Select Committee on Social Security Appendices to the Minutes of Evidence


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 Loans386,000 51%
Mortgages and Housing costs106,000 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%
Total752,000*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 FUNDIN 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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