The funding level for grants has changed very little in the last six or seven years. In 1994-95 the grants budget was £97 million and this year is £100 million. The loans budget was £255 milion and this year is £493.8 million. The ratio of grants to loans budgets over this period has changed from about a third to about one fifth. This, together with Inspectors' experience of the way decisions are made, raises real doubts about whether, in practice, all high priorities are being met and whether the distribution of the grants budget supports consistency in decision making across the country.


  28.  It seems to me that the proportion of cases coming for independent review is very small. I do not understand as yet why this should be so. But it leads me to question how aware applicants are of their rights and whether access to the review is as simple as it might be.

  29.  I was surprised to discover the proportion of cases in which Inspectors overturn the Agency's decision (48 per cent across community care grants and crisis loans), particularly as all of the cases Inspectors review have already been reviewed at the Agency. I appreciate that the ability to take account of changes in circumstances is likely to account for a higher rate than might be expected in a jurisdiction that cannot but even taking account of this it still seems high. The high rate of substitution may be indicative of problems in the operation of the scheme such as inadequate training or experience, protecting budgets or simply that important urgent needs are unmet or indeed a combination of such factors.


  30.  The impact of the changes to simplify budgeting loans has been wider than perhaps Parliament envisaged. All the evidence points towards a gap in provision of the most urgent needs, with some applicants unable to get any help from the scheme. I intend to use the IRS database of information and IRS experience and expertise to give advice to the Department and Benefits Agency about the Social Fund and its operation. From its unique position of seeing the grievances and circumstances of applicants across the country, I believe the IRS can play a valuable role in contributing to the Government's wider objectives on poverty. I plan to commission research on some of the issues flagged up from IRS casework.

  31.  There have been few independent studies of the Social Fund in recent times and I welcome the Committees decision to examine the Social Fund. I should be happy to give oral evidence to the Committee to substantiate the issues covered in this submission or to offer evidence on any other points the Committee may want to address.

Sir Richard Tilt

18 January 2001

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