Select Committee on Social Security Minutes of Evidence

Examination of Witness (Questions 60 - 79)



  60. What are the implications for the Fund, particularly in terms of the cap, in places like Kent, where there is considerable pressure, as we know, in terms of the number of asylum-seekers, refugees; do you have anything to say about that issue?
  (Professor Craig) It is quite clear that that situation has emerged fairly profoundly in the years since I completed my detailed study; the three tiers of what I attempted to do there were to narrow down the discretionary crisis element of the Fund to the smallest manageable proportion. Now I have no doubt those proportions will probably have to be rather different than they are now, but it is also clear that it is possible to do some predictive work about the level of demand, which would be different between different offices, and, clearly, as you say, areas like Kent, where refugees and asylum-seekers arrive, or areas like the dispersal centres, where they may be living for a short while, would need higher allocations in that particular third tier of the scheme that I propose.

  61. Can you say anything about the entitlement of asylum-seekers to Social Fund payments; they have got to be in receipt of Income Support, have they not, in the first instance?
  (Professor Craig) Yes; well, I think there is a whole debate there to be had about income for refugees and asylum-seekers, and I could go much wider. It is quite clear that there is enormous criticism about the voucher scheme, at the present time, and I think that discussion about whether social security, through the Social Fund, should provide help for them needs to be set in that wider context. But I have no detailed evidence at the present time, I have a colleague who is working on the issue, as it happens, but his research findings will not be available for some time.

Ms Buck

  62. If I can just follow up that point particularly, because my understanding is that the point of eligibility would almost certainly be when people are given refugee status, when they are given leave to remain; the issue would then be, when people have been not on benefit at all, after the various 1996 systems, and are therefore moving into local authority accommodation for the first time, with nothing, what would be their eligibility and what would be the response of the system to that particular set of needs? Are you saying that there is no monitoring, no information whatsoever about that particular cohort of people, which is into the hundreds of thousands now?
  (Professor Craig) The scheme that I propose, the second tier, actually considered the possibility of paying specific grants for specified life events, for example, moving out of an institution, say, out of prison; setting up a new home was one of those specified life events. One would simply need to provide documentary evidence that this, indeed, was the case. At the moment, those sorts of events are muddled up with all the other kinds of things, Community Care Grants, or indeed Budgeting Loans, but one could have a shopping list of those sorts of events, and setting up home, obviously, is a very costly thing. At the moment, it is possible, for example, for women fleeing domestic violence to get fairly substantial grants to set up home, through the Community Care Grant scheme; in principle, I see no reason why that should not be extended to other people in different circumstances.

Mrs Winterton

  63. Professor Craig, those who successfully claim loans from the Social Fund have, as a result, their income taken below, sometimes by more than 15 per cent, the official poverty line, and you have had a lot to say and have been very critical of the fact that there have been no official reviews to find out whether benefits are adequate, in fact, for the purpose. Is the solution to the problem of debt amongst the most vulnerable members of society simply to increase the levels of benefit, and would you like to say what you would like to see introduced to replace the present system?
  (Professor Craig) It is not true, Mrs Winterton, that there has never been an official study of the adequacy of benefit levels. There was a study in the 1960s, by the Government, which was suppressed, and I believe you have taken evidence from one of my colleagues, Professor Veit-Wilson, on this subject, in a previous inquiry. I think that loans are nothing short of a disaster. I think I would depart, as it were, from the general thrust of what Elaine Kempson has said, because I think the kinds of questions that are asked of claimants obviously give people parameters within which certain answers might be given. I did a study, a qualitative study, and Professor Berthoud, of Essex University did a similar qualitative study, in the early 1990s, offering claimants a range of alternatives which would enhance their weekly income. Now the answer that most claimants gave us was that they would prefer, strangely, one-off grants. Certainly they would prefer them to loans, for the reason that you have just suggested, that their income would not be reduced below what is already a parsimonious level. But, interestingly, they would also say that they preferred grants because they could not conceive of a Government, at that time, that would actually increase their weekly benefit to a level that they would regard, in a sense, as at all adequate. So the conditions under which people were answering those questions really were set by what they understood the politics and the economics of the situation to be. Now one might hope that, with the present Government's commitment to the abolition of child poverty, we are in a slightly different political context. I think that increasing income is the sine qua non; now the question of how much the income is raised by obviously is a matter partly of political judgement but there is plenty of objective evidence. Colleagues at Bristol and York, in the Family Budget Unit, have produced some very detailed studies over the last three or four years; Poverty and Social Exclusion in Britain, published by the Rowntree Foundation, at the end of last year,[13] the work of the Family Budget Unit on pensioners,[14] I believe you heard some of that evidence in your study of Integrated Child Credit, Modest But Adequate Incomes for families with children,[15] and so on. All of it points to the fact that current income levels are substantially below even very modest requirements. A final point of evidence I would add is that when we asked families, Pakistani families and white families and African-Caribbean families, in the early 1990s, what they would spend an extra £5 on, were they to be given it in extra income, the answer was, overwhelmingly, food, and not on trips to the cinema, or on fancy clothes or parties, but food, generally food for children and nutritious food, like meat and fruit and vegetables, and so on.

