Memorandum submitted by Simon Rahilly,
Liverpool John Moores University (SF 23)
1. Benefit levels of income are inadequate
to meet costs which arise occasionally because of the need to
purchase essential items, such as furniture.
2. People on low incomes are more likely
to be excluded from access to credit, or to have to pay more for
3. Credit is very likely to turn to debt.
4. There continues to be a need for the
state to assist people on low incomes to meet the cost of essential,
but occasional, items.
5. This assistance should be delivered in
a way that is consistent with other objectives (eg tackling social
exclusion). It could also be delivered in a way that was more
consistent with "welfare to work".
6. Benefits should be increased to include
a small weekly amount to help pay for essential, but occasional
needs. This amount could be set aside and either held by the Benefits
Agency or paid to a third party such as a credit union. The amount
should relate to the number of people in the claimant's family.
7. Claimants should have the right to access
the sum "saved" when they either leave benefit, or when
they need money to pay for an essential item. Any additional amount
needed to meet a reasonable cost of an essential item could be
loaned and repaid from future amounts set aside from benefit.
8. The Social Fund should not be restricted
to those on benefit. Anyone with a low income should be able to
obtain loans to meet the cost of essential items. The rate at
which these loans would be repayable would be determined by the
extent to which their income exceeds benefit levels.
In the 1970's Simon Rahilly was involved in
welfare rights and community development. When the Social Fund
was introduced he was a member of the Social Security Research
Consortium, which carried out some early research monitoring the
introduction of the Social Fund and its impact upon claimants,
social workers, and advice agencies. For the past 12 years he
has worked at Liverpool John Moores University, where his duties
have included being the course leader for the University Certificate
Course of Professional Development in Welfare Rights at John Moores
University. This is a post-experience course run over 20 days,
which aims to enable those working in the provision of welfare
rights advice to enhance their skills, knowledge and understanding.
Recent research has included a study on Poverty
in Halton, and current research (with Paul Jones) is looking at
the credit options available to and chosen by people on low incomes.
This is a local study which is sponsored by the Coop Bank. Recently
published work includes a chapter entitled "Social Security,
Money Management and Debt" which was published in a book
edited by Neville Harris: Social Security Law in Context, (2000),
Oxford University Press, 0-19-876307-7 (Hbk) and ISBN 0-19-876308-5
(Pbk). A copy of a draft of this chapter is attached.
Criticisms of the discretionary Social Fund
have been well rehearsed, and centre around four of its central
features- namely the use of discretion, the budgetary limits,
the significance of loans and the lack of right to an independent
A fundamental starting point is to consider
the adequacy of benefit rates and the expenditure which is intended
to be met from that income. Supplementary benefit specified the
weekly items that were expected to be bought from that benefit,
and a system of exceptional needs payments allowed for assistance
with other items. Income Support contains no such outline of what
the benefit should cover, but the replacement of exceptional needs
payments by a mainly loans based Social Fund leads to the conclusion
that claimants are expected to budget for every eventuality out
of their benefit income. Yet this is an unrealistic expectation.
Discretion makes the Social Fund extremely expensive
to administer. It contributes to the uncertainty of claimants,
and unhealthy queues and atmospheres within benefit offices, and
only serves to alienate and remove all sense of dignity. Yet the
use of directions means that in many cases there is, in fact,
no real discretion. (Thus most Community Care Grants are refused
because Direction 4 is not satisfied). The rules exclude those
without entitlement to a means tested benefit to either Community
Care Grants or Budgeting Loans. This may exclude those with low
incomes from wages as well as those with contributory benefits
which are only just above the means tested benefit levels.
The budgetary limits contribute to the accusation
that the fund is a lottery, with the outcome of an application
being determined in part by when an application is made and in
part by where it is made. Applications are refused even though
they meet the criteria.
The number of applications suggests that people
do want to be able to take out a loan from the Benefits Agency.
Whilst people on low income will often try to borrow from family
and friends, a Social Fund loan, with no interest, may represent
the best possible way to purchase essential items without which
social exclusion would be even more stark. Alternative strategies
may well include private sector loans with unacceptably high rates
of interest, and the very real lack of options available to people
on benefit may well contribute to fraud. There is a real concern
about the rates of repayment for Social Fund loans, which are
higher than for the direct payments allowable for other debts,
and which significantly reduce disposable income and thus contribute
to greater poverty.
Whilst the Social Fund has been criticised because
there is no independent appeal, the appeal arrangements do contain
two positive features. Firstly the applicant has the right to
discuss the decision with the decision maker, and secondly the
Social Fund Inspectors provide for some sort of external check
upon the quality of local decision making. However, apart from
cost, there can be no real reason for continuing to exclude Social
Fund decisions from the jurisdiction of the Appeals Service.
The Social Fund could be improved by reducing
the significance of discretion, reducing rates of repayment which
serve to reduce disposable incomes to unacceptably low levels,
and by widening access. The move towards a "fact based approach"
for Budgeting Loans has represented a real improvement. The Social
Fund could draw from some of the positive features of the arrangements
for direct payments.
Regular saving on low levels of income is extremely
difficult. Yet this could be possible if benefit levels were increased
to recognise the fact that everyone will have occasional (though
essential) one-off financial needs, in addition to the usual weekly
expenditure. Most Social Fund expenditure is for household items
such as furniture and cookers. An amount (of the order of £2,
plus an additional £1 for each additional member of the claimant's
benefit unit) could be set aside, to be called upon when needed.
This could also be paid to a third party such as a credit union
to help maintain or establish regular active saving whether on
or off benefits. The reasonable cost of essential items could
then be met, when required, from any accumulated sums. Where these
are insufficient, then additional amounts could be advanced as
a loan. Repayment could be based upon the weekly figure which
is being set aside, plus the amount that can be paid direct from
benefit for arrears (currently £2.65).
This facility should also be available to other
people on low incomes. It is a mistake unnecessarily to distinguish
between the two groups, and the reality is that many people will
move between the two, with periods on benefit alternating with
periods in work. To be consistent, government policy should remove
rules which appear to present barriers in moving from benefit
to work. Repayment could be determined by reference to the extent
to which the applicant's income exceeds benefit levels.
It may be that separate provisions are needed
to meet community care objectives, and that funding should be
made available to those organisations with statutory duties in
These suggestions do not obviate the need to
retain some sort of facility for crises, such as those covered
by the current Crisis Loans. Interestingly, these are already
available irrespective of income source. They are paid in emergencies,
often when the applicant has been left with no money whatsoever,
and are often used to buy day to day items such as food.
The introduction of a fact based approach to
Social Fund Budgeting Loans has gone a significant way to meeting
some of the criticisms that have been levelled against the discretionary
Social Fund ever since it was first proposed. It has reduced the
element of discretion and the associated diversion of resources
into decision making.
Criticisms of the Social Fund have been well
rehearsed, and are not repeated here. Instead this short submission
attempts to indicate some ideas for possible changes that could
be introduced that might help reduce social exclusion, reduce
unnecessary debt and suffering that is so often the consequence
of expensive credit taken out by people on low incomes. In being
"available to all" it will remove the need to retain
the poor law principle of lesser eligibility.
The ideas presented within this brief submission
will clearly have cost implications. Whilst these have not been
quantified, any calculation should take into account the reduction
in administrative costs as well as a reduction in the very considerable
costs associated with exclusion when there is no legitimate and
affordable way to access essential items.
Simon Rahilly, Senior Lecturer
School of Law and Applied Social Studies
Liverpool John Moores University
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