Implementation of welfare reform by local authorities - Communities and Local Government Committee Contents

4  Localisation of the Social Fund

64.  In this chapter we examine the implementation of the changes being made to the Social Fund, the funding of local welfare provision to replace the Social Fund and the information being made available to local authorities by the Department for Work and Pensions (DWP). The currently centrally administered and cash-limited Social Fund—established in the 1980s—comprises discretionary elements and statutory elements, such as Funeral Payments and Winter Fuel Payments. From 1 April this year two of the discretionary elements of the Social Fund will be withdrawn:

a)  Short term Crisis Loans which are currently available to those facing unforeseen emergencies or disasters and are not dependent on a claimant being in receipt of any benefits;[130] and

b)  Community Care Grants which are available to those receiving certain income-related benefits. These can be used to support a person to remain in, or establish themselves within, a community or for expenses such as visiting a sick relative.

65.  From 1 April Local Authorities will be able to provide such services as they think appropriate to replace the withdrawn elements of the Social Fund using non-ringfenced funding from central Government. This change is designed to allow local authorities to "develop tailored support based on their communities' needs".[131] The Government has assured local authorities that they will not have to set up their own "new schemes" to replicate the Social Fund, and provision of local support will not be a statutory requirement.[132] No central guidance on developing local schemes has been provided. Instead, Steve Webb MP, Minister of State for Work and Pensions, sent a letter in December 2012 to local authorities, in order to provide "clarity on the purpose of the funding", leaving them to decide how to spend the money locally.[133]

Funding local schemes

66.  We heard concerns from several councils that the Government was providing insufficient funding for local authorities to set up, administer and operate the new schemes. In addition, councils told us that the timescale for introducing the changes and a lack of information (as opposed to guidance) from DWP were hampering implementation of the changes and preventing innovative and locally tailored programme design. We address each of these issues in turn.

67.  The Government consultation on local support to replace the Social Fund said that:

We recognise that the design, set up and delivery of the new assistance will place an additional burden on local authorities and we are committed to ensuring that this is funded in full by central government.[134]

Therefore administrative and start-up funding—separate from programme funding from DWP—is being provided for the first two years. Total start-up funding in 2012-13 for England is £1.4 million[135]—1 per cent of the total programme budget—which the Government said was "reasonable being both prudent and giving authorities a degree of flexibility according to their intentions".[136]

68.  Evidence we received from local authorities suggests that setting up local systems to provide assistance to replace Crisis Loans and Community Care Grants by 1 April has proved resource intensive and some have suggested that the start-up funding on offer may not be enough. Hackney and Newham Councils told us that start-up funding provided had been insufficient because local authorities needed to set up schemes to cope with a far more diverse set of claimants than they currently dealt with through existing funds such as Discretionary Housing Payments (discussed at paragraph 76).[137]

69.  West Midlands Metropolitan Councils said that funding for setting up and administering programmes in 2012-13 was not enough and that this money had in some areas covered IT costs alone.[138] It told us that the Government had made no allowance for "the considerable investment councils are providing in terms of staff time to prepare, and further costs attributed to staff recruitment, training and equipment".[139] Croydon Council, told us that the Social Fund represented "an entirely new scheme, and new area of work" for the authority.[140] It said that, even if existing IT suppliers were used to develop Social Fund schemes, additional expense would be incurred renegotiating contracts.[141]


70.  For the first two years from 2013-14 programme funding of £144.2 million will be available which the Government said "represents a generous settlement, and aligns with both current Departmental spend and what [local authorities...] asked for during consultation".[142] This programme funding for local schemes will be allocated to individual authorities on the basis of discretionary Social Fund spend in each area for 2012-13. The funding for individual local authorities is currently indicative as DWP will not know the final figure for spend in 2012-13 until after 1 April.[143] Programme funding will be divided by area on the basis of "legitimate demand" which the Government has said will take into account measures currently being taken to reduce demand for Crisis Loans.[144]

71.  We raised concerns in our 2011 Report about the method being used to calculate future demand for local provision based on past Social Fund spending in 2011-12.[145] The Government responded that a review of its methodology conducted in 2011 had suggested that demand for Community Care Grants was "relatively stable over time" with the implication that past demand could be used as a good indicator for future demand and that it was now confident of its methodology for calculating future need.[146] On this basis the indicative amounts allocated to local authorities are likely to be an accurate representation of the actual funding they will receive.