  64. I think you have made a very strong case, as one would expect. If, for example, the Government did not go along the path that you advise, for whatever reason, and that some form of Social Fund or grant aid is continued, do you feel that it is particularly disadvantageous to applicants that there are only two systems where their own personal problems and personal debt levels are discussed, and perhaps solutions proposed; one is the credit union system and the other with those who collect weekly debt repayments? Do you feel that this is a tremendous disadvantage to most people, that when applying to the Social Fund they perhaps do not tell the whole story, the full story, of their indebtedness, because, of course, that is not going to be taken into consideration and they may be adversely affected by the result?
  (Professor Craig) I would agree with Professor Kempson, first of all, that credit unions really are not the answer to the people who are living on the lowest income, the bottom decile of incomes, if you like. There is plenty of evidence to suggest, and Elaine has already pointed out some of that, that people on the lowest incomes cannot even save the paltry amount weekly required to join credit unions. So I think one can tinker around with credit unions, but I do not think they are a structural answer. The exploitation that is offered by, as it were, the worst elements of the private loans market obviously is something that this Committee, I guess, would not wish to celebrate in its report. I think the issue of whether people, in a sense, present their picture as accurately as possible is quite a difficult one to answer. I think, if I put myself in the position of a claimant applying for a Social Fund loan, and bear in mind that people apply for Social Fund loans only because it is the best of a bad bunch, I would present the most positive case. History shows, and my study shows, that people, to some degree, play games. I do not mean necessarily that they are corrupt, or deceitful, or whatever, but there is plenty of evidence to show that people know what it is they ought to apply for, and therefore apply for it; fortunately, those kinds of constraints have been slightly reduced recently. But I ask you to put yourself in their position, what would you do in that situation? If £150 would make the difference between eating and heating, or not eating and not heating, what would you be asking for? You would be asking for the thing that you thought would get you the best chance. And that is another element of the description of the Fund as a lottery.

  65. And, finally, do you believe that high levels of debt affect people's ability to move off benefit into work?
  (Professor Craig) This is a perennial question, of course, whether there should be a substantial amount of, dare I say, clear blue water between levels of benefit income and levels of work income. It seems to me one has to address both the levels of benefit income and the levels of work income, if one is seriously going to address that in policy terms. I think there is plenty of evidence from claimants, I have a research student at the moment who has been interviewing 16-19 year olds on the New Deal, who are very clear that, actually, what stops them getting work is the quality and the adequacy of work in the local labour market and the levels of pay that are on offer. It is nothing about wanting to live a life on benefit. Now if people are enormously indebted, that may present some structural obstacles to getting work, for example, it may present obstacles for them travelling to find work, it may present obstacles to them being appropriately clothed to go for a job interview. I can see that it would work in that way. But I do not think the issue of indebtedness, in a general sense, prevents people getting work. I think it is the level of income that they might expect when they get work and the level of indebtedness that they have before they get work. I think it is the interaction, if you like, rather than a single factor.

Ms Buck

  66. It is slightly irrelevant, but I am just interested, because, looking at your options for reform and some of the things that we have been discussing, by no means all but many people manage extraordinarily well on very low incomes, until a life event knocks them off course, whatever, and you have detailed a number of those examples. Is there any scope, and have you considered any scope, as a sort of complement to all of this, for increasing people's access to affordable insurance, because it does seem to me that people fall into exactly the same holes, in terms of being able to insure themselves against life events, in the same places and at the same times that they find it difficult to get access to reasonable credit? And it just seems to me that one of the ways of helping a group of the people that we are talking about is finding a way of underpinning their access to insurance against particularly your unpredictable crises?
  (Professor Craig) Yes; well, I think there is plenty of evidence around from community safety studies which suggests that it is the people who live in poverty, if you like, who are often most at risk to crimes of burglary, and so on, and the reasons for this are fairly obvious, that they cannot afford security lights, they cannot afford good locks on their doors, and so on and so forth. Similarly, poor people are often much more liable to be prone to fall victim to crimes of assault, because they cannot get in cars and travel around in relative safety. When it comes then to the issue of being able to insure yourself against those risks, poor people have enormous difficulties. I think the insurance companies should look to their practice to see the extent to which they are actually making affordable insurance available to people on very low incomes. I suspect the answer is that their record is as bad as the building societies' used to be, they may not operate an official red line but I am sure one can find an unofficial red line dotted round housing estates in many of the towns and cities up and down the country.

