Delivering the social fund at London-level: opportunities and risks

June 2012

Executive summary (full report available as PDF, see right)

This report forms part of CPAG’s new programme of work on child poverty within London, where four in ten children fall below the poverty line. Currently, the social fund provides an essential, if imperfect, source of support to many families on a low income. Following the Welfare Reform Act 2012, key functions of the social fund will be devolved to local level in 2013. It is vital that replacement schemes, provided by local authorities, continue to provide support for these families.

About this report

The report is based on a roundtable held in April 2012 with representatives from local authorities, voluntary sector organisations and credit unions; a series of in-depth discussions with five local authorities and potential delivery partners; and desk research. It aims to provide an insight into current thinking rather than a comprehensive account of future local authority provision in London – which for the most part remains at a very early stage of planning.

For a write-up of the roundtable meeting, download the PDF (see right).

Current provision and planned changes

The social fund, currently administered by the Department for Work and Pensions (DWP), seeks to meet a range of needs that are not met by regular benefit or tax credit payments. There are two parts of the fund:

  • the regulated social fund – Sure Start maternity grants, funeral expenses payments, cold weather payments and winter fuel payments;
  • the discretionary social fund – community care grants, budgeting loans and crisis loans.

It is parts of the discretionary scheme that are being devolved to local authorities. From 2013, local authorities will have responsibility for meeting the needs for one-off items of expenditure for benefit claimants through community care grants, and for emergency financial support for all local residents through crisis loans. The money formerly spent in local areas on delivering this support will be devolved to a local level, but will not be ringfenced; rather, the purposes of this funding will be set out in a settlement letter.

Future demand

The primary drivers for the level of social fund demand are economic; the number of people who are on a low income in a given area, and the costs they face. The DWP has provided data on current local level demand and expenditure, while the money devolved to a local level for crisis loans will be pegged to 2005/06 levels of spending. But there are a number of factors which CPAG believes may act to increase demand on the fund.

  • The impact of overall benefit cuts; around 55 per cent of cuts to financial support have not yet hit families.
  • The specific impact of the local housing allowance cap and overall benefit cap on London: it is estimated that 54 per cent of families who will be hit by the overall benefit cap live within the capital.
  • Changes to disability benefits, which will see some residents losing access to contributory employment and support allowance, and some losing support when the personal independence payment replaces disability living allowance for adults. Around 30 per cent of total community care grant expenditure and 20 per cent of expenditure on crisis loans goes to disabled people.
  • The introduction of universal credit in October 2013. While we hope for a smooth transfer to the new system of universal credit, any glitches in delivery may have an impact on demand for the social fund.

Most local authorities we spoke to were at an early stage of thinking around the delivery of the fund. There was clear potential for authorities to offer a more integrated service than that currently provided, but many authorities were concerned that this would be difficult with the level of funding.

Promising approaches

A number of promising approaches are emerging, which include:

  • No big bang. A number of local authorities were considering putting an interim scheme in place, enabling them to assess the level of need within their local area before finalising the delivery model. If this route is taken, it will be important to monitor outcomes carefully, and ensure that the interim scheme does not become a permanent option by default.
  • Integrated assessment processes. Local authorities run a number of discretionary payment schemes, including, for example, discretionary housing payments and Section 17 payments for children in need. There may be access to other funds, such as those from charitable foundations, within the borough. It seems sensible for residents to be assessed for their eligibility for this type of support at one time – rather than having to pass through multiple assessment procedures. This will require joint working across housing, revenue and benefits, and adult and children’s social services. We are not recommending that the different forms of payment are integrated into one fund; they have clear and distinct purposes. Rather, we are suggesting there may be options to ‘hide the wiring’ from the residents’ perspective, so that wherever they enter the system, whether through housing, social services or through applying for a social fund type payment, their eligibility for the full range of support is determined.
  • Maintenance of some form of cash scheme. Local authorities may see a dilemma between the desirability of making cash payments to avoid stigma and the potential for savings from the bulk procurement of goods to be provided in kind. We set out a number of steps that councils should consider to reduce stigma if they do go down the route of providing goods in kind. However, whatever the route chosen, we think that local authorities will need to retain some type of provision to make cash payments in the case of emergencies; most notably when people are threatened with their fuel being disconnected and for travel costs.
  • Clear referral routes to other help and support. There is a real potential for local authorities to improve existing arrangements to deliver a more integrated scheme that not only meets immediate need, but enables residents to access further help and support. Credit unions and advice agencies have a role to play here.
Key risks

There are also a number of key risks that local authorities will need to consider when establishing new schemes. These include:

  • The inability to accurately predict demand. It is difficult to predict the real levels of demand in each local authority under the present system – the current data suggest a mismatch between predicted levels of need and expenditure.
  • Reputational risk from turning people down. The reduced level of funding means that local authorities will inevitably be turning down claimants who would previously have been eligible for support.
  • Cross-borough issues and postcode lotteries. An integrated approach is required across London boroughs to ensure that local connection rules or their absence do not create a situation in which London residents who cannot prove a local connection (eg, if they are moving because of domestic violence) become concentrated in those areas which have not imposed such rules.
  • Dealing with emergencies. It is not yet clear how local authorities would deal with a large scale emergency (eg, riots or floods) which significantly increased the demand for emergency support.
  • Out of hours provision. The level of money devoted under the ‘new burdens’ scheme, by which funding for services devolved from central to local government is determined, will limit the level of service which local authorities will be able to provide at the assessment and application stage, although there should be benefits from an integrated assessment process across council departments. But this funding is unlikely to cover the costs of an out of hours service, potentially leaving residents with no source of support in an emergency.
Messages to central government

The salience of these risks will in part depend on the level of administrative funding provided by central government to support local delivery. Although the main aim of this report is to provide a resource for local authorities thinking about how to develop a scheme, some key messages emerged for central government.

  • Clarity over administrative funding. Local authorities require clarity over administrative funding in order to be able to plan provision, and need it soon.
  • Taking a lead on local connection. Government at a national or regional level could helpfully take a lead in clarifying issues around local connection and eligibility. If one authority chooses to apply local connection rules and others do not, those who do may see an unsustainable increase in demand for their schemes.
  • Contingency arrangements around universal credit. Local authorities are seriously concerned that any delivery problems with universal credit will end up on their doorsteps, and place pressure on their discretionary funds. We know that the implementation and IT for universal credit have been carefully planned. Nevertheless, we think that the government needs to make clear contingency plans, and to share these with local authorities well before the initial roll out of universal credit in October 2013.
  • Monitoring and evaluation. Central government will be reviewing social fund localisation in 2014/15. We recommend that the outcomes it monitors include the prevention of hardship and destitution; access to affordable credit; and the perception of the service by claimants.

Localisation of the social fund is an experiment which could have positive impacts for local residents, providing a more responsive and integrated service. But we do not yet know whether it will be possible to deliver these within the current budgets; the government must be prepared to rethink its approach and the level of funding provided if the reforms mean that low-income families are left with nowhere to turn in a crisis.

To read the full report, download the PDF (see right).