72.  Rochdale Council told us that total programme funding "is unlikely to be adequate to cover all needs" because, when the Government set the budget for localised Social Fund provision, it did not take into account the likelihood of increasing demand, resulting in part from the "economic context generally and welfare reform in particular".[147] Rochdale Council said that:

The transfer of the social fund from DWP to local authorities brings opportunities to deliver services / financial support to families in crisis locally and more tailored to the needs of families in the Rochdale community. However, this comes at a time when more families may find themselves in crisis due to the abolition of housing benefit, changes to council tax support, the impact of other welfare reform changes and the impact of universal credit as this filters through to claimants.[148]


73.  Durham County Council told us that, because there will be no transition period for the introduction of local support before 1 April, local authorities will be unable to assess the actual levels of demand for the funding allocation in their areas.[149] The provision of comprehensive information from DWP about current Social Fund spending by area will therefore be especially important for local authority planning. Several councils said that there had been insufficient information made available from DWP about current Social Fund spending.[150] West Midlands Metropolitan Councils said:

DWP have been reluctant to provide detailed information about the delivery of the current social fund. This has placed [local authorities] in a position of establishing local provision without a clear understanding of the level and type of demand that they are likely to encounter from 1 April 2013.[151]

Southwark Council told us:

in not helping local authorities to understand the nature of local demand for the Social Fund, the Government has inadvertently hindered the development of innovative solutions involving local authority partnering which by their nature take longer to develop.[152]

74.  Lord Freud told us that there had been "mutual frustration" for the Government and local authorities because DWP was not legally permitted to transfer certain data to local authorities.[153] The situation had improved, he said, because "primary powers in the Welfare Reform Act" had been used to allow the Government to send certain types of information to local authorities.[154] He added that "we are reviewing it the whole time, and we may have to make specific moves" to update the legislation.[155] We recommend that the Government make available to local authorities the information they need about current Social Fund spending in their area as quickly as possible to enable them to assess accurately the level of local provision that will be needed.

75.  As we have noted, the money provided for replacing Social Fund provision will not be ring-fenced, in order to allow local authorities discretion over how it is spent. We heard concerns that money allocated to local authorities might be spent on existing programmes rather than on locally tailored support. The Government said, in the settlement letter of 6 August 2012 setting out the funding, that "spending decisions are, and will continue to be, a matter for local authorities and the Government does not intend to start placing restrictions on any future decisions they may make on funding."[156]

76.  Citizens Advice said that the main channel into which funds from local Social Fund provision may be diverted is Discretionary Housing Payments (DHP).[157] DHP are met from a cash-limited fund with which local authorities can provide additional assistance to those in need of housing support. Although funding of £390 million for DHP to cover the remainder of the current Spending Review has been announced by Government including assistance for those affected by the reforms to welfare, several witnesses considered the funding to be "insufficient" to cope with expected need.[158] The National Audit Office (NAO) in its report Managing the impact of Housing Benefit reform questioned the basis for the funding allocation for DHP and whether it would be enough to allow local authorities to tackle the impacts of the reforms.[159] London Councils commented that as there was no system in place for reviewing funding levels for DHP it was not clear how any shortfall would be addressed. We expect that there will be pressure to divert funding for replacing Social Fund provision to support Discretionary Housing Payments (DHP).[160] It is a matter for local authorities how they allocate non-ring-fenced money from central Government to provide local support in place of the Social Fund.

77.  The Government gave local authorities an assurance that replacing the Social Fund would not result in additional unfunded burdens. Replacing Social Fund provision locally is a new area of work for local authorities and represents a major change in their costs particularly when taken together with DHP, the demand for both of which is difficult to forecast. The Government must ensure that local authorities are provided with the funding they need to set up and administer local support schemes and deal with reasonable demands for DHP from 1 April. We recommend that the Government meet with the Local Government Association after 12 and again after 24 months to review the level of support required and decide on the appropriate level of additional funding if local authorities are incurring reasonable, unfunded costs.


78.  Transferring any funding responsibility from central government raises the question how accountability for that funding will be maintained. In 2011 we heard of concerns about a possible "'postcode lottery' of support" resulting from the localisation of Social Fund provision but concluded that local authorities were best placed to "refine and deliver" these programmes.[161] However, we recommended that central Government clearly identify the money allocated to local authorities and collect information about its use for a period of five years.[162] The Government responded that it was for "local authorities to account to their residents on the scope and quality of the service they provide".[163] In our current inquiry Citizens Advice raised the issue of monitoring the use of Social Fund money spent by local authorities. It pointed out that because of the number of different ways the money could be spent it would be difficult to assess where, and how effectively, the Fund was being used alongside other budgets such as funding for the voluntary sector.[164] It concluded that local authorities:

should be required to provide to the public detailed information as to how these resources are being deployed. [Local authorities] should be able to identify clearly a resource to help people in times of crisis and to support independent living.[165]

79.  The Local Government Ombudsman has predicted "huge variance"[166] in locally designed schemes, which suggests that centralised monitoring would be challenging and expensive. We recognise and accept that the Government should not take on responsibility for monitoring how local authorities use resources locally for the replacement of the Social Fund. However, it is important that local authorities are fully accountable to the public in their area for how they use these resources. We therefore recommend that Government requires local authorities to make information about how they spend localised Social Fund money available in a format that is simple for the public to understand. At the national level, the Government should use this information for high level monitoring of the operation of the new arrangements over the next five years, to assess how local authorities are deploying these resources and whether any vulnerable residents risk falling between the gaps in provision after 1 April 2013.

National guidelines

80.  A consequence of having locally designed welfare schemes will be variation in the ways that support is provided in different areas. This raises the possibility of some areas developing provision that is more generous than others, and the possibility that variation in the arrangements may provide an incentive for some people to move between areas. A further consequence of growing variation between local authority areas is the potential for some groups to be excluded from provision, for example, as a result of residency criteria.

