House of Commons - Localisation issues in welfare reform - Communities and Local Government Committee

Localisation issues in welfare reform - Communities and Local Government Committee Contents

2 The discretionary Social Fund

The Government's proposals

5. The Social Fund, introduced fully in 1998, has two components: payments made according to regulations (such as Sure Start Maternity Grant, Funeral Payments, Winter Fuel Payments and Cold Weather Payments) and the discretionary Social Fund, which is cash-limited and provides grants and loans. The discretionary Social Fund is currently administered through Jobcentre Plus and comprises:

Budgeting Loans (BLs): interest-free loans for people who have been on certain means-tested benefits for at least six months, intended to help with occasional items of expenditure;
Community Care Grants (CCGs): non-repayable awards for people in receipt of means-tested income replacement benefits, to help people move back to or stay in the community, to ease exceptional pressures, or for certain travel expenses. Changes in the Welfare Reform Act 2009 allowed applicants to receive goods and services rather than cash awards;
Crisis Loans (CLs); interest-free loans for people facing an unforeseen emergency or disaster, where they have no other funds and where they would otherwise face serious damage or serious risk to their health or safety. Crisis Loans are available to anyone, whether receiving benefits or not.

6. The Welfare Reform Bill would, if passed, abolish Community Care Grants and Crisis Loans for living expenses. Funding is to be made available instead to unitary and upper-tier local authorities in England to enable them (under existing powers in the Local Government Act 2000) to provide new locally-administered assistance to vulnerable groups. The new arrangements are to be in place from April 2013. The Universal Credit White Paper argued that discretionary schemes such as these could be run more effectively at local level, where they can be tailored to specific circumstances and linked up with other support services, and where staff should be better able to identify the most vulnerable applicants.[3] The White Paper also stated that Crisis Loan awards had almost tripled since 2006, "with little evidence of an underlying increase in need".[4] Minister of State for Pensions, Steve Webb MP, explained to us the Government's thinking in devolving the discretionary Social Fund:

It is important to make clear that we are not asking local government to do what we do; we are saying to them, 'This is 170 million pounds. We think you can spend it better than we do because we are trying to operate a discretionary system remotely. […] Can you do better with that money based on what you know of your area?'[5]

Budgeting Loans will be replaced by a new nationally-administered advance of benefit facility.

7. A Call for Evidence on local support to replace CCGs and CLs was issued in February 2011, and the Government's response was published in June. The Call for Evidence document stated that

in line with the decentralisation and localism agendas, the Government is committed to removing burdens and controls from local government. There will therefore be no new statutory duty requiring local authorities to deliver the service. [...] However, to support the transition the Secretary of State will write to local authorities to set out the Government's policy expectations for the new funding.[6]

The document further stated that the Government does not expect local authorities to recreate the current Social Fund, but that local authorities will be given "the funding and flexibility to re-design the emergency provision for vulnerable groups according to local circumstances, in order to meet severe hardship in the way they think best".[7] Councils are not expected, for example, to offer loan facilities under the new arrangements, and are encouraged to consider granting second-hand furniture or white goods, or using food banks, rather than making cash grants. Local authorities are also encouraged to work together, so that there need not be 150 separate schemes running across the country.[8] Although there will be no statutory duty to provide it, Steve Webb dismissed the idea that local authorities might choose not to operate any sort of replacement service for the Social Fund:

If [councils] have the best interests of local residents at heart, which I am sure they do, they will want to put in a pattern in provision, which will not mirror what we did. It may be delivered through different agencies, but I cannot see them not wanting to meet the kinds of needs we have met but perhaps in new and creative ways.[9]

Is localisation the right way to reform the discretionary Social Fund?

