Reforming the Social Fund: summary of proposals and background briefing

• The National Council for One Parent Families, the Family Welfare Association and the Child Poverty Action Group are working in partnership to explore how the Social Fund might be restructured to provide a fairer and more comprehensive system of grants and loans in line with the Government’s objectives of ending child poverty, enabling full employment and tackling financial and social exclusion.
  
  
• The charities have devised six options which could be gradually introduced to help meet key government objectives.
  
  
• Option A: ‘Child Development Grants’
  To help tackle child poverty, regular lump sum payments – either annually or at key stages in a child’s life – to children in families on key benefits. These would reflect some of the additional expenses incurred at important stages of a child’s life, for example, when a child starts or changes school. The grants could be annual payments, based on a notional amount for essential items; be linked to Child Trust Fund endowments, so that each endowment payment is ‘matched’ by a cash grant payment from the SF to meet short-term needs; they could be linked to the child tax credit as a lump sum child development credit; also, an annual fuel payment specifically for heating costs could be provided; or an annual child development grant as a winter payment.
  
  
• Option B: ‘Health and Safety Grant’
  A system of grants for the key items which are considered essential for a child’s health and safety, such as repair or replacement of gas and electrical items. The main target group would be those who have been on benefit for some time, eg more than six or twelve months, and so may not be able to afford these items. The grant could be administered via Jobcentre Plus and targeted at those eligible for maximum Child Tax Credit.
  
  
• Option C: ‘Secure Homes Grant’
  Lump sum payments to enable families with children to obtain basic essentials (eg cooker, beds) to furnish a home if they are re-housed. The main aim would be to help people who are fleeing domestic violence, relationship breakdown or homelessness. The grant would best be administered by Jobcentre Plus, with assistance from specialist workers such as those working with women’s refuges.
  
  
• Option D: ‘Opportunity Grant’
  A standard payment scheme to help people with the costs incurred during the transition from welfare to work, to cover things such as upfront childcare costs, work clothes and travel to work costs before payment of wages.
  
  
• Option E: Reducing debt
  The aim of this option is to test ways of reducing debt, especially for lone parents entering work. This might be through developing debt buy-out loans into a single loan which is more manageable. Alternatively, a matched debt reduction scheme could be piloted whereby SF debt for lone parents entering paid work could be reduced by matching their repayments £ for £, in line with the Government’s proposals for the Savings Gateway.
  
  
• Option F: Low Income Loans Scheme
  Extend loans to a wider group than those currently eligible for Budgeting Loans eg those who may be in work but on low incomes. A low income loans scheme would require more flexible repayment conditions at more affordable rates.

All options will have a price tag, however, the costs could be spread across different departmental budgets and would be more clearly targeted on meeting key Government objectives than the current system, such as the ambition to end child poverty in twenty years.

Background to the Fund

The Social Fund (SF) was introduced in 1988 and was intended to reduce spending on exceptional payments for Income Support claimants by offering a discretionary approach to individual need. The SF is a cash limited, discretionary fund, four fifths of which is repayable via deductions from benefits. It provides limited assistance to some of the poorest families with the kind of basic items that were more widely available through the former single payments system abolished in 1988 .

• The SF is currently in two parts – the regulated fund (eg grants for maternity and funeral expenses) and the discretionary fund (Community Care Grants and Budgeting/Crisis Loans).
  
  
• Gross Spending on loans in 2000-2001 (for essential items) far outweighs the spending on grants. Loans are recycled into state funds by deduction from benefit.
  Community Care Grants £100.1 million
  Budgeting Loans £435.2 million
  Crisis Loans £65.3 million
  
  
• Spending on grant payments to claimants is lower, in cash terms, than it was fifteen years ago. In the last full year of operation of the previous system (1985/86), spending on single payments grants stood at £335 million. The budget for grants for 2000/01 is £100 million. This does not take inflationary increases into account.
  
  
• The fall in resources for grants means that some of the poorest families are living on incomes below benefit levels because they are having to repay SF loans.
  
  
• About a third of spending on CCGs and almost half of spending on BLs is paid to lone parents – reflecting the proportions on Income Support and the level of need.
  
  
• Growing pressure on budgets results in millions of refusals for CCGs (eight million applications were denied up to 1999), many because there was not enough money to meet the evident need.
  
  
• BLs are interest-free loans, intended to help people pay for essential items eg beds, cookers and washing-machines. Many people are turned down because they cannot afford to pay back the loan, therefore the poorest and most in need are the least likely to receive any help.
  
  
• BLs operate within cash limits for each office, which results in a ‘postcode’ lottery and a ‘calendar’ lottery rather than responding to real need.

Press release
J K Rowling backs charities' call for Social Fund reform 15 April 2002