  67. Obviously, this is not central to what we are discussing, but is there a sort of parallel strategy that is something that you are fairly sure there is a need to examine?
  (Professor Craig) It is one of the costs that being in poverty leads you to have to bear, yes, which is not acknowledged in income streams.

  68. We have talked a little bit about refugees and other trends, and obviously since 1992, since your major study, multiculturalism is much more established in this country. Are there any other social trends, effectively, which would change in any way the recommendations you made, either your critique or your proposals for change, from those of nine years ago?
  (Professor Craig) Clearly, one of the major social trends is the move towards more and more households. People tend to live separately, longer, and have more separations, and so on, so, if you like, the number of households that one might have to deal with would be different. In terms of the costings that I put together, clearly, the economic situation now is far more favourable to the kind of scheme that I suggested. Remember that in 1992 the level of unemployment was, I guess, three to three and a half times what it is at the present time. So that my estimates of overall cost probably are way on the high side now. But I did want to say something supplementary about the issue of ethnicity, and I am afraid I must again take issue with Elaine Kempson's evidence. The detailed study that I did in Bradford, which was done in conjunction with colleagues doing similar studies in other cities, looked at the attitudes of, certainly in Bradford, admittedly, a fairly orthodox Muslim community. They were absolutely clear that they were not prepared to approach the Social Fund because of the loan foundation, regardless of whether it was interest-free or not. And Muslims often operate an informal, mutual, collective form of help, variously called Lena-dena, or Bira-dari, they are both Urdu words, I believe, Chair, but I can check that, which actually is a way of raising capital sums from within the community, and others would raise money, for example, for weddings, or funerals, or trips back to their country of origin, and they would rather do that than apply to the Social Fund for help.

  69. I am sure that is something that the Committee will want to look at more closely. Your costings at 1992 prices were £675 million; have you updated the cost, and was that a gross cost, or a net cost?
  (Professor Craig) That, if I recall, was a cost which was net of administrative savings, at the time. No, I have not updated them. I am sure the Department of Social Security, with all the resources that it has at its disposal, could do that rather more quickly than I could. I have not done any detailed work. But, as I say, the number of claimants that we are talking about is probably 30 to 40 per cent of the number of claimants we were talking about then.

  70. So it will be swings and roundabouts?
  (Professor Craig) Yes; and, indeed, some of the costings had to be fairly rough and ready, because the statistics were not then available. One would hope that, in thinking about any cost, the enormous, relatively enormous, costs of administering the Social Fund, which have sometimes been more than 50 per cent of net payments, would be taken into account. There is a vast sum of money there, which I think is a waste of public expenditure.

  71. Do you get any sense of your proposals being more likely to be acceptable now than they were?
  (Professor Craig) I live in hope, yes.

  72. That was not what I asked you.
  (Professor Craig) When I have read the Committee's report, I might have a better idea of whether I am batting in the right direction, but I am absolutely convinced that the Social Fund is a disgrace, and I am also absolutely convinced that it is completely out of kilter with the Government's objective of reducing child poverty, because it does not reduce child poverty, in many cases it enhances the difficulties that families with children have.

Mrs Humble

  73. Can I just ask for some clarification about these three tiers, and the new grant system that you are proposing. Have you looked at what proportion of this sum of money that was £675 million in 1992 you would have for tier one, and what proportion would be left for tier two and tier three? And, secondly, given that there are fewer claimants and there will probably be more money because of inflation increases, what sort of lump sum grant figure were you looking at to be given out in your first tier, which the applicants do not apply for, and so I get the impression that once or twice a year, in their benefit book or their girocheque, they could have a lump sum; what sort of lump sum were you talking about?
  (Professor Craig) If one takes the three tiers, first of all, the first part of your question, they were designed to address three different elements of the Social Fund and the preceding schemes. The first tier was a recognition that weekly income was not adequate, it was not adequate to enable people to save money for the normal lump sum items that most people would need on a year-by-year basis. So that would be regular, regulated sums of money, which would come, in a sense, it is a form of involuntary banking, every six months, or every year, you would get that sum of money. The second tier was a recognition that there are these detectable life events, and the evidence, over the last 70 years, is quite consistent, that there are a number of life events which would need payments. So you do not give those monies to everybody, you give them to people in recognition of those life events, setting up home, travelling to an institution, leaving care, and so on and so forth. The third tier was a recognition that any scheme has to have a degree of discretion and flexibility in it, and the idea, of course, was to reduce that, as I said earlier, to the minimum possible level. Now the rough and ready calculations I did suggested that the distribution between those three tiers was something of the order of £400 million, £240 million, and, I think, £30 million, something like that, adding up to about £670/675 million. So you can see rather more than half the expenditure would go on the first tier. Now that, of course, represents the tier which is administratively most easy to deal with, in any case. Now, turning to the issue of what I call bonus payments, it might be, it seemed to me, and it also seemed to the Social Security Advisory Committee, that there was no point in making payments where the administrative cost of making the payment was actually greater than the sum of the payment itself, so there would have to be a minimum threshold. If you wanted to link the bonus payments in the same way that Income Support premia are linked to household type and size, and so on, then you would obviously need a sliding scale, and, in a sense, you could not have an upper limit because somebody might come along with 37 children, to take a silly example. But if one took the bottom figure as the minimum payment which was then being made for a crisis loan of £30 and stepped it up, the range that we had was £30 for a single person, this is taking the Income Support—

