Select Committee on Social Security Third Report

Community Care Grants - The Postcode and Calendar Lottery

Direction 4

34. To obtain a Community Care Grant, an applicant has to overcome two hurdles. The first hurdle is to show that he or she comes within the eligibility criteria for a CCG. Secretary of State's Direction 4 lays down that Community Care Grants are available in the following limited circumstances:

Direction 4(a)(i):  to help people to establish themselves in the community after a stay in institutional or residential care;

Direction 4(a)(ii):  to help people remain in the community rather than enter institutional or residential care;

Direction 4(a)(iii):  to ease 'exceptional pressures' on the claimant and family;

Direction 4(a)(iv):  to care for a prisoner on temporary release;

Direction 4(a)(v):  to help people set up home in the community as part of a planned resettlement programme following a period without a settled way of life.[28]

Direction 4(b):    to help with certain travel expenses. These include visits to someone who is ill; to attend a funeral; to ease a domestic crisis; and fares to move to suitable accommodation.

35. Of those who obtain a Community Care Grant, the largest category are families under exceptional pressure, who receive almost half of the money spent on CCGs. A third of CCG money goes to people to help them stay in the community rather than enter residential or institutional care. Just over ten per cent assists people moving out of institutional or residential care, and a further 2.8 per cent goes specifically to support people setting up home as part of a resettlement programme.[29]

36. However, in 1999-2000, two-thirds of all applicants for Community Care Grants (426,000 people) were refused.[30] Sixty-six per cent of these (281,520 people) were refused a Community Care Grant because they failed to satisfy Direction 4. Three quarters of those refused for that reason were lone parents and four-fifths were unemployed people.[31] But how robust are the decisions that an applicant fails to satisfy Direction 4?

37. Respondents to the inquiry drew attention to the subjective element involved in deciding whether an applicant comes within Direction 4. CPAG pointed out that the term 'exceptional pressure' was very imprecise: "what is exceptional pressure, nobody has defined it, and there is a general acceptance that it is not sufficient to say you are in poverty; so what is it?"[32] South Lanarkshire Council, for example, reported two recent cases where families being rehoused following domestic violence were refused CCGs to furnish their new tenancies on the grounds that they did not come within Direction 4.[33] The Social Regeneration Unit at the London Borough of Newham commented that what was regarded as 'exceptional pressure' in one area is not regarded as exceptional in another.[34] London Advice Services Alliance drew attention to the difficulty applicants faced in seeking to bring themselves within Direction 4(a)(ii): "applicants need to say that without it they are likely to go into an institution such as hospital, or residential care, or indeed that their children will go into care, if they do not get a bed. This may well be the eventual consequence. But it is much too drastic and frightening for most people to say about themselves or their children."[35]

38. We were particularly disturbed by evidence from the Social Fund Commissioner that: "[Social Fund] Inspectors regularly see cases that are deemed not to meet the qualifying conditions under Direction 4 when clearly the conditions are met."[36] In his view, it was pressures on the CCG budget which drove such decisions.[37] This is discussed further below.[38]


39. Those applicants who succeed in coming within the eligibility criteria for a Community Care Grant then face a second hurdle. Their need is given a 'priority' rating, high, medium or low. The Social Fund Guide suggests that an application be given a high priority where a CCG would have a significant and substantial impact in resolving or improving the circumstances of the applicant and be very important in fulfilling the purposes of CCGs.[39] A medium priority application is one where the CCG would have a substantial impact in resolving or improving the circumstances of the applicant but be less important in fulfilling the purpose of CCGs.[40] The Local Government Association observed, "to determine between high and medium priority need...requires an extremely sophisticated and sensitive form of decision-making and involves a high degree of subjectivity on the part of the Social Fund officers when considering the merits or otherwise of a particular claim."[41]

40. In practice, many respondents referred to a cruder set of judgements. A welfare rights officer from North Ayshire Council commented that, in her experience, many ordinary items, for example, carpets, a fridge or a wardrobe were not of sufficient priority to be awarded under the Social Fund. Local guidance meant that for many months each year only cookers and beds were considered high priority items. Ex-offenders rarely qualified when leaving institutional care, being classed as low priority.[42] Pauline Adey, Independent Review Service Manager, explained to us: "in theory, at least, any item could be paid as a Community Care Grant; in practice, it is very often still only the top few items, cookers and beds."[43] The Social Fund Commissioner added, "Fridges are quite often excluded, or put into medium priority; some elements of clothing, that one might have thought quite high priority, sometimes get pushed into medium priority."[44] Seventeen per cent of applicants (73,734 people) were turned down in 1999-2000 because their needs, although falling within Direction 4, were deemed 'insufficient priority.'[45]

The budget

41. According to the construction of statute and case law, the budget is not a relevant factor when deciding priority.[46] In reality, according to the Social Fund Commissioner, "the budget often plays a dominant role in decision making".[47] Inspectors regularly saw cases where the budget had influenced the decision on priority, resulting in needs, which, on a proper application of the law, were high priorities being given an artificially lower priority and refused and applications being refused because they did not meet the grant qualifying conditions, when the evidence showed clearly that the conditions were met.[48] Other agencies made similar points. Leicestershire Social Services said: "Whilst reasons are given for any item being considered low priority, it is evident that the decision is primarily based on the state of the local budget. The reasoning is put together after the real internal decision that there is not enough money to pay for an item."[49] The National Association of Citizens' Advice Bureaux gave a number of examples where seemingly essential needs had been refused on priority grounds. One concerned a woman with an asthmatic child, who had left her violent husband, and was rehoused by the council after an unsatisfactory stay with her mother, a heavy smoker. Her application for a CCG to furnish her new home was turned down on priority grounds.[50]