8. The Social Fund is perceived as a vital 'safety net' for some of the most vulnerable people in society.[10] It can prevent more acute and costly interventions, and is heavily used by people who are often not eligible for other grants or assistance.[11] The prospect of significant changes in the way this support is delivered has therefore raised many concerns. Should assistance become more difficult to access as a result of these changes, many voluntary organisations warn that substantial additional pressure will be felt on charity grant schemes, and rejected applicants may resort to loans from 'doorstep' lenders at extortionate rates of interest.[12]

9. The way in which the discretionary Social Fund is managed has long been subject to criticism, not least from parliamentary select committees.[13] Among the identified problems are high levels of administrative error and poor standards of decision-making in the CCG scheme (in 2009/10, around half of reviews of CCG decisions resulted in the decision being revised);[14] the 'postcode and calendar lottery' faced by applicants due to the cash-limited nature of the Fund; low awareness of the facility among the public, particularly ethnic minority communities; long processing times for applications for some payments; confusion about qualifying arrangements and eligibility criteria; and the reactive nature of the Fund, meaning little attempt is made to address underlying problems and a degree of Social Fund 'dependency' arises.[15]

10. There was, however, much doubt expressed by our witnesses that localisation in itself would remedy these known problems, or that the process of change had been based on a thorough assessment of how the Social Fund could be made more effective.[16] Alan Barton of Citizens Advice told us:

We accept that there are problems with the Social Fund at the moment and welcome a thorough review involving all the stakeholders, but that is not what has happened. We have just been told that this arrangement with local authorities is the way ahead, and it is very unclear what local authorities will do following the handover.[17]

Family Action argued that the Call for Evidence did not make a clear business case

for why more localised discretion would improve the accessibility of the Social Fund from the service user's point of view, or its costs and sustainability from the tax-payer's. Our view is that the present review is being driven by a desire to transfer the costs of administering the Social Fund to local government. This is what is hidden between the lines of strengthening a commitment to localism.[18]

The National Housing Federation stated its belief that:

localisation is not the most effective way to improve the way the system operates. A localised service is likely to be less efficient in terms of running costs and less consistent in terms of standards of provision. Localisation of the discretionary Social Fund is likely to result in both fragmented and inadequate provision for vulnerable individuals and families, and great additional demands being placed on local authority resources that cannot be adequately met.[19]

11. Witnesses from the voluntary sector were unconvinced by the argument that a localised Social Fund scheme would benefit from greater flexibility and responsiveness to local circumstances. The main concern was a proliferation of different criteria and processes, leading to a 'postcode lottery' for those seeking assistance.[20] The Government's intention to reduce reporting burdens on local authorities, to remove ring-fences around funding, and to allow councils to respond to the distinct needs of their communities were seen to be in tension with the effective operation of fair, clear, accountable local schemes.[21] With no requirements being put on local authorities as to which services they provide to which groups of people, Helen Williams told us that the National Housing Federation had "real concerns that historically those people who have been able to access support from the Social Fund will not be able to do so in future."[22] The Social Fund Commissioner commented that

With over 150 local authorities in England, there is a high risk that a scheme providing unbounded discretion in each of those areas could result in geographical inequities that do not correlate with local needs. I appreciate there is a policy intention to allow different areas to respond to the distinct needs of their particular communities, but in the absence of any guidelines or criteria that set parameters for local discretion, it will be difficult to achieve some broad consistency of purpose and approach. The relationship between local discretion and other local and national policy programmes needs to be clear.[23]

12. Other witnesses were more optimistic about the improvements that could be achieved by localisation. Kerry Macdermott of the Institute of Revenues Rating and Valuation (IRRV) argued that lower tier and unitary authorities could join up the discretionary Social Fund with many other services and areas of policy, and "are very much pro-customer".[24] Lynne Hutton, Chair of BenX, a group of local authorities with a particular interest in benefits reform, emphasised the advantages of local knowledge, accessibility and existing partnerships:

We have spent a lot of time and effort getting to know our demography and our caseload make-ups; we know what our citizens want and we know how to help them. We think we are best placed to help them locally. […] People who apply for Crisis Loans need it now; they need money to get to an interview, to buy food, to get a cooker and a bed. I think that local authorities are ideally based to do that as an emergency function.[25]

13. Nonetheless, local authorities were anxious about taking on the problems of the Social Fund as it operates at present, particularly if they do not receive sufficient support to deliver it. Kerry Macdermott described the Fund as being "in disrepair"; "we will deliver it but we do not want the poisoned chalice passed our way".[26] Cllr Peter Fleming, representing the Local Government Association (LGA), argued that "unless the funding comes it will be no better than the situation we have at the moment. But we are best placed in localities to make sure the right people get the right funds at the right time".[27]

