APPENDIX 26
Memorandum submitted by the National Council
for One Parent Families (SF 45)
EXECUTIVE SUMMARY
1. Today, as a result of the introduction
of the Social Fund, the total spent on grants to claimants on
Income Support (IS) is still less, in cash terms, than it was
over twenty years ago. In our submission we concentrate mainly
on the problems for one-parent families under the discretionary
part of the Social Fund.
2. This fall in resources to poor families
and in particular to lone parents has been the direct cause of
many millions of pounds of indebtedness to the state. Indeed,
the poorest and most in debt are the least likely to receive any
help from it. Eighty-four per cent of lone parents on IS are having
direct deductions taken from their benefit, a higher proportion
than any other group on that benefit including people with disabilities
and pensioners. Fifty per cent of all Social Fund recoveries from
IS claimants are being paid by lone parent claimants.
3. Differences in housing tenure, poor standard
of accommodation and homelessness are all factors that may lead
some families disproportionately to need access to additional
support from time to time. In the case of lone parents, many need
access to extra help following divorce and separation because
they may be left with joint debts (including joint debts for utilities),
re-connection fees, lump sum housing liabilities and a need for
furniture and other household items. These, along with items for
children are among the items lone parents commonly need help with
from the Social Fund.
4. Good research now tells us the shortfall
of benefits over needs, the Poverty and Social Exclusion Survey
itemises those who lack basic items recognised as essential by
the public. There is now an excellent research base to allow us
to make decisions about what is needed. Ultimately, reliance on
additional payments should be reduced through increasing benefit
rates and the introduction of the Integrated Child Credit (ICC)
if set at the right level.
In summary, the National Council for One Parent
Families (NCOPF) favours:
— schemes based on ideas around asset-based
welfare;
— the use of ICC as the trigger for
grant entitlement; or,
— the extension of entitlement to those
on Working Families Tax Credit (WFTC)/ Employment Tax Credit (ETC)
getting free prescriptions and legal services;
— the retention of a discretionary
and locally-based top-up scheme;
— for those that can better afford
it, the reform of financial institutions to provide cheap financial
and credit schemes for families on low incomes;
— the use of ICC to meet more fully
the costs of children with lump sum payments to meet intermittent
needs;
— An amnesty on existing Social Fund
debt for lone parents planning a return to the labour market and
help with the one-off costs of starting work, building on the
New Deal for Lone Parents (NDLP).
A new system of grants would:
— Be paid automatically or at regular
intervals; and/or
— Be available to meet key life events;
— Be designed to respond to key life
events which might include: pregnancy, pregnancy, childbirth,
child starting school, moving house, funerals, and other household
items essential for child safety or wellbeing including beds,
bedding, children's clothes, house repairs for home owners and
essential household equipment;
— Include regular or annual cold weather
payments for lone parents with children under 5 and help with
re-connection fees;
— Include a system of interest-free
loans for those on higher incomes or for those falling outside
the new grants scheme;
— Retain a local emergency or crisis
fund to deal with needs arising from emergencies such as fire
and flood and events such as loss of money;
— Include NDLP grants connected with
return to work to meet the immediate costs of starting work, including:
clothes, uniforms, travel, childcare deposits and tools, equipment
and safety gear.
1. INTRODUCTION
The National Council for One Parent Families
campaigns to advance the interests of one parent families and
to campaign against the injustice and inequality they so often
face. Since 1918, we have been a national centre of expertise
on lone parent issues and we promote policies to end poverty and
social exclusion. Today, one-parent families are the group at
greatest risk of poverty in the UK—three in five live on
incomes below half the average after housing costs.[37]
36 Despite their best efforts to protect their children, lone
parents often find themselves at a disadvantage due to the low
income, poor housing and social exclusion that characterises this
poverty.