42. The Community Care Grant budget is under severe pressure. The budget was frozen completely for four years between 1994 and 1998. An injection of an extra £1 million in 1998 was in fact to take account of an added eligibility category in Direction 4, for planned resettlement programmes. £2 million was added in the current year. Altogether, the CCG budget has risen only three per cent in value since 1994.[51] This is at a time when, as Herefordshire Council pointed out, "more people are either moving out of residential care or are seeking to access greater levels of support to live in the community. This in turn means that there are larger numbers of people 'competing' for Community Care Grant funding."[52] As explained above, this has led in 1999-2000 to two-thirds of applications being refused.[53] The number of people receiving grants has fallen year on year, from 294,000 in1993-94,[54] to 219,000 in 1999-2000.[55] There is also evidence that those awarded grants are receiving reduced amounts.[56] In practice, all the evidence suggests that, due to severe budgetary constraints, in large parts of the country only applications classed as high priority stand any chance of success. The Social Fund Commissioner commented, "There are a tiny number of districts that are paying any medium priority, there are just a handful, but that is very small indeed."[57] The welfare rights officer at Stockton on Tees Borough Council said that, for the last two years, the Teeside District Benefits Agency had only been able to meet those applying for community care grants who have highest priority.[58] The London Advice Services Alliance commented: "the interaction of the low budgets and discretion means that in practice only cases considered 'high priority' ever have a chance of getting a payment...To put this in context, a person moving out of hospital and setting up home may get a payment for essential furniture and household equipment, but a pensioner needing extra or replacement warm bedding is likely to be refused. So this makes a nonsense of the other ranges of priority."[59]

43. The national Social Fund Budget is allocated to Benefits Agency Districts under a formula which, historically, took account, firstly, of the previous year's budget for the District; secondly, of the Income Support caseload for the District, weighted to take account of the numbers of pensioners, unemployed people, disabled people and 'others', and the length of time they had been on benefit; and thirdly, of 'legitimate demand,' based on the value of payments made by the District in the previous year and the estimated value of refusals on grounds of insufficient priority for the four client groups.[60] In view of the evidence presented to us concerning the accuracy of decisions on eligibility and priority, and the hidden role of the budget in influencing such decisions, questions must arise concerning the accuracy of the Department's figures concerning 'legitimate demand'. It also became clear during the course of our inquiry that the caseload figures on which the formula is based date from 1994 or even earlier. As a result, allocations may not reflect more recent demographic change, for example, the disproportionate growth in asylum seekers and refugees in certain parts of the country and the increased number of families in temporary accommodation because of pressure on housing stock, especially in the south-east of England. The basis of allocation of the Social Fund budget is likely to have to change in future to reflect organisational change, including the demise of the Benefits Agency. We recommend that the Department should commission research to re-examine the basis on which the CCG budget is currently allocated to local offices, including the relative weightings given to different client groups; the current accuracy of caseload measurement; and the accuracy of measurement of 'legitimate demand'.

A postcode lottery

44. The pressure on local budgets is such that there are at least 23 out of the 159 Benefits Agency District Offices where local guidance had been issued restricting CCGs applications to only those unofficially classed as "highest of high priorities."[61] Plymouth CAB, in an area where only 'most urgent and pressing high priority' claims were being met,[62] gave a vivid example of the hardship caused as a result. They cited the case of a couple with mental health problems who were rehoused due to the birth of their baby. They had no cooker, washing machine, fridge, as well as no carpets and little furniture. The couple did not have care of their baby, because the social worker had said that the house must have basic equipment to enable best care of the baby. Their application for a Community Care Grant was refused. On review, they were allowed only a cooker. As a result, they still had not got care of their child.[63] Most other District Offices had told the Independent Review Service that they could meet all high priorities, but the Social Fund Commissioner was sceptical: "our evidence leads us to conclude that not all these districts can meet all high priority needs."[64] The result is a postcode lottery, where, as Blackburn with Darwen Borough Council noted: "two claimants living in different local catchment areas with identical circumstances can have different awards due simply to the budget."[65]

A calendar lottery

45. As well as a post code lottery, the evidence suggests that there is also a 'calendar lottery', whereby two claimants living in the same catchment area with identical needs could have different decisions on a CCG application, by virtue of applying at different times of the year. The decisions do not reflect the merits of their case, but rather the state of the District Budget. Help the Aged, which operated a confidential free advice line for older people and their carers, told us that: "applicants often find that near the end of the month it is very difficult to get a payment because their local office is running very low or has spent all their Social Fund budget."[66] Bob Holman, a community worker in Easterhouse, Glasgow told us that it was social workers and other advisers who would warn prospective applicants for CCGs: "Do not apply this month because they have not got any money." He commented: "It is a ridiculous situation, is it not, that your need can be exactly the same in February as in June but in one month you get it and in another month you do not get it? That is a nonsense."[67] Professor Gary Craig drew our attention to the Social Fund statistics, which up until 1995 gave monthly expenditure totals on grants. He was critical of the Department's decision to discontinue this information, which showed that "February and March are always better months to get an application in: in some years almost twice as much spending has gone on pro rata in March as it would do on a steady spending basis."[68] The problems of the calendar lottery are reinforced by the rule that a person who applies for a CCG and is refused, cannot reapply for the same need for a further six months, unless their circumstances have changed.[69]

46. The Minister responsible for the Social Fund saw the 'postcode' and 'calendar' lottery which the Community Care Grants scheme has become as the inevitable consequence of a discretionary, budget-limited scheme: "With entitlement schemes you can guarantee similar treatment everywhere at all times of the year and in every geographical area. Discretionary schemes do not give you that guarantee...This is a cash­limited scheme so clearly, if there is pressure on the limits, you will get different decisions at that time than if there is not a pressure on the limits."[70] We accept that any discretionary scheme will inevitably lead to differences in decisions. However, we are concerned at the extent to which those differences - between geographical areas, and at different times of the year - are not due to differences of judgement of skilled staff, but to a lack of money in local Social Fund budgets.

