Select Committee on Social Security Third Report


The Social Security Committee has agreed to the following Report:—


A Lifeline For The Poor - Or The Fund That Likes to Say No?

1. The Social Fund was launched in 1988.[1] It replaced a series of grants (known as 'single payments') which were available as of right subject to conditions laid down in regulations, with a fund which is largely discretionary, cash-limited, and consisting of loans not grants. In introducing the Social Fund, the then Government's key objectives were:

  • to support the Government's economic objectives by containing expenditure within the Social Fund budget;

  • to handle the arrangements in a way that did not prejudice the efficiency of the main Income Support scheme;

  • 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.[2]

7. How does the Social Fund match up to those aims? The cash-limited nature of the Fund has ensured that costs have been contained, and because it is separately administered, the Income Support scheme has remained unaffected. However, in ensuring that those first two aims are met, the Social Fund seems to have been working directly against achieving the remaining three. In particular, is it capable in its present form of providing the necessary help and attention to those applicants "facing greatest difficulties in managing on their income"? Does it achieve the aim stated by the Minister in oral evidence: "to help the poorest and the most vulnerable people in our society"?[3] The Committee set out to explore to what extent the Social Fund is succeeding in providing assistance to these people and whether claimants are receiving equitable treatment from the Department of Social Security (DSS). The inquiry was announced on 14 December 2000 and many memoranda were received.[4] We took oral evidence from academics, charities, the Local Government Association, the Social Fund Commissioner, claimants of the Social Fund, the Parliamentary Under-Secretary of State and DSS officials,[5] and visited a Law Centre and Citizens Advice Bureau in London followed by a local DSS office where claimants would first apply for Social Fund grants or loans. We are extremely grateful to everyone who assisted the Committee in its work.

8. The Social Fund today is in two parts: the Regulated Social Fund and the Discretionary Social Fund.

The Regulated Social Fund

9. In the Regulated Fund, payments are made by right, if a person meets the conditions, and with a full right of appeal to an independent Social Security Appeal Tribunal.

10. The Regulated Social Fund is responsible for Sure Start Maternity Grants (£300), Funeral Payments (burial/cremation charges plus up to £600), Winter Fuel Payments (£200 per household) and Cold Weather payments. The total budget for these payments in 1999-2000 was £815m.

11. While most of the evidence we received focussed on the Discretionary Social Fund[6] we did consider two specific areas of the Regulated part of the Social Fund: Funeral Payments and Winter Fuel Payments.

Funeral Payments

12. Funeral payments are available to people receiving an income-related benefit, Working Families Tax Credit or Disabled Persons Tax Credit. They are intended to cover necessary burial or cremation charges and up to £600 of other funeral expenses. Payments are reduced if a claimant has savings over £500 (£1000 if aged 60 or over), or certain other sums such as money from a pre-paid funeral plan. To get a payment, a person must qualify as an eligible person, under strictly defined rules. In 1999-2000, there were 44,000 funeral payment awards, averaging £866 each. 26,000 were refused. The total spent on Funeral Payments has reduced from £47m in 1995/96 to £37m in 1999/2000.

13. Many witnesses drew our attention to the restrictions on who may claim and the maximum amount available for successful applicants. The Local Government Association considered that: "The complicated rules on 'absent partners' and 'close relatives' amount to an inflexible and insensitive set of exclusions which produce trauma, despair and practical difficulties."[7] Mr Patterson of the Local Government Association (LGA) said: "either people are refused, or [receive] limited amounts. The average Social Fund funeral payment is about £866. The average cost of a funeral in the UK, the last figure I saw, was £1,600."[8] The London Borough of Newham said that: "The level of £600 for funeral directors' costs for the Funeral Payment causes hardship and distress. Local funeral directors have described how they find it very difficult to offer dignified funerals to claimants at this level of the Funeral Payment."[9] Mr Bateman, representing the LGA, thought that: "it ought to be possible to devise a model, 'value for money', 'funeral with dignity' scheme, where we do not get into that type of degrading behaviour."[10] Mr Wheatley of the National Association of Citizens Advice Bureaux (NACAB) was of the opinion that:

"The amounts paid out could be higher and the rules could be less restrictive. We would back up what others have said, that successive restrictions have produced cruel and absurd decisions, and the typical outcome, even if people do get a grant, is that it only pays half the cost of the funeral. It can be very distressing, people are left with enormous shortfalls to find, if they can, from charitable sources, others are left with debts and are visited by bailiffs."[11]