2. THE ORIGINS
OF THE
SOCIAL FUND
The Social Fund was introduced in 1988 as part
of the "Fowler Reviews" that resulted in the 1986 Social
Security Act. The policy intention was to reduce spending on exceptional
payments for Income Support (IS) claimants. The Social Fund replaced
a series of "demand-led", regulation-based, single payments,
aimed at meeting specific needs. By contrast, the Social Fund
would be cash limited, discretionary, two-thirds of payments would
be repayable and regulations would be replaced by a series of
Directions and Guidance from the Secretary of State. Legal challenges
failed to find that the "regulation-making" powers taken
by the Secretary of State were ultra vires. Maternity and Funeral
payments would remain non-discretionary and these were introduced
separately as a regulatory "Part 1" of the Social Fund
with no cash limit.
2.1 Spending on single payment grants had
increased from £65 million in 1980-81 to £335 million
in 1985-86[38]—a
period of rapid growth in poverty and unemployment. The budget
was restricted and by 1987-88 had fallen to £197 million.
The gross budget for the first year of the discretionary "Part
II" of the Social Fund was set at £203 million—close
to the final year of operation of the single payment scheme. However,
only three in ten payments (£60 million) would be for grants,
the rest would be loans. In other words, the start of the Social
Fund coincided with a 70% fall in the amount of cash made available
to the poorest claimants. The rest would be re-cycled into state
funds by deductions from benefit. Since then, the gross budget
has usually been increased by inflation and for 2000/01 it stands
at £596 million for the year, of which only £100 million
is intended for grants.[39]
Even if you add in the roughly £56 million spent on the
non-discretionary Social Fund last year, spending on grant payments
to claimants is still lower, in cash terms, than it was over twenty
years ago.
2.2 The consequences of this fall in resources
to poor families and in particular to lone parents has been the
direct cause of many millions of pounds of indebtedness to the
state. In another of the peculiar features of the Social Fund
scheme, many are refused help because they simply cannot afford
to pay back the loan.[40]
This aspect of the law, the consideration of a claimant's ability
to repay a loan, is one feature that starkly reveals the ineffectiveness
of the Social Fund to help those most in need. Under this rule,
the poorest and most in debt are the least likely to receive any
help. In this submission we concentrate mainly on problems surrounding
the discretionary Social Fund.
3. THE SOCIAL
FUND AND
ONE-PARENT
FAMILY HARDSHIP
The 894,000 lone parents reliant on Income Support
(IS) are particularly vulnerable to hardship and debt. This can
be illustrated by showing that 84 per cent of lone parents on
IS are having direct deductions taken from their benefit, a higher
proportion than any other group on that benefit including people
with disabilities and pensioners.[41]
And this proportion is increasing year on year as more lone parents
move into paid work. Lone parents make up 45 per cent of all those
on IS having a deduction made at all, but only 23 per cent of
the IS case load. In 51per cent of cases the direct deduction
made from a lone parent's benefit is a Social Fund loan recovery
and 50 per cent of all Social Fund recoveries from IS claimants
are being paid by lone parent claimants. The average amount deducted
from benefit for a Social Fund debt is also rising and currently
stands at £9.75 a week. Undeniably, the Social Fund is making
a considerable contribution to the debt and hardship experienced
by lone parents, pushing their incomes well below the minimum
required under social security law. Deductions from IS are as
follows:
| Type of deduction from lone parents IS
| Number of lone parents
affected
| % of total deductions |
| Social Fund Loans | 386,000
| 51% |
| Mortgages and Housing costs | 106,000
| 14% |
| Fuel & Water (water 9% on its own) |
96,000 | 13% |
| Council Tax and Community Charge debts |
94,000 | 13% |
| Fines and Overpayments | 71,000
| 9% |
| Total | 752,000* | 100%
|
| | |
Source: Income Support Quarterly Statistical Enquiry, November
2000, Table 12.3.
(* Does not sum due to rounding)
3.1 These represent priority debts where payments can
be taken direct from benefit to retain key services. There are
likely to be others, such as catalogues, loans, debts from a marriage,
as well as token/cash meter payments that can result in a de facto
disconnection. We know from research that lone parents are 14
times more likely than other parents to go without themselves
in order to provide for their children,[42]
so extravagance is certainly not the explanation. It is more
likely to be related to the fact that although a parent may deny
him or herself it is impossible to deny essentials for children.