47. We expressed our concern to the Minister at the way 'high priority' needs were being further sub-divided into the highest or most urgent of the high priority needs. She responded that:

"There is no such category as "highest of the high" in any of the directions or guidelines but I can see how that might be a phrase that would enter somebody's language if they know that, by the rules, they have to ensure that if there is a range of needs in front of them they have to make sure that the highest ones are paid first. If the budget then is tight you can see that you might define "highest" would be different than at a time when you could give grants to a broader range of people. I have thought about this, and I do not see how you can avoid it if you have a cap and a cash limit."[71]

48. We are extremely concerned that the budgets of a considerable proportion of District Offices are so strained that they are unable to meet all high priority needs, which, by definition, are needs where an award would have a significant and substantial impact in resolving or improving the circumstances of the applicant and would be very important in fulfilling the aims of Direction 4. We are also concerned that claimants may be given a misleading impression by the current system of different classes of priority. We recommend that claimants should be given sufficient information to enable them to have a reasonable expectation of what is or is not classed as a priority.

49. One way of immediately relieving the pressure is to raise substantially the Community Care Grant budget in order to meet the level of unmet need. The Social Fund Commissioner drew our attention to the change in the ratio of Social Fund discretionary grants to loans since 1994, from one third to about one fifth.[72] The Minister said: "I would welcome discussion on what the correct balance between grants and loans is, whether there is a correct balance and whether we have it right."[73] We have concluded that the balance needs to be changed. If restored to the 1994 position, the CCG budget would now be around £166 million. At present, the budget is such that essential basic items such as clothing or bedding are classed as insufficient priority, even for people coming within the limited eligibility criteria of Direction 4. We recommend that, failing more fundamental reform, the Community Care Grant budget should be raised substantially to a level which ensures that all applications which are classed as high and medium priority are met to the full amount required.

Budgeting Loans

50. Budgeting Loans were described by Professor Gary Craig as the "operational heart and soul of the Social Fund".[74] Within the alternative credit market in which those on low incomes have to operate, Budgeting Loans represent one of the very few sources of cheap credit, offering interest-free loans. Changes were made in 1999 to the way applications for Budgeting Loans are administered. Applicants now apply for a sum of money, rather than for a loan for specific items as previously. To qualify a person must be in receipt of Income Support or income-based Jobseeker's Allowance, and have been so for the past 26 weeks. Capital over £500 (£1000 for people aged 60+) reduces the amount of an award. The applicant must be able to repay the loan from weekly benefits.


51. Each budgeting loan application is weighted in accordance with set factual criteria relating to the applicant's personal circumstances. The two main criteria are the length of time the claimant or partner has been on benefit (up to a maximum of three years) and the number of people in the family. More time on benefit and a larger family result in a higher weighting. Existing Social Fund debt is also taken into account. The maximum Social Fund debt allowable is £1000.

   52. There is no assessment of need involved in the assessment process, and applications can be refused on the basis that people will be unable to repay the loan applied for. Although the Minister made the point that 82,000 more people received Social Fund loans in the year after the 1999 changes were introduced[75], the refusal rate for budgeting loans in 1999-2000 was 40%, that is 647,000 applications.

53. The evidence from several witnesses[76] is that although the new application forms are simpler and loan applications are processed more quickly since the new arrangements were introduced in 1999, applicants are not receiving the full amounts they apply for. The Family Welfare Association quoted an example of a woman with five children:

"Ms L manages her money well despite her large family. Her bills are paid, she has no debts and sets aside a weekly sum for replacing shoes, buying presents for Christmas etc. She recently applied for a Social Fund loan for £185 to purchase a fridge/freezer. Bulk buying enables her to save money. The Social Fund gave £100 as they said she could not repay a larger loan." FWA was pleased to fund the balance required."[77]

54. Elaine Kempson of the Personal Finance Research Centre at the University of Bristol told us that as a result, applicants are now beginning to apply for more money than they require in order to receive a loan adequate for their needs.[78]

55. The reasons for the amount of grant awarded or for a refusal are not explained adequately to claimants. Alan Barton of the National Association of Citizens' Advice Bureaux, when referring to the Budgeting Loan scheme said: "the process is not transparent, I think to the staff who operate it, and this means that they cannot explain to the applicant why they are being offered what they are."[79] This issue is explored later in this report.[80]

56. Another consequence of the high refusal rate is that applicants turn to alternative sources to get the money they need. Helen Dent, Chief Executive of the Family Welfare Association (FWA) told us that charities are increasingly being asked to bear the shortfall by providing funding for items when applications for Social Fund grants and loans have been refused. She wrote: "After the introduction of the Social Fund FWA became flooded with applications for essential items. Today nearly all of our funding is allocated to essential items and little to enhancing the quality of life for individuals and families in need."[81]

57. As we heard from many witnesses including claimants, and in numerous written submissions, other forms of debt are frequently incurred as a result of loans being refused or because inadequate amounts are awarded. Most types of credit available to poor people perversely have higher rates of interest than those available to the better-off. The types of loan mentioned by witnesses are for example, catalogue purchase, cheque repayment systems, certain shops which provide credit (at a price) without status inquiries, and even unlicensed money lenders. Credit Unions, although considered beneficial in other circumstances of low income, were deemed by witnesses[82] to be of little help to most Social Fund claimants. In order to obtain a loan from a Credit Union there is a requirement to save first and claimants' low income prevents them from depositing the required number of payments.

