Select Committee on Public Accounts Twelfth Report


3  Whether the Social Fund treats people consistently

17. The Social Fund is designed to help those in greatest need. The annual budget for discretionary awards is limited, so that the Department must make judgements about and priorities between individual cases. The Committee was concerned applicants may suffer if the Department did not allocate the Fund budget accurately. The Department explained that this should not happen for loans as the budget is managed on a national basis. For Community Care Grants, money is allocated to districts, taking account of forecast demand and levels of unmet need in the previous year. Since districts only pay out for high priority cases for these grants, the Department said it was hard to see from whom it could take the money to reallocate.[34] For Community Care Grants, where a budget is made available to districts and they are then required to prioritise, it is possible that two people in identical situations in different parts of the country can be treated differently, although the Department doubted that two similar cases would in practice be treated completely differently.[35]

18. There are large variations between districts in the percentages of decisions that result in a payment. For example, for Crisis Loans, the payment rate varied from 48-94% of applications across the districts.[36] There are also large variations in the average amounts districts pay for the different awards. For Funeral Payments, for example, the most generous district on average pays over twice as much (£1,405) as the least generous district (£694). This suggests that decision-making for some awards can be quite arbitrary.[37]

19. The Department explained that the extent and reasons for geographical variations in the outcome of applications is different for different types of award. For Budgeting Loans, any variations were likely to be solely because of different demographic profiles, and for Community Care Grants variations were related to the different needs of people in different communities. Decisions were made within locally set and administered cash-limited budgets, and so some variation was inevitable. For funeral payments, the Department noted that there were different burial charges around the country. The difference in costs were substantial (for example, £443 in Powys and £1,960 in Wood Green) and explained much of the variation. In addition, the deceased person's assets which are available to pay the funeral bill are deducted. In more affluent areas, it is more likely there will be assets. Nevertheless, there was some inconsistency in decision-making and the Department agreed it needed to work on improvements.[38]

20. Social Fund debt arises when Budgeting Loans and Crisis Loans are awarded. In 2003-04, some £569 million was paid out and £529 million recovered. If a customer receives benefits, Fund debt is recovered automatically through benefit deductions, and 98% of all recoveries are made this way. Fund loans are recovered one at a time and the Department sets a limit on multiple loans of £1,000 of total indebtedness. More than 40% of those with Fund debt have more than one loan, and 1.5% have more than ten.[39] For benefit claimants the Department planned to reduce the ordinary maximum repayment rate from 15% to 12% of weekly benefit entitlement.

21. With many people moving address regularly, the Department was unable to monitor outstanding debt. The Department explained that its system flagged up outstanding debt for people returning to benefit, although it accepted that the information was not always acted upon.[40] It also runs checks of all outstanding Budgeting Loans against all new benefit claims in order to pick up those who return to benefit. By July 2004, only just over half of districts had used the new MIDAS system to identify returning claimants with outstanding debt.[41] Regular use was part of the new standard operating model being trialled.

22. Currently repayment methods make it difficult for some customers not on benefit to repay their debts. Two-thirds of districts accept repayment by cash or cheque only, because the direct debit facility had been suspended pending the transfer of off-benefit repayment to the central Debt Management team. Customers did not always have information on their debt position despite recommendations to that effect by the Social Security Committee in 2000-01.[42] Over half of Budgeting Loan refusals in 2003-04 were due to existing Fund debt, suggesting customers did know how much credit they could expect to receive. The Department said that they had no plans to provide information on debt level routinely to individuals because it had to be calculated manually, although people could request it.[43]

23. The Department collect money from benefit claimants automatically via deductions, but not always from those who have returned to work. It was harder and more costly to do off-benefit recovery, which was why responsibility had been transferred to their Debt Management team. The off-benefit debt balance has risen from £90 million in 1999 to £181 million in 2004, and many districts advised the National Audit Office that lack of resources was responsible for their failure to pursue this debt.[44] Other barriers include limited repayment methods, an inability to recover debt from tax credits, and difficulties in retrieving papers. In deciding whether to pursue debts, including through the small claims courts, the Department considers value for money as well as the importance of maintaining the overall integrity of the scheme. The cost of any legal action needed varies between an average of £50 for a full warrant, £60 for an attachment of earnings and £23 for a summons.[45]


34   Qq 18, 32-37 Back

35   C&AG's Report, 2.14; Qq 17-19 Back

36   C&AG's Report, Figure 12 Back

37   ibid, Figure 13; Qq 5-8 Back

38   Qq 5-8, Ev 13-14 Back

39   C&AG's Report, para 5.4; Ev 12 Back

40   Q 39 Back

41   C&AG's Report, para 5.14; Qq 96-98 Back

42   3rd Report from the Social Security Committee, The Social Fund, (HC 232, Session 2000-01) Back

43   C&AG's Report, paras 2.21-2.22; Q 60 Back

44   C&AG's Report, paras 5.11-5.12 Back

45   Qq 54-59 Back


 
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