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The Social Fund provides an important safety net for some of the most vulnerable people in society and is designed to help those on low incomes when they find it hard to pay for important items or cope with emergencies from regular income. It was also introduced to enable exceptional, one-off or emergency payments to be made without affecting the efficiency of the main Income Support scheme and replaced Supplementary Benefit, which was widely seen as too complex and rigid. There are seven types of Social Fund award, which address different needs, of which the Committee considered five: Budgeting Loans, Crisis Loans, Community Care Grants, Funeral Payments and Sure Start Maternity Grants. The Committee did not look at those awards paid automatically - Winter Fuel Payments and Cold Weather Payments.
For all but Crisis Loans, applicants must be in receipt of certain benefits or tax credits to be eligible. All loans are interest-free and are generally re-paid by deductions from benefit. In 2003-04, almost 3 million payments were made, amounting to £854 million of gross expenditure. More than half was in Budgeting Loans. Around 93% of gross loans expenditure was funded by recoveries of £530 million (Figure 1). Figure 1 : Social Fund awards and expenditure, 2003-04
DISCRETIONARY AWARDS
REGULATED AWARDS
Budgeting Loans
Crisis
Loans
Community Care Grants
Funeral Payments
Sure Start Maternity Grants
Total
Average payment (£)
384
77
364
1,019
506
-
Number of payments (000)
1,250
1,059
256
46
238
2,849
Gross expenditure (£m)
484
85
118
47
120
854
Recoveries (£m)
462
67
N/A
1
N/A
530
Net expenditure (£m)
22
18
118
46
120
324
Note: Information available for the number of discretionary awards does not include those made after review, but the gross and net expenditure figures do include such payments. Average payment for discretionary awards is calculated by dividing expenditure on initial decision awards by the number of initial awards. Unlike the other four types of award, Sure Start Maternity Grants are paid at a flat rate (£500 per baby). The average is greater than the flat rate because of multiple births. Funeral Payments are not loans, but they are potentially recoverable from the estate of the deceased.
Source: Department for Work and Pensions
Although it has existed for 17 years, awareness of the Fund is low. The complex nature of some eligibility rules runs counter to the Fund's original objective to provide a flexible and quick way of making one-off or emergency payments to help the most vulnerable in society. Only about half of people on low incomes surveyed by the National Audit Office were aware that jobcentres and benefit offices paid grants and loans for emergency or important items. Different customer groups use the Fund to differing degrees, with pensioners less likely than others. The Department has been cautious in advertising the Fund, but it is revising its literature and increasing staff training to raise awareness.
Nearly 3,500 staff administer the Fund at a cost of approximately £70 million. Application volumes have risen by 4% since 2001-02, whilst staff numbers have fallen by 8%. On the basis of the information available (which has significant limitations), average cost per application in 2003-04 was £15 for Budgeting Loans, £16 for Crisis Loans and £24 for grants. There are large local variations in unit costs, partly due to different approaches to claim handling such as the greater use of phone contact in some districts. To make efficiencies, the Department is considering the introduction of a standard operating model with more defined staff roles, better training and clearer use of information technology. It is being piloted in Wales and will be reviewed in April 2005, although there is no date yet for full roll-out.
Other practices which appear to be leading to reduced costs are the use of specialist teams and greater use of telephone contact. Factors driving costs up included the poor quality of applications received from some jobcentres by those processing the awards and problems with the computer system, which slows down the processing of some awards in all districts. The timescale for implementing the required upgrades has slipped from April to September 2006.
The Committee has emphasised previously the importance of getting decisions on benefits right first time but for Funeral Payments and Crisis Loans, only 52% of initial decisions on applications are correct. The Department said not all these errors affected the outcome for the customer, but the reasons included difficulties in retrieving customers' papers, so that all the evidence was not available for making a decision. The lack of evidence is in itself a matter for concern and has led to the qualification of the Social Fund accounts for 2003-04. In addition, nearly 40% of Crisis Loans are payments made where customers are awaiting receipt of another benefit. Assisting customers until their benefit starts is a legitimate use of the Fund, but delays in getting this process under way mean that some of these 'alignment' payments are a poor use of the Fund.
A high proportion of decisions is overturned when looked at again by the Department or the Independent Review Service (which carries out independent review for dissatisfied customers of the Social Fund), often because customers provide new evidence. There are also some problems with clearance times for applications for certain awards, particularly for Crisis Loans, where some districts took an average of 3.5 days. The Department is now revising its targets.
From a customer perspective, Jobcentre Plus offices are a big improvement on their predecessors. However, progress made in improving customer service could be lost with the large number of staff reductions proposed. The Department said it was aware of the risk but had plans to mitigate the effects. For the Social Fund, it would be centralising the processing of awards, which would help to make a critical mass of staff working on the Social Fund for training and development purposes.
The allocation of funds across districts differs between awards. The budget for loans is managed on a national basis, but for Community Care Grants, money is allocated to districts according to the level of unmet need in the previous year. It is possible that two people in identical situations in different parts of the country can be treated differently. There are, for example, large variations between districts in the percentages of decisions that result in a payment; for Crisis Loans, the range is between 48% and 94%. There are also large variations in the average amounts districts pay for the different awards. These variations suggest that decision-making for some awards can be quite arbitrary, although the Department believe they also reflect differences, for example in funeral costs, across the country.
The Department has a good record on recovering Social Fund debt. Recoveries funded over 90% of new loans in 2003-04. Most recovery is via automatic deductions from benefits. Currently, repayment methods make it hard for some customers not on benefit to repay their debts. Customers do not always have information on their debt position and the Department has no plans to provide information on debt level routinely to individuals, although people can request it. Although the Department collects money effectively from benefit claimants, recovery rates are lower for those who have returned to work because the Department does not pursue vigorously those who do not meet repayment agreements. The Department said it was more difficult and costly to make off-benefit recovery, which was why responsibility had been transferred to their specialist Debt Management team.
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