58. Elaine Kempson gave the Committee an illustrative example of the consequences of financial exclusion causing people to turn to forms of more expensive credit.

"We have costed a washing-machine, bought through different routes, and I think that perhaps illustrates it rather more realistically for these people, because APR is a little difficult to grapple with and it gets rather distorted at this bottom end of the market. If someone were to use the Social Fund Budgeting Loans scheme to buy a washing-machine in the high street for about £400, if they bought it through a mail order catalogue and spread the cost over about 50 weeks of the year, it would cost them about £500, to go to Crazy Georges, or one of the rental purchase schemes, about £600, a £400 loan from one of the weekly collector credit companies could cost you £700. Some people, in extremis, do need to go to unlicensed lenders,....there you might be looking at £2,000 pay-back."[83]

59. It is clear that the revised Budgeting Loan scheme is simpler for the DSS to administer and has improved the speed of decisions. However during the course of this inquiry questions have been raised about the transparency of the system, both to applicants and to the BA staff who need to explain decisions to them. This has implications of uncertainty for families attempting to plan their finances and make decisions about credit. As Elaine Kempson put it:

"Potential applicants lack the information they need to assess their remaining 'credit limit' with the Budgeting Loan scheme. As a consequence, they find it harder to ration their use than they do with almost every other source open to them - including their family and friends. The result of this is that people apply but either have their applications turned down or are offered much less than they applied for. Budgeting Loans are the only source of credit where applicants are quite likely to get less money than they apply for. Many people who are offered reduced amounts do not really understand why this is the case. In particular, there is very poor understanding of the rules on 'top-up' loans. The problem seems to arise because the Budgeting Loan scheme operates differently from other sources of credit that applicants are familiar with. Top-up loans from credit unions, weekly collected credit or a mail order catalogue are discussed in advance of the application. And most customers, in any case, know their limit and how much of it is still available to them because it is a much simpler calculation than the one used for Budgeting Loans."[84]

60. We recommend that better information be made available to applicants, to increase their awareness of their credit limit and the chances of an additional loan application being successful.[85]

Crisis Loans

61. Crisis Loans are available to people without sufficient resources to meet the immediate short-term needs of themselves or their family. They are intended to help with:

  • rent in advance, but only where the landlord is not a local authority and a CCG is being given, following a stay in institutional or residential accommodation.


64. In the case of an item or service, the maximum amount is the reasonable cost of purchase, or the cost of repair if cheaper. In the case of living expenses, the maximum is a reduced rate of Income Support/Jobseeker's Allowance.

65. Table 1 above gives details of the annual budgets for Crisis Loans since 1994-95. In 1999-2000, the gross expenditure on Crisis Loans was £62 million, and 939,000 Crisis Loans were awarded. The refusal rate was 27%. The Minister explained that "One third tend to be granted because people have money stolen and therefore have no money at all; a third is this alignment reason, and a third is sudden crisis."[86] In 1999-2000, 37.3% of Crisis Loan payments were made for "alignment", that is to people waiting for their applications for other benefits to be decided or to tide people over until their first payment date arrived.

66. Both oral and written evidence indicate that the Crisis Loan scheme is being used to compensate for deficiencies elsewhere in the benefits system. Terry Patterson from the Local Government Association gave the following example:

"The claiming process involves verification of identification and National Insurance numbers to be allocated,. The classic problem is, an asylum-seeker gets status, there are then huge delays to get those National Insurance numbers, just the interviews for them so that you can put your evidence to the staff in the first place, and they will not give the Crisis Loan in the meantime. And then people come back to social services, of course, and it is each department being played off, to get evidence from one another so that you can try to intervene, and it is very, very difficult, particularly for single people."[87]

67. Neil Bateman of the Local Government Association, when asked whether there was evidence that Crisis Loans are masking inefficient administration of basic income benefits replied: "Yes; and, indeed, the actual system of paying large numbers of claimants in arrear can mean that you have got claimants going in hock to the state at the start of their time on benefit, which surely cannot be a good thing, and certainly is not a good thing in terms of actually trying to get them off benefit, in line with the Government's objectives."[88]

68. This was borne out in written evidence from Suffolk County Council Social Services:[89]

"We also have concerns about Crisis Loans. Not only do these become an arena for conflict between Benefits Agency and Social Services staff, but our staff frequently come across situations where it should not be necessary to have to apply for a Crisis Loan in the first place. For example, crises can arise because of delays in processing benefit, lack of flexibility with the new National Insurance number requirement (this is particularly a problem for young people who have had unsettled lives and may be without a National Insurance number) and the trend to pay benefit in arrear.