14. The Government's response to the Call for Evidence describes CCGs and CLs as "essentially a social care package", and the impact assessment for the Welfare Reform Bill suggested that assessments for Crisis Loans might be incorporated into social services functions.[28] There is some concern, however, about the suitability of social services as a conduit for this service.[29] Citizens Advice told us that a high proportion of those who access CCGs (including large numbers of disabled people and lone parents) do not have high enough needs to be social services clients. Alan Barton suggested that "people who are already in touch with social services for either children or adults might do quite well out of a system that is locally administered, but the rest will not."[30]

15. More generally, some argue that upper-tier authorities are not the best place for this new responsibility to sit.[31] Kerry Macdermott of IRRV reasoned that district councils, having responsibility for housing and homelessness, have a more direct interest in offering a service that might make the difference to people being able to secure or remain in a home.[32] Cllr Peter Fleming agreed that district authorities had more day-to-day, face-to-face contact with those most likely to need access to the Social Fund in its new form.[33]

16. We acknowledge the concerns of those who fear that localisation of the discretionary Social Fund will result in a 'postcode lottery' of support, or that it will be a 'poisoned chalice' for local authorities. However, we consider that councils' local knowledge, broad responsibilities and experience of benefits administration put them in an ideal position to refine and deliver the successor schemes to Community Care Grants and Crisis Loans.

17. We urge the Department to reconsider, however, whether social services functions in upper-tier authorities are the most appropriate channel for this service, given that many current recipients of CCGs and CLs are not social services clients. The service should be delivered by teams that are able to make contact with the widest possible range of people who might need support, including through partnership with other organisations and other relevant local authority functions.

Funding

18. The resources available to support localised schemes are a major concern of many organisations, on three counts: fears that the funds will be inadequate to meet legitimate demand, that they will be further diminished by the administration costs of localised schemes, and that they will prove vulnerable to pressures in local authority budgets more generally, in the absence of a ring fence.[34] Currently, CLs and CCGs cost £178 million annually. The Government has said that localisation "is not a cost-cutting measure and any new burdens on local authorities will be funded".[35]

19. Minister Steve Webb acknowledged that in the past there had been criticism of the way in which Social Fund funding had been allocated. He explained that, before the transition to local authority management, the DWP would be moving towards allocating funding on the basis of 'legitimate demand', in other words taking into account the numbers of applicants whose applications currently fail simply because there is not sufficient funding, rather than because they do not have a good case. By the time that the transfer to local authorities is made, therefore, they expect to make the allocations based on what has been spent on legitimate demand in the final quarter of 2012-13.[36] There are doubts, however, about how accurate such measurements of demand are likely to be. The Social Fund Commissioner commented that it will be very difficult to predict demand levels for any new localised support replacing CCGs and CLs: financial pressures on local government, third sector organisations and individuals, as well as proposed changes to health and social care, disability benefits, Housing Benefit and legal aid may all have an impact.[37] The Local Government Association has argued that localisation of the Social Fund "transfers significant financial risk to councils" because of the likelihood of higher demand.[38]

20. The difficulty of predicting demand is not the only concern. Kirklees Council warned that "any scheme, regardless of how transparent or simple it might be in design, will bring with it an administrative burden."[39] Ensuring that applicants have access to face-to-face support and access to some form of review system would be particularly expensive.[40] Cllr Peter Fleming, speaking on behalf of the LGA, told us that

If the Government are to fund it properly then we are willing to take on the management of the scheme. […] There must be a clear link between the risk and the responsibility. You cannot just pass down the responsibility without the funding to carry it through.[41]

The Government has stated clearly that the administration cost of the localised Social Fund elements will be met separately to the allocations of funding.[42] Mr Webb told us that the calculation of administration costs was still to be decided upon: "I cannot give you a figure, but our intention in good faith is to work out what we spend currently, to disentangle it and hand over that cash."[43] He suggested, however, that the localised system may be cheaper overall to administer, because the Government was not expecting each council to replicate in miniature the processes that currently operate at national level.[44]

21. We welcome the Government's assurances that the allocation of funds for disbursement will be calibrated against legitimate demand, and that administration costs will be separately and fully funded. However, we have doubts about how accurately demand in the last quarter of next year will predict demand in the longer term. We also caution against assumptions that a localised system will be cheaper to administer, at least in the short term. The level of resource given to councils must accurately reflect the costs of setting up and running new local schemes, rather than the cost of administering the discretionary Social Fund in its current form.