3.2 The reason for such indebtedness is clearly related
to need. The key point is that we have clear evidence here of
the inadequacy of benefit levels, but also evidence that points
to yet another formidable barrier to taking paid work—that
of indebtedness. We know that if a lone parent is exposed to severe
hardship, in the long term, he or she is less likely to have a
job even four years later.[43]
Thus, a hardship barrier to work is established. The practical
consequences of poverty and social exclusion can be seen to have
far reaching implications for families. One simple consequence
is that even the increased income from a job may not be enough
to cover both the basic household expenditure and the debt recoveries
that will fall due as soon as benefit deductions stop.
3.3 We hope that support for children will be dealt with
through the new mechanism of the Integrated Child Credit. This
provides an opportunity to target additional help on low income
families—which, to be successful, must be based on clear
adequacy or minimum income standards. Current benefit levels are
clearly insufficient to prevent families from experiencing poverty
and hardship despite the substantial improvements made. The Social
Fund is one obvious contributor to this situation.
4. THE SOCIAL
FUND AND
HOUSING NEED
One-parent households most commonly experience downward housing
mobility following divorce or separation. One national study found
that 58% moved on becoming a lone parent, mostly into social housing.[44]
Also, 30% have experienced homelessness in past 10 years, compared
to only 3% of couple-families.[45]
Contrary to the received impression that many lone mothers retain
the family home, in fact, only 34% are owner-occupiers compared
to 79% of other families.[46]
Two-thirds live in rented accommodation and most of these (four
out of five) live in social housing of some kind.
4.1 Lone parents also find themselves in a poorer standard
of accommodation. Twelve per cent have no central heating compared
to 7% of other families and, only 39% live in a detached or semi-detached
house compared to 65% of other families. Most (61%) live in a
terraced house, flat or maisonette compared to only 34% of other
families. The living space requirements of a one parent family
are essentially no different to those of a couple family. Children
still need a room separate from their parents and space to grow
and play.
4.2 In its Housing Green Paper, the Government has already
recognised the problem that poor housing exists across all tenures
and that "Vulnerable and disadvantaged households such as
the unemployed, lone parents and some ethnic minority groups are
more likely to live in poor housing. They are also more likely
to live in run-down areas where there are concentrations of housing
that is in substantial disrepair, empty or derelict."[47]
We agree with the Green Paper analysis that problems can arise
from policies that concentrate some of the most disadvantaged
people in the poorest housing: "There are strong associations
between poor housing and poverty, deprivation, crime, educational
under-achievement and ill-health. People are discriminated against
in looking for work or using services because of where they live.
Whole neighbourhoods suffer from neglect."[48]
We applauded the Government for recognising this reality.
4.3 Differences in housing tenure, poor standard of accommodation
and homelessness are all factors that may lead some families disproportionately
to need access to additional support from time to time. In the
case of lone parents, many need access to extra help following
divorce and separation because they may be left with joint debts
(including joint debts for utilities), re-connection fees, lump
sum housing liabilities and a need for furniture and other household
items. These, along with items for children are among the items
lone parents commonly need help with from the Social Fund.
5. THE SOCIAL
FUND—IN
PRACTICE
In practice many applicants to the Social Fund who apply
for a grant may instead be offered a loan. Although the claiming
process has been altered to make the forms for each type of payment
separate, claimants may not realise that they may fit the criteria
for a grant. In a recent focus group with young lone parents held
as part of our Lone Parent Information Project, many of the young
mothers reported Social Fund deductions as a problem. On closer
questioning it was clear that many had received loans after leaving
a hostel to live in independent housing—clear circumstances
that would warrant help through a grant not a loan. No alternative
had apparently been offered to these young mothers. Instead, they
were starting out in debt.
5.1 The amount you are allowed to borrow is determined
by your ability to repay the amount in 78 weeks (although this
can be extended in certain circumstances). The level of weekly
deduction is, in turn, determined by the level of pre-existing
debt. Ultimately, the amount offered relates only to your ability
to repay and not to the actual items you need. Thus, the need
may still exist even though you are in debt to repay the loan.
This can lead to a situation where a claimant soon becomes so
in debt to the Social Fund that they have no-where to turn to
for support but outside of the social security system. Such sources
of help may carry the additional cost of extortionate interest
rates, or worse. Although certainly not recommended as a course
of action, some claimants might find that the civil courts would
ask for lower weekly repayments if they default on a debt than
the state does through the Social Fund. Others may find that although
they meet the criteria for a payment, they are turned down as
there is insufficient money in the budget.
