Impact of the Discretionary Social Fund

The Discretionary Social Fund: Discretion but Little Valour!

The introduction of the Social Fund in 1988 was politically driven. Prior to its introduction, there were available a series of grants (“Single Payments”) which were available as of right. The imperative which drove the measure was the need to constrain the ever-burgeoning Social Security budget. Of course, certain of the stated aims were superficially laudable[1]:

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“To concentrate attention and help on those applicants facing greatest difficulties in managing on their income;
To enable a more varied response to inescapable individual need than could be achieved under the previous rules;
To break new ground in the field of community care”

However, it might be argued that in pursuing the aims of containing the Social Security budget without adversely affecting the efficiency of the main Income Support scheme, the three objectives described above have become neglected or even prejudiced. So much so that the Select Committee on Social Security[2] has questioned whether the Fund has succeeded in its stated objective of helping the poorest and most vulnerable in society and has urged the Government radically to reassess (“urgent overhaul and an injection of funds”) the working of the fund, in particular “so that it may work to enhance the strategy to reduce child poverty, rather than work against it”.

Particular concern has been expressed by charities working in the field of child poverty[3]. The Discretionary Social Fund operates within fiscal policies and weightings and is subject to cash limits for each administrative area. This gives rise to criticism that applications to the Fund are subject to both a “postcode” and a “calendar lottery”. The components of the Social Fund are:

Community Care Grants (“CCGs“);
Budgeting Loans; and
Crisis Loans.

By contrast with the previous system, the availability of grants as opposed to loans has become severely restricted. The FWA[4] acknowledges that while CCGs are intended to help people remain or re-establish themselves within the community:

“…decisions are discretionary and are subject to cash limits, what counts as exceptional pressure can vary and the Social Fund Inspectors regularly see cases that have been refused when qualifying conditions have been met and a payment should have been granted.”

More pernicious still is the shift in emphasis to loans. This may be presented politically as an admirable social objective, discouraging continued reliance on “hand outs” and encouraging a sense of financial self-discipline and responsibility. In reality, the insistence upon repayment militates against the escape from poverty of those of the most limited means.

The principle which underlies Budgeting Loans is again admirable: interest free lending to those who are in difficulty budgeting after a period on benefits and usually used for the purchase of essential household items such as beds and cookers. Admittedly they provide invaluable support to those who are unable to access other forms of credit and are directly repayable from benefit thus ensuring repayment discipline. However, they are also subject to the “postcode lottery” described above and the repayment rates are high and inflexible (78 weeks at between 5%-25% of benefit). Strict rules discourage repeat applications or “topping up”. The end result is a failure adequately to meet the needs of many poor families giving rise to particular concern for the welfare of the children within such households. This is as a result of what should have been predicted to be an unacceptable imkpact upon weekly income: benefit rates are by definition calculated to meet the subsistence expenses of the family unit in question. Deductions from such a minimal level of income cannot fail to lead to hardship.

However, a more positive evaluation of the Social Fund is supplied by the Department for Work and Pensions[5] which describes it as “an extremely important and highly valued source of financial support for recipients. It had a positive impact on recipients’ life situation, and made a considerable difference to the housing condition in which people lived.” However, in common with the FWA, the authors of this report acknowledge that “there was limited knowledge of rules and eligibility criteria among recipients” and “there may also be scope to providing more training to staff on some of the barriers that recipients face when applying” and to “offer financial advice to recipients when providing information on the Social Fund”.

There are also glaring deficiencies in the procedure by which Social Fund decisions may be reviewed. Dissatisfied claimants may seek internal reviews of initial decisions and further review by the Social Fund Inspectors of the Independent Review Service of the Social Fund. Such decisions are themselves susceptible to judicial review. However, as Pick and Sunkin[6] question:

“Created out of compromise, is the IRS review system to be regarded as an administrative device for deflecting criticism of an unsound system by means of symbolic due process..?”

It is not possible in a submission of this length to do more than scratch the surface of the impact of the discretionary social fund. However, as has been demonstrated, the system is fundamentally flawed in principle and defective in operation. There is an appalling parallel with the operation of the much-maligned Child Support Agency. The latter was born of a political desire to reduce the burden imposed on the social security budget by feckless parents but has in many instances signally failed to deliver benefit to the intended recipients. The loan-dominated mechanism of the Social Fund similarly fails to meet the avowed social policy objectives of the government.

Bibliography

Buck, T. & Smith, R., A Critical Literature Review of the Social Fund, (Summary Report) for The National Audit Office (7 April 2004)

Department for Work and Pensions, The Discretionary Social Fund and Money Management, Research Report No 241 (2005)

Family Welfare Association, ‘Like it or Lump It’, A Role for the Social Fund in Ending Child Poverty, April 2002

Pick, K. & Sunkin, M., The Changing Impact of Judicial Review: The Independent Review Service of the Social Fund, (2001) PL 736

Select Committee on Social Security, Third Report, The Social Fund: A Lifeline for the Poor – Or the Fund that Likes to Say No? (2001) HC 232

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