69. The National Association of Citizens' Advice Bureaux said that:

"CABx see a worryingly large number of cases in which benefit applicants who are without money, are denied Crisis Loans to tide them over while their claims are considered."[90]

70. Citizens' Advice Scotland told us about a client who had lost her entitlement to Incapacity Benefit because she had failed to attend a medical assessment. The bureau was involved in the case already as the reason she had missed the appointment was because the Benefits Agency had sent notification to her previous address despite being told of the change. In the meantime, the client was advised to apply for a Crisis Loan to tide her over. This was refused on the grounds that, without benefits entitlement, she had no ability to pay the loan back.[91]

71. We recommend that the annual percentage of Crisis Loans paid for "alignment" (37.3% in 1999-2000) is analysed in order to assess the underlying problems leading to the need for those Crisis Loans, how the causes could be addressed and that the results be published by the Secretary of State in the annual report to Parliament.

72. In his written memorandum, the Social Fund Commissioner raised another concern about the Crisis Loan scheme:

"The Crisis Loan scheme does not appear to have picked up many of the needs that cannot be met by way of a budgeting loan. The Secretary of State's annual reports on the Social Fund show that spending on crisis loans for items was down slightly in the first year of the new scheme as was the average award size."[92]

73. Ann Greenshields, the Aide to the Social Fund Commissioner, explained further in oral evidence: "The direction that deals with crisis loans actually was amended at the time

of the changes to the scheme, from April 1999, saying that refusal of a Budgeting Loan will form part of the considerative process. But this is one of the problems that we have had with that particular amendment, in that it does not actually seem to make any difference to the cases that would have qualified for a crisis loan under the old scheme, it does not seem to allow any additional people to qualify."[93]

74. We recommend that the direction dealing with eligibility criteria for Crisis Loans be reviewed in order to increase access to Crisis Loans when applications for Budgeting Loans have been refused.

Repayment And Rescheduling of Loans

75. Budgeting Loans and Crisis Loans, which form the majority of the claims from the Discretionary Social Fund, have to be repaid by claimants from weekly benefits. The loans themselves are interest-free but in order to qualify the claimant must be claiming Income Support or income-related Jobseeker's Allowance and is thus already on a very low income. Dr. Holman of the Easterhouse project reminded the Committee that a Social Fund loan is interest-free, but went on to warn that: "it is an interest-free loan to people who cannot really afford to pay back. That is the crux of the matter."[94] Once a loan is approved repayments can be as much as 25% of their weekly benefit income.[95] The maximum repayment term is 78 weeks, although in practice the high rates of repayment mean that loans are repaid over much shorter periods.

76. A result of the preponderance of loans is that the actual cost to the Exchequer is extremely low (some £23m in 1999/2000 as against a gross cost of £396m). It is very effective from an accounting standpoint to recoup the money in order to lend it to another applicant, but what is the effect on the person struggling, below the generally-agreed poverty line, to repay a loan relatively quickly? We heard from Citizens Advice Scotland that: "a single parent who had recently applied for a Budgeting Loan had received two loan offers: one of £630.30 to be paid back at £21 per week or £165 to be paid back at £5.60 per week. The client could not afford the first option and the second offer was too low to meet her needs."[96] The Nottinghamshire Probation Service agreed: "repayment of the loan can cause considerable hardship for people on means-tested benefits. The rate of repayment set by the Benefit Agency does seem high."[97] Another example was given to us by Redcar and Cleveland Borough Council of:

"An 18 year old pregnant girl, estranged from her parents and living in a rented flat. She receives Housing Benefit up to the 'single room' rate of £35 per week and therefore has to pay the shortfall to her landlord. She also repays a Budgeting Loan for basic furniture at the rate of £5.35 per week leaving her £36 per week for food, clothing and rent. She had no money to buy food or to heat her home, after paying her landlord."[98]

77. Rotherham Council Welfare Rights and Money Advice Service commented:

 "As Debt Counsellors we believe the Benefits Agency is recovering a larger proportion of debt to income than we would offer to other creditors. Over 50% of clients receiving money advice from Rotherham Metropolitan Borough Council with Social Fund loans required repayments to be reduced as they were unable to meet priority payments on fuel, utilities bills and had often got into arrears as a result. This is creating, rather than reducing, a downward spiral of debt. Such claimants are forced to find money in their budget through reducing spending on food and heating leading to poor diets and poor health".[99]

78. We consider that the level of repayments and the repayment period should be much more flexible in order to minimise the hardship which claimants experience and to avoid them encumbering themselves with further high-priced debt. For example major purchases (referred to by one witness as lumpy items) such as washing machines, cookers and beds would be expected to last several years and thus the repayment period could be greatly extended. We recognise that if the payment period was extended, in order to sustain the current level of loans, the budget would have to be increased. But we consider that, because the loans would still have be repaid, there would be hardly any increase in net expenditure in the long term.

79. Another worrying facet of Social Fund loans is that claimants experiencing hardship while trying to repay a loan seemed to be unaware that they could apply for the repayments to be rescheduled if their circumstances change. We heard from several witnesses that the Benefits Agency staff did not inform them of this. As Elaine Kempson said: "they do not realise that if they are in financial difficulties they could ask for [the loan] to be rescheduled."[100] When we put this to the Minister she hoped (our italics) that: "the advice bureaux and our staff would make that knowledge available."[101] and went on to offer that the DSS would: "participate in any extra work to try to make that knowledge available."[102]

80. We consider that Benefits Agency staff should be expected to draw the attention of applicants to the possibility of rescheduling loans both at the time of application and subsequently if it becomes clear that the claimant is suffering additional hardship as a result of their Social Fund loan repayments. We recommend that Benefits Agency staff be so instructed. The possibility of rescheduling should also be more prominently displayed in publicity material and on application forms.