5.2 Social Fund payments are usually claimed for urgent
items and often in an emergency, eg, because the cooker does not
work or the children need clothes or because children are being
deprived of basic items of clothing or household equipment that
others take for granted. The Small Fortunes study from Loughborough[49]
and the recent Poverty and Social Exclusion Survey[50]
both give ample evidence of the essential household and child-related
items that many families lack due to poverty. Work from the Family
Budget Unit[51] provides
all the evidence we need to estimate the benefit shortfall that
makes it impossible for these needs to be met from benefits.
6. REFORM OF
THE SOCIAL
FUND
Despite recent benefit increases for families with children,
benefit rates currently do not meet the needs of one-parent families
on IS. Jonathon Bradshaw estimates that benefit rates are still
£5.95 a week below the most basic "low cost but adequate"
budget.[52] Therefore
it is extremely difficult for families on IS to save for one-off
or intermittent needs and there is no available income to pay
back loans. Also, it cannot be right that the poorest families
in the deepest poverty and debt are the least likely to be helped
through the Social Fund, as described above.
6.1 Good research now tells us the shortfall of benefits
over needs, the Poverty and Social Exclusion Survey itemises those
who lack basic items recognised as essential by the public. There
is now an excellent research base to allow us to make decisions
about what is needed. Ultimately, reliance on additional payments
should be reduced through increasing benefit rates and the introduction
of the Integrated Child Credit if set at the right level.
6.2 A national regulated system of exceptional payments
is needed to replace the Social Fund. This would be available
to IS claimants but also in certain circumstances to Working Families
Tax Credit recipients as maternity and funeral payments are today.
This could either be tied to the current limits on claims for
prescriptions and passported benefits or, better still, linked
to the receipt of full ICC. Grants could be paid at key life events,
pregnancy, childbirth, child starting school, moving house, funerals,
and other household items essential for child safety or wellbeing
including beds, bedding, children's clothes, house repairs for
home owners and essential household equipment. The criticism of
this approach is that it is as vulnerable to a rise in demand
as the old single payment scheme. However, if as anticipated,
the ICC lifts many more people into a situation where they are
facilitated to move into paid work, and the payments are tied
to specific life events, then there is also greater predictability
of cost than before.
6.3 Cold weather payments could also be introduced as
for pensioner claimants. There is good evidence about the extent
of fuel poverty in one-parent families and children need to be
kept safe and warm. This is a basic requirement for families.
This could be paid to lone parents with children under 5 years
and three months to coincide with the age at which participation
in the New Deal for Lone Parents is expected. The rationale here
is similar to that for other payments, namely that large winter
bills are impossible to budget for on current benefit rates and
consequently creates a disincentive to use fuel in cold weather.
The table above illustrates the extent to which paying such bills
is a problem for lone parents.
6.4 Another approach would be to pay lump sums at regular
intervals to allow claimants to meet any exceptional expenses
in addition to certain key life events. This would help with budgeting
for bills and one-off or "lumpy" items that can upset
the family budget. It goes somewhere towards providing an asset
base for claimants to allow them to plan for major items of expenditure.
It also builds on the idea of the recent proposal for a "baby
bond" given to children to save for early adulthood and possibly
further or higher education costs. Parents too could benefit from
receiving money earmarked for certain intermittent needs. It would
also provide an incentive to save. In any event, there should
not be capital rules for any of the grants or loans as this has
the effect of discouraging planning and saving.
6.5 There is also an argument for retaining some kind
of local emergency or crisis fund to deal with needs arising from
emergencies such as fire and flood and events such as loss of
money. This could be based around interest-free loans and be available
both to those on IS and WFTC or the proposed Employment Tax Credit.
Such loans would not be subject to a cash limit. In any event,
the Government should continue its efforts to encourage financial
institutions to provide accounts and products attractive to low-income
families. They might also be encouraged to fund debt advice services
for low-income families.
