Yet another rainy day

Rain clouds in the form of the
social fund are still dampening 
expectations of the government’s plans to tackle family poverty, writes
Mark Hunter.

In the West Midlands a
woman and her children aged two and six are sleeping on the floor of a council flat
with no furniture or cooking facilities. Benefits Agency staff have wrongly
told her she is not eligible for a community care grant from the social fund.
In Essex another single parent cannot afford a fridge in which to keep her sick
child’s medication. She has been refused a budgeting loan as she still owes
money on a previous £530 loan. In the North West a man, wrongly denied a crisis
loan, is forced to sell his car to support his partner and five children. In
London a woman waiting for income support is told to survive on her £45-a-week
child allowance. In Yorkshire a disabled woman is told to use her daughter’s
student loan.

Up and down the country, these, and
many more examples recorded by Citizens Advice Bureaux, illustrate how failures
within the social fund are forcing thousands of vulnerable families with
children deeper and deeper into poverty. Whether it is through poor advice from
Benefits Agency staff, the social fund’s restrictive eligibility criteria, or
simply the fact that there is too little money to go around, the system of
loans and grants brought in under Margaret Thatcher in 1988, condemned by
Labour in opposition but retained in government, remains off-limits to many of
those who need it most.

Those denied by the social fund are
left with little choice – they can go without basic essentials, seek charity
handouts or fall prey to loan sharks and other lenders.

“Very often they are left in extreme
hardship,” says National Association of Citizens Advice Bureaux (Nacab) head of
social policy John Wheatley. “They may have to rely on charities, whose own
budgets are limited, or they end up borrowing money and getting deeper into
debt.”

That the social fund is falling
short of requirements is hardly surprising – it has been roundly criticised
throughout its 14-year history. More difficult to explain is why, given that
many of its critics are now in government, little change has occurred.

The fund was only three years old
when the National Audit Office noted that, while it was less expensive than the
single payments system it replaced, it was also forcing growing numbers of
people into debt. In 1994 the Labour party’s Commission on Social Justice
described the fund as “perhaps the most soul-destroying aspect of income
support”.

And the Commons social security
select committee reported to the last parliament that the fund was working
against the government’s key aim of reducing child poverty. “In its present
form, the discretionary social fund is adding to the poverty and social
exclusion of families with children by in many cases denying them access to
basic necessities and increasing their indebtedness,” concluded the report.
“This is unacceptable. We urge the government to use the opportunity offered by
the re-organisation of the Department of Social Security to take a radical look
at the social fund, so that it may work to enhance the strategy to reduce child
poverty, rather than work against it.”

The government’s response was to
pump more money into the system with an extra £5m for community care grants.

However, the bulk of the £627m
social fund budget for 2002-3 is accounted for by loans. These will eventually
be recovered through deductions in recipients’ benefits payments. In fact, by
improving its recovery of these loans the government has actually managed to
reduce its net spending on the social fund by 8 per cent in real terms between
1997-8 and 2000-1.

The scarcity of cash within the
system puts Benefits Agency staff under huge pressure to keep a tight rein on
applications. Last year more than 70 per cent of community care grant
applications were refused as being of “insufficient priority”. Around one-third
of budgeting loans and crisis loans were also refused. However, when these
refusals were challenged the Independent Review Service reported that more than
60 per cent of decisions were overturned in the applicant’s favour.

Even when the rules on eligibility
are followed, many people in need are denied. Community care grants and
budgeting loans are restricted to people receiving income support or an
income-based jobseeker’s allowance. This excludes many people on very low
incomes including those receiving contribution-based jobseeker’s allowances,
incapacity benefit or disability living allowance. Budgeting loans are also
refused to people in genuine need, often because the applicant already has an
outstanding debt.

According to Wheatley the social
fund needs to be completely overhauled if it is to begin fulfilling its
function as a lifeline for society’s poorest and most vulnerable. “It’s not
that there’s anything wrong with the social fund per se,” he says. “It’s just
the way it is implemented. The budget is too small, the eligibility criteria
too restrictive and there are too many wrong decisions made by the benefits
offices.”

Nacab has produced a 10-point list
of changes it would like to see the government introduce. These include:

• Making community care grants
available for milestone events such as setting up home, moving to a new school,
pregnancy and home safety problems.

• Extending eligibility for
community care grants and budgeting loans to all people on very low incomes.

• Increasing in the budgets for
community care grants and budgeting loans.

• A new scheme for special travel
costs.

• Abolition of the 26-week
qualifying period to apply for a budgeting loan.

• Increasing the £1,000 maximum for
a budgeting loan.

• Offering options of lower
repayment rates for budgeting loans.

• A simple, fast-track loans scheme
for people awaiting a benefit decision.

• Reviewing the requirement that
there must be serious damage or risk to health and safety before making crisis
loans.

Nacab is not alone in calling for
the social fund to be extensively revised. A joint report focusing on the needs
of children was published in April by the National Council for One Parent
Families, the Family Welfare Association (FWA) and the Child Poverty Action
Group (CPAG). The report focuses on specific times in a child’s life when costs
can make life difficult for families on low incomes.

“Being on benefit or a low income
makes it very difficult to save, so there is nothing there for a child’s winter
coat, or PE kit, or if the cooker breaks down,” says NCOPF policy director
Alison Garnham.

“All you can do is take out a social
fund loan. But you will have to repay that out of your benefits, so you end up
with families living on sub-benefit income,” she says. “Six out of 10 lone
parents have deductions made from their benefits, most of which are to repay
social fund loans. They are worse off than they were before.” To address this
the report calls for the fund to be replaced by six “inclusion funds”.

It proposes “child development
grants” to be paid annually or at key stages in a child’s life for children in
families on key benefits. “Health and safety grants” would provide payments to
families on long-term benefits for items essential to a child’s health and
safety, such as repair or replacement of gas and electrical items. A “secure
homes grant” would offer lump sum payments to families with children to obtain
essentials to furnish their new home if rehoused. “Opportunity grants” would
help people cover costs incurred when moving from welfare into work.

The report also recommends measures
to reduce debt including a matched debt reduction scheme in which lone parents
entering work would receive pound-for-pound reductions in their social fund
loans. A final proposal is to extend the budgeting loans scheme to people who
are in work but on low incomes. The report acknowledges than none of these
options will come cheap, but should be a price the government is willing to pay
if it is serious about ending child poverty within 20 years.

This, of course, is the crux of the
matter. When the social fund was introduced it was seen principally as a way to
save money on the welfare budget. The question now is whether the government is
willing to release its purse strings and allow the social fund to become the
lifeline it always should have been.