Administration of the Discretionary Social Fund

81. The process of applying for a Discretionary Social Fund payment is far from straightforward. Mike Rowe, a Nottingham Trent University academic who has undertaken a detailed case study of the Social Fund, reported that welfare rights advisers described a "series of barriers and hurdles intended to deter applicants and to protect the cash limited budget from unnecessary demands."

People turned away

82. A repeated allegation which was made to us by claimants and advisers during the course of this inquiry was that people were regularly turned away from Benefits Agency offices without being given an application form. To give a sample of the complaints we received on this point:

"A person is often advised by local advice agencies to ask for a Social Fund form when it has been established that the person may qualify for a payment and meets the criteria. However, once the person gets to the counter staff within the Benefits Agency they are often told that they do not qualify and are denied a form" (Luton Borough Council).

"Claimants are not given forms in the first instance by local offices on the basis that it is considered that they do not fulfill the criteria" (Neath Port Talbot Council).[103]

"People were simply being refused the basic form on the basis that reception staff believed they would not be entitled" (North Ayrshire Council).[104]

"Social Services reception offices regularly deal with confused and angry claimants who are under the impression they've been turned down for a grant or loan but, on investigation, find that no application has ever been made and that an informal decision has been made by BA reception staff after a brief conversation with a Social Fund Officer on the telephone. There have been examples of Social Services staff actually sending clients with completed claim forms to local BA offices only to find them returning with the same form still in their hand" (Local Government Association).[105]

83. The Minister was adamant that people should not be turned away or prevented from applying for Social Fund payments: "We do issue guidelines and extra guidance if we feel things like this are happening, to remind staff of what their duties are and what they are not...if it is happening and somebody can tell me where it is happening, I will deal with it."[106] The Minister had earlier been asked whether claimants were being given false hope that they might get a Community Care Grant, when in fact the overstretched budget meant that only high priority cases stood a chance. She replied "I think staff do try and guide them as to which area of the Discretionary Social Fund would be the most likely to give them assistance."[107] In a climate where demand so clearly outstretches supply, front desk staff may well feel that they are simply being frank and honest in telling people that they have no chance of qualifying. Nevertheless, the result is that people are being turned away without their cases having been fully considered by qualified decision-makers. The Local Government Association pointed out that such behaviour becomes a form of 'gatekeeping', with the result that the true extent of the need is underestimated.[108]

Which type of Discretionary Social Fund payment to apply for?

84. The Minister's comments indicate a further problem which confronts the potential Social Fund applicant: which type of discretionary payment to apply for? Prior to April 1999, each application was considered for all three types of Social Fund payment. Since April 1999 when the new simplified Budgeting Loan system was introduced, there have been separate claim forms for Community Care Grants, Budgeting Loans, and Crisis Loans. The result, said the Secretary of State's Annual Report on the Social Fund, was that the application forms have become clearer and easier to complete, and that: "staff no longer have to spend time considering a payment that the applicant may not have requested."[109] In 1999-2000, applications for Community Care Grants dropped by almost 45 per cent, from 1,166,000 in the previous year, to 643,000, whilst applications for Budgeting Loans rose by 26 per cent and crisis loans by 14 per cent. This was described in the Annual Report as a success, in that revised leaflets and application forms were being successful in helping people identify "which type of payment fits their circumstances."

85. However, a series of case histories cited by NACAB suggested that people who appear to be eligible for Community Care Grants are claiming Budgeting Loans or Crisis Loans instead, either because they had been advised directly to do so by Benefits Agency staff, or because staff had failed to notice that the facts of the individual case clearly brought the claimant within the eligibility criteria for a grant. One example was a woman who was rehoused following domestic violence. She applied for a Budgeting Loan for household goods of £950 and was refused. The Citizens Advice Bureau advised her that she was eligible for a Comunity Care Grant. She was awarded a grant of £1, 295. In another case, a man with cancer who had to feed himself with warm food through a tube in his stomach, urgently needed a cooker to heat his food. Although on Income Support, he applied for a Crisis Loan. The staff suggested he claim a Budgeting Loan. The Citizens Advice Bureau thought he should have been advised to apply for a Community Care Grant."[110] Other respondents to the inquiry expressed similar concerns. Help the Aged detected that: "there is a culture within the Agency which is to discourage access to CCGs in favour of a loan due to reasons of priorities and resources."[111] One Parent Families reported that: "in practice many applicants to the Social Fund who apply for a grant may instead be offered a loan."[112] A further problem is that an application for one type of payment cannot be treated as a claim for the other. Thus a person refused a Community Care Grant, then has to apply all over again for the same items, this time as a Budgeting Loan, then if that is rejected, as a Crisis Loan. Early results from research being carried out by the Independent Review Service on the effects of the Budgeting Loan changes showed that of the 207 applicants who took part in the research up to October 2000, over half had completed two forms and a quarter had completed three forms in respect of the same need.[113] We recommend that a rule be introduced that, if it is later shown that a person who has applied for a Budgeting Loan would have been eligible for a Community Care Grant in respect of the same need if he or she had been correctly advised at the time, a decision to award a Community Care Grant should be substituted and if a Budgeting Loan has been granted, the debt should be written off.