81.  Camden Council raised concerns about the potential for significant numbers to move across boundaries, particularly in areas in London with a high number of rough sleepers, on account of differences between neighbouring authorities' schemes especially if they had different residency criteria.[167] In the wider context of the operation of the local Social Fund, however, we heard no evidence that the changes will lead to widespread 'benefit chasing'. Although we found no evidence to support fears that the localised arrangements replacing the Social Fund would provide widespread incentives for 'benefit chasing', we have concerns that problems may arise in specific areas, especially in those local authorities with significant transient populations such as rough sleepers. We recommend that the Government provide local authorities with guidance on whether they have any responsibility to provide assistance, in the absence of the national Social Fund, to rough sleepers moving into their area and how such provision should apply to rough sleepers who have recently received support from another local authority.

82.  Residency criteria can be used by councils to ensure that local programmes support their local populations. Citizens Advice, the Local Government Ombudsman and Child Poverty Action Group were all concerned that some localised Social Fund provision might have strict residency criteria or include a requirement for claimants to have a local connection because the money for the provision would be seen to be itself local.[168] Citizens Advice told us that such conditions would make it difficult for victims of domestic violence to claim support in a new area.[169] We received some evidence that local authorities were planning to provide support to those people who might fall foul of strict residency criteria. Blackpool Council told us that the criteria it would use for allocating welfare provision would "be more robust" than the current Social Fund and be "based on residency [...] with exceptions such as domestic abuse".[170] Local authorities that introduce a 'local connection' criteria into their local Social Fund provision should ensure that support is not denied to individuals who are displaced from their usual residence because of domestic violence.

130   A specific type of Crisis Loan, paid in response to problems with receiving benefit, will be replaced with Short Term Advances administered nationally by the Department for Work and Pensions within Universal Credit.  Back

131   Ev 89, para 2 [DCLG]  Back

132   Ev 94, para 46 [DCLG] Back

133   "Abolition of the discretionary Social Fund and transfer of programme funding for a new provision", letter to local authorities in England from Steve Webb MP, Minister of State for Work and Pensions, December 2012  Back

134   DWP, Local Support to replace Community Care Grants and Crisis Loans for Living Expenses: A Call for Evidence, February 2011, p 4, para 3.3 Back

135   Localisation of the Social Fund, Standard Note SN06413, House of Commons Library, November 2012, p 8 Back

136   DWP, Settlement funding frequently asked questions, December 2012, p 3 Back

137   Ev w83 and Ev w100 Back

138   Ev w78 Back

139   As above Back

140   Ev w48, para 3.8.1 Back

141   As above Back

142   DWP, Settlement funding frequently asked questions, December 2012, p 3 Back

143   "Abolition of the discretionary Social Fund and transfer of programme funding for a new provision", letter to local authorities in England from Steve Webb MP, Minister of State for Work and Pensions, December 2012 Back

144   DCLG, 'Government response to the Communities and Local Government Select Committee's Report: Localisation Issues in Welfare Reform', Cm 8272, January 2012, p 8, paras 24-25 Back

145   HC (2010-12) 1406, para 21 Back

146   Cm 8272, p 8, para 25 Back

147   Ev w62; see also Ev w102 [London Borough of Newham]. Back

148   Ev w60-w61, para 5 Back

149   Ev w9, para 7 Back

150   Ev w102 [London Borough of Newham], Ev w40 [East Riding of Yorkshire Council], Ev w10 [Durham County Council], Ev w28 [London Borough of Southwark], Ev w47 [London Borough of Croydon], Ev w107 [London Borough of Tower Hamlets], Ev w15, para 4.3 [London Councils] and Ev w63 [Leeds City Council]  Back

151   Ev w77 Back

152   Ev w29, para 3.3 Back

153   Q 247 Back

154   Q 246 Back

155   Q 248 Back

156   "Abolition of the discretionary Social Fund and transfer of programme funding for a new provision", letter to local authorities in England from Steve Webb MP, Minister of State for Work and Pensions, August 2012 Back

157   Ev 82 Back

158   Ev w122-w123, para 2.3 [RNIB], Ev w13, para 2.8 [London Councils] and Ev w11, para 27 [Durham County Council] Back

159   NAO, Managing the impact of Housing Benefit reform, HC (2012-13) 681, 1 November 2012, p 27, para 2.15, and Ev w14, para 2.7 [London Councils]  Back

160   HC (2012-13) 681, p 27, para 2.15, and Ev w14, para 2.7 [London Councils] Back

161   HC (2010-12) 1406, paras 16 and 25  Back

162   HC (2010-12) 1406, para 25 Back

163   Cm 8272, p 8, para 30 Back

164   Ev 82, para 2.7 Back

165   Ev 84, para 3.9 Back

166   Ev w32 Back

167   Q 83 [Lesley Pigott] Back

168   Ev 80, para [Citizens Advice], Ev w32 [Local Government Ombudsman], Ev w36, para 30 [Child Poverty Action Group] Back

169   Q 173 [Gillian Guy] Back

170   Q 81 [Steve Thompson] Back

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Prepared 3 April 2013