  74. That is an annual payment?
  (Professor Craig) This is an annual payment, yes. Up to, for a couple with five children, with a disability premium and one disabled child premium, the sum would be £243. Now that was based on ongoing business, as it were, one could jack up the bottom figure, and obviously the top figure would rise on a proportionate basis; but that is a matter of economic judgement. I think equity would require that the size of those bonus payments was obviously related to household size, and so on. Though one could think, for example, at the present time, of, let us say, a bonus payment ranging from something like £60 a year to £300 and £350 a year, something like that.

  75. And you have looked at the administrative complexity then of administering this scheme, because if you are matching it to the claimants' needs and the families' needs then it is much more complex than just giving everybody a flat rate bonus, across the board?
  (Professor Craig) I am not sure it is administratively complex. Just two points. One is that the computer system which manages the Social Fund is archaic and long beyond its sell-by date. It is going to have to be replaced anyway, the DSS are quite clear about that, so there is going to be some need for change. If one looks at the Benefits Agency computerised facilities, they know what they are paying people, in terms of Income Support and premia. It does not seem to me to be rocket science to be able to translate that into a bonus payment on a pro rata basis. Now that actually would deal with probably two-thirds of the business of the Social Fund. The second tier actually requires people to provide evidence of this life event, `I am visiting my husband in prison,' `I'm going after a job,' `I'm setting up a house after domestic violence,' and so on and so forth. That is probably where the greatest amount of business would be, but it would be substantially smaller than the present level of activity that Social Fund officers have to engage in.

  76. But it would still be cash-limited, and therefore still open to the possibility of the same sorts of criticisms that the existing scheme has, so that if the local office had run out of money halfway through the year, for this particular group of life events, the second tier allocation,—
  (Professor Craig) No, it would not be cash-limited, because the sums that I did actually took into account the Community Care Grants that were paid to those who applied for them, and the Community Care Grants that would have been paid had people not been refused because there was not enough money in the budget.

  77. So you want to go back to a demand-led system?
  (Professor Craig) Demand is actually constrained, in a number of ways. People, in a sense, do not have to demand their annual bonuses, because they would get paid; in a sense, as I say, they are a form of involuntary banking. The second tier would be led by demand about life events. Now people do not sort of pitch up at an office, saying `I'm fleeing domestic violence,' if they are not. I should think it is much more easy to predict the demand for that sort of thing than it is at the present time.

  78. So the answer to my earlier question, about proportions of allocations for first tier, second tier, third tier, were your guesstimates for the second and third tier, what would be the likely demand. But it was not a cash-limited budget; it was a budget that would be allocated, where you would hope that that would meet the demands upon it. But if the demand exceeded that budget you would expect the Treasury to make additional money available?
  (Professor Craig) They were not guesstimates, they were actually based on Social Fund statistics, which showed the level of demand, but showed the level of demand including those who were refused because there was not enough money, not because they did not have needs. Remember that the people who are refused are refused largely not because they do not need the money but because there is not enough money in the budget, they are assessed as needing it, but "insufficient priority" pushes them out of the frame.

Mr Dismore

  79. A question in relation to the regular payment, the annual bonus, whatever you want to call it, presumably people would know when that was coming?
  (Professor Craig) Yes, and one of the suggestions, of course, would be that people could defer receipt of it, if they wished to; let us say, we had a six-monthly payment of £100, one family might say, "Well, alright, I'd like £200 in a year rather than £100 every six months." And another element of that would be that people would be enabled to take, as it were, their credit back into work with them when they went to work, so that would not be a disincentive. So if you had, let us say, a job offer, that you wanted to take four months into your six-months cycle, you could get that four months' credit in a lump sum, which would help you in your setting-up costs for starting work.

13   Poverty and social exclusion in Britain, David Gordon at al., 2000, Joseph Rowntree Foundations. Back

14   Low costs but acceptable; a minimum income standard for the UK: families with children, H. Parker (ed.), 1998, Policy Press. Back

15   Pensioner Poverty, Social Security Committee's 7th Report, Session 1998-2000. Back

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