Inaccurate information and advice from BA staff

86. The Minister told us: "if people ask questions they have a right to expect our staff will give them good explanations."[114] The evidence we received suggests that, in reality, the quality of advice to Social Fund applicants is not always of a good standard. Both the Local Government Association and NACAB reported cases where people had been advised that they could not get a Community Care Grant because they had not been on Income Support for 26 weeks, when in fact this is a condition for a Budgeting Loan.[115] There were accounts by a number of agencies concerning misleading information from officials about the availability of Crisis Loans. This included advice that Crisis Loans were not available unless the person was in receipt of Income Support,[116] and advice that Crisis Loans could not be made whilst a benefit claim was being processed.[117] The Local Government Association commented, "the lack of clear advice and guidance for potential claimants...has had the effect of limiting demand."[118] It also conceals the extent to which the need for Social Fund payments is not being met. Help the Aged, which runs a free advice line for older people and their carers, commented that: "poor information and advice about Social Fund payments is preventing older people from accessing payments which are designed to help them stay independent, and is adding to older people's stress at times of crisis and bereavement."[119]

The need for better advice and assistance to Social Fund claimants

87. The advent of separate claim forms in 1999 has emphasised that the onus is on individual applicants to decide which type of Social Fund payment they are likely to qualify for, and to demonstrate their entitlement. Yet, there was a widespread feeling among welfare rights advisers we spoke to, and who responded to the inquiry, that, in the words of the London Advice Services Alliance: "It seems virtually impossible for unassisted applicants to know how to qualify, or what to write in their application, especially for Community Care Grants. From our experience, most need a skilled adviser to help complete what should be a simple form."[120] It is therefore unsurprising that there was also a consensus among respondents to the inquiry that applicants for Social Fund payments were far more likely to be successful if they had the assistance of an adviser. The people having to negotiate the obstacle course of claiming a Social Fund payment are particularly vulnerable. Elaine Kempson's description of applicants for Budgeting Loans could apply equally to those applying for Community Care Grants and Crisis Loans:

"They have a high incidence of ill-health, of family instability and breakdown and of insecure housing.. They also tend to be people who have been receiving benefit for long periods of time and so have very little or (more usually) no money in savings that they can draw on to meet unexpected expenditure. Because of the incidence of family breakdown, many also have no relations they can turn to when they need to borrow money."[121]

88. Liz Forest, a witness with direct experience of using the Social Fund, described what it was like to claim: "You are in a very vulnerable position. You are usually distressed. Usually you are upset and up to here with life...You are very intimidated..."[122] Helen Dent of the Family Welfare Association drew attention to the particular need for advice of people from minority ethnic groups, and those whose level of literacy was poor and understanding of bureaucracy, nil.[123] However, she also pointed out that there simply were not enough advice workers available for the numbers in need of help.[124] Therefore many vulnerable people ended up dealing with the system unrepresented.

89. Academic Mike Rowe wrote that: "Throughout my work, the value of quality information was emphasised. Social Fund Review Officers stated that, in review interviews, they were able to see the applicant, to ask questions and to obtain information that application forms could not. Social Fund Inspectors suggested that, in many cases, they changed decisions on the basis of further information rather than as a result of procedural or other errors."[125] Sunderland Welfare Rights Service commented: "The high success rate of reviews witnessed by Welfare Rights Officers when providing representation suggests that the quality of original decisions is rather poor. It appears to be a waste of public money to have reviews of poor decisions. We believe that the initial inquiry into the claimant's circumstances should be more thorough."[126] The Social Fund Commissioner made a similar point about the quality of initial decisions: "I think, sometimes, some of the earlier decisions, at the first stage, are made without all the information that ought to be there."[127]

90. The Minister was very frank to us in admitting there were difficulties for claimants in need of Social Fund payments in negotiating the system successfully. She argued that the Government was trying to move away from the "unwritten assumption...that somehow there was perfect knowledge of the benefits system out there which could be assumed on the part of claimants, therefore it was the claimant's job to do all the work within the system to get out of it what their entitlements were."[128] She argued: "I think we have changed that assumption in introducing Personal Advisers, in trying to have a much more open access to the system."[129] However, when pressed to say when a Personal Adviser service would be available to Social Fund applicants - a particularly vulnerable group of people in a time of special need or a crisis - the Minister could not say: "there are no immediate plans to apply Personal Adviser services to the Social Fund individually and separately to everything else. I think it will come as part of the process as a whole."[130]

91. We agree with the Minister when she said "we do need to try and strengthen the ability of the system itself to take up somebody's circumstances and needs and make sure that they get access to everything they are entitled to."[131] The Committee is on record as being enthusiastic about the role of Personal Advisers in offering claimants a 'holistic' service, drawing together benefit claiming and supporting people back to work. At present, their role mainly consists of in-depth interviews with people when they first claim benefit, aimed at helping them focus on steps to return to employment. There are also interviews with people who have been on benefit for some time, to assist them in moving towards work. However, we have become very aware in the course of our inquiry that Social Fund clients are a particular group of claimants, often in desperate circumstances, who are likely to need particularly intensive help in finding their way through the benefits system. It is asking too much of Personal Advisers in their present form to take on this role.

92. It has become quite clear to us that Social Fund applicants need more active and informed assistance from Benefits Agency staff both in accessing appropriate Social Fund payments and in dealing with their benefits more generally at a disruptive period of their lives. We would like to see better trained staff working directly and intensively with Social Fund claimants for short periods, acting as 'champions' to assist them in accessing the benefit help they need. This might involve greater liaison with other agencies, such as local authority housing and social services departments, the probation service, homelessness resettlement projects and welfare rights services.[132] Help given at this point may assist people in getting their lives on a more stable footing, thus giving them the possibility of thinking in the future about work and ultimately reduce the cost to the public purse of their benefits.