In their written evidence the London Advice Services Alliance (Lasa) agreed:

"By definition funeral payments are intended for the very poorest in society, as neither the deceased nor the bereaved have adequate savings or assets. There is no justification for not funding the standard cost at least. Many bereaved people get into serious debt as a result."[12]

14. There is consistent evidence from claimants that they perceive the process as unfeeling and overly-bureaucratic. For example Citizens Advice Scotland told us of:

 "a woman on Income Support whose mother had recently died. Her father, who was aged 90 and registered blind, was rendered incapable of doing or signing anything due to the shock of his wife's death. The client therefore filled in the form for him and signed as his appointee. The claim was turned down as she had not filled in form AP1, necessary in such circumstances. Her father died before arrangements could be made for this form to be signed. The bureau states that pleas to the Benefits Agency to consider the circumstances in which the claim was made were ignored."[13]

15. We also heard that the rules were restrictive in the case of people from ethnic minority backgrounds. Mr Patterson of the LGA told us that: "they cannot get even the costs of religious observance in this country, because the final funeral will take place, say, in Pakistan, and they certainly do not get equal treatment."[14]

16. We tackled the Minister on the question of Funeral Payments. While she agreed that: "The funeral payments end of the Social Fund is one of the most difficult"[15] and suggested that "The £600 is kept under review",[16] she accepted that the amount of Funeral payment had last been increased in April 1997.[17]

17. Whilst we accept that there have been many changes to the Benefit system since 1997 which have taken priority, we believe that reform of Funeral Payments is long overdue and recommend that the Government increases the amount available to claimants for Funeral Payments to a more realistic total, reflecting the current charges for a funeral and that steps should be taken to ensure that the amount is reviewed annually to reflect increases in funeral costs.

18. We recommend that there should be greater flexibility in the rules governing eligibility for funeral payments, so that payments can be, for example, made to the parent of a deceased child, or to a close relative or close friend if it is reasonable to do so. The question of reasonableness should be decided at the discretion of the decision-maker, subject to guidance (as opposed to inflexible rules laid down in regulations as now); and with a right of appeal to a social security appeal tribunal on the exercise of that discretion.

19. In the case of applications from people who wish to bury the remains of the deceased overseas, we recommend that funeral payments (subject to the usual maxima applied to other funerals for which a Funeral Payment is available) should be allowed in respect of funeral costs (or equivalent religious observance) which are incurred in the UK, prior to transportation overseas.

Winter Fuel Payments

20. Included in the Regulated Social Fund, Winter Fuel payments, of £200, are paid to all households where there is someone aged 60 or over. The annual cost of this benefit in the current year[18] is £1.7bn. Some questions have been raised as to whether the benefit should be more targeted or extended to those receiving Income Support or other income related benefits. The Social Inclusion, Housing & Voluntary Sector Committee of the Scottish Parliament asked whether we would take up this issue.

21. In response to our questioning, the Minister stated that: "to extend winter fuel payments to those who currently effectively get cold weather payments, that is the disabled and those with children under 5 ... will cost an extra £300 million a year"[19] and that the benefits paid to disabled people and those on income-related benefits included an element towards additional heating costs.[20] She considered that; "the government is not contemplating doing it."[21]

22. We do not believe that the current universal Winter Fuel payments are likely to be extended at the present time. If, however the arrangements are changed in the future to a more targeted benefit we will expect the fuel poor in other groups to be included. The element of benefits which is intended to cover fuel costs, to which the Minister referred in her evidence to the Committee, should keep pace with any increase in the cost of heating generally.

The Discretionary Social Fund

23. Most of the evidence we received during our inquiry concerned the Discretionary Social Fund which consists of three elements: Community Care Grant (CCG); Budgeting Loans, repayable by the claimant from weekly benefit to meet expenses which occur irregularly; and discretionary Crisis Loans for emergencies, similarly repayable from weekly benefit. The administration of the Discretionary Fund remained substantially unchanged from 1988 until April 1999, when a more computerised, mechanistic approach to awarding Budgeting Loans was introduced.


24. Table 1 below shows expenditure on the Discretionary Social Fund since 1994. In the case of Budgeting Loans and Crisis Loans, the difference between gross and net expenditure is accounted for by loan repayments. The table shows that expenditure on Community Care Grants grew by only 3% between 1994-95 and 2000-01. Gross expenditure on loans rose by over 80% during the same period. Net expenditure on the Discretionary Social Fund was less in 1999-2000 than in 1994-95.