Accountability

22. The Minister also confirmed in oral evidence that local authorities will have freedom to decide what they do with the funds they receive: "It is not ring-fenced; they could spend it on other things."[45] Helen Williams of the National Housing Federation told us,

we would be looking for some safeguards about the actual level of funding available for those groups and accountability of how that money is being spent locally […] We are really concerned that, if local authorities do not have to account for the expenditure and there is no ring fence, it may go to plugging holes in other budgets.[46]

Homeless Link, Shelter and Citizens Advice all cited cuts to Supporting People services in some parts of the country as evidence that unringfenced funds may be deployed to support statutory client groups instead of for their intended purpose.[47] Citizens Advice recalled that the vulnerability of unringfenced funds

was a point of considerable discussion at the Welfare Reform Bill Committee's oral sessions in March. Committee members asked why witnesses believed that local authorities would not consider it a priority to support people in emergency need. This seems to us to show a lack of appreciation of just how difficult local authority decisions will be as they manage their greatly reduced spending allocations. We have no doubt that local authorities will indeed prioritise support for people in greatest need, but in practice, the definition of 'greatest need' is being narrowed and tightened in order to focus diminishing funds - as illustrated, for example, by trends in criteria for social care. […] We are concerned that many people who are highly vulnerable but perhaps not the most vulnerable, will not be given support. The irony is that very vulnerable people will quickly become the most vulnerable if they are not supported to avoid their situations becoming even worse.[48]

The Social Fund Commissioner suggested that "a ring-fenced budget for an initial period would provide some transitional protection".[49]

23. The Minister indicated to us that the Government would principally rely on the ballot box as the means of holding local authorities to account for their use of the Social Fund monies:

Andrew Stunell [Parliamentary Under-Secretary of State, DCLG] and I have jointly met the LGA on two occasions, and we are talking through with them how much reporting they would want to do and how much they would feel was appropriate, but fundamentally we see accountability as being local […]. we would expect local people would know the money had come down and the kinds of needs to be met and would challenge the local authority and hold it to account. We think that is the best mechanism for accountability.[50]

The Government's response to the Call for Evidence states that

We believe that setting out the purpose of the funding in a settlement letter from the Secretary of State for Work and Pensions will provide sufficient clarity of purpose for local authorities to act. This may be supplemented with a requirement to report on how the funding has been used.[51]

24. This would fall some way short of the accountability mechanisms suggested by some stakeholders. Family Action argued that:

Each local authority should be required to account for how the money is spent, and for a set of outcomes of that spending. Simultaneously, an annual review should be undertaken compiling national data on the local authority spending, in order to address differing levels and forms of provision in different areas of the country. This would help for two reasons. Firstly, it would allow comparison with current levels of provision under the existing Social Fund. Secondly, it would allow assessment of the extent to which localisation had created a postcode lottery of provision with some areas performing better than others.[52]

Kerry Macdermott argued that, to guard against allegations of postcode lotteries, localisation of the Social Fund needs to be accompanied by "some form of regulatory framework, if it is only at a very high level".[53] Lynne Hutton agreed that some sort of parameters for consistency would be desirable.[54]

25. The Government's decision not to ring-fence the funds that will be devolved for this purpose may carry some risks at a time of difficult financial circumstances for councils. Nonetheless, we accept that it is desirable that local authorities have autonomy to use the resource in innovative ways. However, we recommend that central government identifies clearly the amounts that are being allocated to local authorities, and collects information about their use, until the new arrangements have bedded in—we suggest a period of five years. This would provide some reassurance about the effectiveness of the new system in helping those in need, and provide clearer information to local voters about whether their local authority was choosing to spend less than the allocated amount.