28   This category was added in 1998. Back

29   See Annual Report by the Secretary of State for Social Security on the Social Fund 1999-2000, Annex 4, Cm 4755. Back

30   Op cit Annex 1, Cm 4755. Back

31   Op cit Annex 5, Cm, 4755. Back

32   Q. 305. Back

33   Appendix 20. Back

34   Appendix 15, para 3.2.2. Back

35   Appendix 19. Back

36   Ev. p. 40. Back

37   Ibid. Back

38   See para 37. Back

39   Social Fund Guide, para 3350. Back

40   Ibid. Back

41   Ev. p. 69, para 13. Back

42   Appendix 12. Back

43   Q. 99. Back

44   Q. 99. Back

45   See Annex 5, Cm 4755. Back

46   See ex parte Taylor, and Ev. p. 30, para 18. Back

47   Ev. p. 30 para 18. Back

48   Ev. p. 30, para 18. Back

49   Appendix 10. Back

50   Ev. p. 100, para 15. Back

51   See Table 1 above. Back

52   Appendix 16. Back

53   See Annual Report by the Secretary of State for Social Security on the Social Fund 1999-2000, Annex 1, Cm 4755. Back

54   See Annual Report by the Secretary of State for Social Security on the Social Fund 1993-94, Cm 2598. Back

55   Cm 4755. Back

56   See NACAB, Ev. p. 101, Citizens Advice Scotland, Appendix 4, Rotherham Welfare Rights and Money Advice Service, Appendix 5; Suffolk County Council, Appendix 13; Stockton on Tees, Appendix 18. Back

57   Q. 96. Back

58   Appendix 18. Back

59   Appendix 19. Back

60   See Social Fund Allocation Formula, Annual Report by the Secretary of State for Social Security on the Social Fund 1990-91, Appendix 1, Cm 1580. Back

61   Bankside, Birmingham North West, Bristol South, Cardiff West and Vale, Coventry, Devonia, Dorset, Eastern Valleys, Gloucester, Gwyneddigion Maldym, Liverpool North, Mercia Operations West, Mid Glamorgan, North Cheshire, Solent and Forest, South Cheshire, South Devon, Surrey Group, Tees, Thameside, West Sussex, West Wales and Wiltshire. See Ev. p. 40. Back

62   Appendix 2, para 1. Back

63   Appendix 2. Back

64   Ev. p. 31, para 19. Back

65   Appendix 6. Back

66   Appendix 23. Back

67   Q. 227. Back

68   Ev. p. 19, para 3.6. Back

69   Section 140(4)(a) Social Security Contributions and Benefits Act 1992, and Social Fund Directions 7. Back

70   Q. 356. Back

71   Q. 358. Back

72   Ev. p. 32, para 27. Back

73   Q. 448. Back

74   Ev. p. 20, para 3.11. Back

75   Q. 335. Q. 404. Back

76   Q. 30. Ev. p. 5, para 3.2. Back

77   Ev. p. 81, para 2. Back

78   Q. 30. Back

79   Q. 311. Back

80   Paras 86 and 87. Back

81   Ev. p. 79, para 3.3. Back

82   QQ. 22, 29, 196, 64, 246. Back

83   Q. 5. Back

84   Ev. p. 6, paras 4.9 and 4.10. Back

85   Para 87. Back

86   Q. 431. Back

87   Q. 287. Back

88   Q. 285. Back

89   Appendix 13. Back

90   Ev. p. 102, para 20. Back

91   Appendix 4. Back

92   Ev. p. 32, para 25. Back

93   Q. 134. Back

94   Q. 220. Back

95   Repayments are15 per cent if there are no 'continuing commitments' (ie. other debts), 10 per cent if the person has continuing commitments of up to £7.83 per week and 5 per cent if the person has higher continuing commitments. Claimants are routinely offered repayments of up to 25%. Back

96   Appendix 4. Back

97   Appendix 1. Back

98   Appendix 11. Back

99   Appendix 5. Back

100   Q. 15. Back

101   Q. 413. Back

102   Op citBack

103   Appendix 8. Back

104   Appendix 12. Back

105   Ev. p. 68, para 16. See also Neath Port Talbot Council, Appendix 8; Newham Council, Appendix 15, Sunderland Council, Appendix 17; Stockton-on-Tees Council, Appendix 18; LASA, Appendix 19; Help the Aged, Appendix 23; and One Parent Families, Appendix 26. Back

106   Q. 421-2. Back

107   Q. 361. Back

108   Ev. p. 69, para 16. Back

109   Cm 4755, para 7.2. Back

110   Ev. p. 97-8, para 6. Back

111   Appendix 23. Back

112   Appendix 26. See also CPAG,. Ev. p. 90, para 1.9. Back

113   Ev. p. 31, para 23. Back

114   Q. 432. Back

115   LGA, Ev. p. 70, para 17 and NACAB, Ev. p. 97-8, para 6. Back

116   See NACAB Ev. p. 101-2, paras 20, 22 and 23; Newham Council, Appendix 15 para 3.3.1; Age Concern, Appendix 23, para 5.4. Back

117   See NACAB, Ev. p. 102-3. Back

118   Ev. p. 67, para 3. Back

119   Appendix 23. Back

120   Appendix 19. Back

121   Ev. p. 2, para 1.1. Back

122   Q. 178. Back

123   Q. 309. Back

124   Q. 301. Back

125   Appendix 21. Back

126   Appendix 17. Back

127   Q. 155. Back

128   Q. 416. Back

129   Q. 416. Back

130   Q. 417. Back

131   Q. 416. Back

132   See recommendation in para 94. Back

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