6.6 Finally, action needs to be taken to ensure that
lone parents are not prevented from attempting to join the labour
market as a result of poverty and debt. Ideally, all Social Fund
loans should be remitted for lone parents planning to take up
paid work. This would be a serious and radical move to right the
injustice of the Social Fund. A kind of amnesty on debt for lone
parent returners. Not only does this tackle what has become a
huge barrier to work for lone parents, but it targets the groups
that are increasingly over-represented among the lone parents
remaining on IS—namely those who have been on benefit the
longest and who are some of the deepest in poverty and debt. Into
the bargain it would create significant work incentives for these
families. There would have to be a time limit before any repeat
request was made. For example, someone taking a series of short-term
contracts would have to be prevented from taking out new debt
at regular intervals. A one year rule could prevent this.
In summary, NCOPF favours:
— schemes based on ideas around asset-based welfare;
— the use of ICC as the trigger for grant entitlement;
or,
— the extension of entitlement to those on WFTC/ETC
getting free prescriptions and legal services;
— the retention of a discretionary and locally-based
top-up scheme;
— for those that can better afford it, the reform
of financial institutions to provide cheap financial and credit
schemes for families on low incomes;
— the use of ICC to meet more fully the costs of
children with lump sum payments to meet intermittent needs;
— An amnesty on existing Social Fund debt for lone
parents planning a return to the labour market and help with the
one-off costs of starting work, building on the New Deal for Lone
Parents.
A new system of grants would:
— Be paid automatically or at regular intervals;
and/or
— Be available to meet key life events;
— Be designed to respond to key life events which
might include: pregnancy, pregnancy, childbirth, child starting
school, moving house, funerals, and other household items essential
for child safety or wellbeing including beds, bedding, children's
clothes, house repairs for home owners and essential household
equipment;
— Include regular or annual cold weather payments
for lone parents with children under 5 and help with re-connection
fees;
— Include a system of interest-free loans for those
on higher incomes or for those falling outside the new grants
scheme;
— Retain a local emergency or crisis fund to deal
with needs arising from emergencies such as fire and flood and
events such as loss of money;
— Include NDLP grants connected with return to work
to meet the immediate costs of starting work, including: clothes,
uniforms, travel, childcare deposits and tools, equipment and
safety gear.
February 2001
37
Department of Social Security (DSS) (2000) Households Below
Average Income 1994/5 - 1998/9, Leeds Corporate Document Service. Back
38
National Audit Office (1991) The Social Fund, Report by
the Comptroller & Auditor General, London: HM. Back
39
DSS (2000) Annual Report by the Secretary of State for Social
Security on the Social Fund 1999/00, Cm 4755, London: The
Stationery Office. Back
40
Social Fund Direction. Back
41
DSS (2000) Income Support Quarterly Statistical Enquiry,
November 2000, Newcastle: ASD, Table 12. Back
42
Middleton S, Ashworth K and Braithwaite I, (1997) Small Fortunes:
Spending on children, childhood poverty and parental sacrifice,
York: Joseph Rowntree Foundation. Back
43
Bryson A, Ford R and White M (1997) Making Work Pay: Lone mothers,
employments and well-being, York: J. Back
44
Bradshaw J and Millar J (1991) Lone parent families in the
UK, DSS, London: The Stationery Office. Back
45
Office of National Statistics (ONS) (1998) Social Trends 28,
London: The Stationery Office. Back
46
ONS (2000) Social Trends 28, London: The Stationery Office. Back
47
Department of the Environment, Transport and the Regions (DETR)/DSS
(2000) Quality and choice: a decent home for all - The Housing
Green Paper, London: DETR, p. Back
48
DETR/DSS (2000) Op cit, p. Back
49
Middleton S, et al (1997) Op c. Back
50
Gordon et al, Poverty and Social Exclusion in Britain,
Joseph Rowntree Foundation, 20. Back
51
Parker H (ed), Low Cost But Acceptable: a minimum income standard
for the UK: families with young children, Bristol: The Policy
Press. Back
52
Bradshaw J (2001) Child Poverty Under Labour, from Fimister
G (ed) Tackling child poverty in the UK: An End in Sight,
London: Child Poverty Action Group (CPA). Back
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