Table 1: Discretionary Social Fund Expenditure (£m)[22]


Community Care Grants

Budgeting Loans

Crisis Loans









































00/01 (Allocation)


In 2000-01 the Grants budget has been increased to £100m and the total loans budget (Budgeting Loans and Crisis Loans) to £494m.

Number of awards

25. Table 2 below shows the number of awards for Discretionary Social Fund in the last five years.

Table 2: Numbers Receiving Discretionary Social Fund Awards (000)[23]


Community Care Grants

Budgeting Loans

Crisis Loans





















26. The table shows that the number of people receiving grants has fallen year on year. In 1999-2000, around two-thirds of those who applied for a Community Care Grant were refused, as were almost 40 per cent of Budgeting Loans applicants and 27 per cent of Crisis Loan applicants.

27. To qualify for a Community Care Grant or Budgeting Loan, the applicant must be in receipt of Income Support or Income-based Jobseeker's Allowance, and in the case of Budgeting Loans, must have been so for 26 weeks; Crisis Loans are for anyone in a crisis and without sufficient resources to meet their immediate short-term needs.

The cash-limited nature of the Discretionary Social Fund

28. In the Discretionary Social Fund, payments are made from a cash-limited budget. The Government sets the total budget for the Discretionary Social Fund each year. Each Benefits Agency district office is then allocated a fixed sum for grants and a fixed sum for loans. Social Fund staff must have regard to the budget when deciding whether to make a payment and how much to award.

29. During the course of the inquiry it became apparent that under-funding is one of the major underlying problems of the Social Fund in its current form. The cost of the previous system of single payments which was replaced in 1988 had been rising "so rapidly as to be out of control."[24] Professor Gary Craig told the Committee: "Throughout the history of the Social Fund, the problem has been to manage inadequate budgets, and I think all the nuances and regulations and directions that have been introduced over the last few years are simply directed towards that goal, of actually ensuring that expenditure does not exceed allocations. Discretion is not used in a positive sense to respond to need, it is used in a negative sense to ensure that the budget is not overdrawn."[25]

30. The Social Fund Commissioner, Sir Richard Tilt said "It strikes us I think, that the scheme is under great pressure because of the amount of money available, and that some of the problems we are talking about do derive from just the quantum of money."[26]

How decisions are made


31. Instead of regulations debated by Parliament, the key rules determining eligibility are set out in a series of 'Secretary of State's directions', which are legally binding on Social Fund staff.[27] The Secretary of State also issues national guidance for Social Fund staff on how to administer the Social Fund, how to interpret the law and directions, how to prioritise applications and when to make payments. There is also local guidance on priorities which staff must follow.

32. Claimants access the Discretionary Fund by completing separate application forms for a Community Care Grant, a Budgeting Loan or a Crisis Loan. These separate forms were introduced in 1999. Social Fund applications are dealt with at Benefit Agency District Offices (not at local BA outlets). Only Crisis Loans are normally paid at the local BA outlet.

33. There is no right of appeal against Community Care Grant, Budgeting Loan or Crisis Loan decisions. Instead there is a two stage review system. Stage One is an internal review carried out within the Benefits Agency. Stage Two is a further review, on request by an applicant, to a Social Fund Inspector. Social Fund Inspectors are part of the Independent Review Service, based in Birmingham and headed by the Social Fund Commissioner.

1   Maternity and funeral grants were introduced earlier in 1987. Back

2   See The Social Fund, NAO, 1991. Back

3   Q. 335. Back

4   See lists at pages xlii-xliv Back

5   See list of Witnesses at page xli Back

6   See below paras 18 et seq. Back

7   Ev. p. 70, para 20. Back

8   Q. 279. Back

9   Appendix 15. Back

10   Q. 281. Back

11   Q. 318. Back

12   Appendix 19. Back

13   Appendix 4. Back

14   Q. 280. Back

15   Q. 346. Back

16   Op cit Back

17   Q. 350. Back

18   Ev. p. 121, para 38. Back

19   Q. 342. Back

20   QQ. 342 and 343. Back

21   Q. 343. Back

22   Figures from Secretary of State's Annual Reports on the Social Fund 1994-2000. Back

23   Figures from Secretary of State's Annual Reports on the Social Fund 1995-2000. Back

24   NAO Report 190 The Social Fund 1991. Back

25   Q. 56. Back

26   Q. 101. Back

27   Procedural aspects of applying for payments and acceptance and repayment of loans are set out in regulations. Back

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