The social fund undermines the government’s key aim of reducing
child poverty, MPs said last week.
A report by the House of Commons Social Security Committee
report finds the fund’s system of grants and loans for the poorest
and most vulnerable in society in need of an “urgent overhaul and
an injection of funds”.
It urges the government to take advantage of the reorganisation
of the Department of Social Security to take a “radical look” at
the social fund, to ensure it is enhancing child poverty strategies
rather than working against them.
It also calls for research into the levels of income needed to
avoid poverty, prompted by concerns over loan repayments – both to
the social fund and alternative credit providers – by those on
The social fund is split into two parts. The mandatory fund
comprises Sure Start maternity grants, and funeral, winter fuel and
cold weather payments, while the discretionary fund consists of
community care grants, budgeting loans and crisis loans. It is the
latter which comes in for most criticism.
The report says the discretionary fund is subject to chronic
underfunding, and a postcode and calendar lottery in grant
applications, as well as poor information and administration.
Applicants are too often turned away, receive inaccurate
information or are the victims of poor decision-making.
“The discretionary social fund seems to us to be the forgotten
end of the social security system, yet it can be a lifeline for the
very poor at difficult points in their lives,” says the report.
The narrowness and subjectivity of the eligibility criteria for
grants are singled out for criticism, as well as the limited
funding available. The report recommends a review of the overall
grant budget and the criteria to overcome high refusal rates,
inconsistencies in decisions, and the inability to fund essential
Failing fundamental reform, the grant budget should be raised
substantially, the committee says.
Gross expenditure on the discretionary fund has grown from
£366 million in 1994-5 to £594 million in 2000-1. But the
figures mask a shift from grants to loans during that period:
grants grew by only 3 per cent, while loans rose by more than 80
per cent (see graph, left). However, due to loan repayments, net
government expenditure was less in 1999-2000 than in 1994-5.
“The social fund is deeply flawed and has never worked,” said
Child Poverty Action Group director Martin Barnes. “Given the
government’s pledge to eradicate child and family poverty,
replacing the social fund should have been a top priority.”
A DSS spokesperson said the government would give the report
“due consideration” and respond formally in three months’ time.
Meanwhile, the DSS announced a 3 per cent rise of £3 million
in the community care grants budget.