Reform of the Social fund

Child Poverty Action Group, Save the Children, Family Welfare Association, Help the Aged and One Parent Families

1. Despite significant welfare reform under the recent Labour administrations, the Social Fund has escaped major attention. This is despite repeated reports which amply demonstrate the fund's failings and others which have propounded practical reform proposals.

2. There has been some recent interest shown in Social Fund reform but, despite a series of moves which have somewhat increased its resources and made some limited administrative and policy reform (for instance removing the double debt rule), long term reform of the Social Fund does not appear to have been seriously considered. Given the manifest inadequacies of the current scheme this should be as unacceptable as it is surprising.

3. The failure to tackle the problems of the Social Fund is particularly odd given the political capital afforded to improving financial inclusion - we see these as closely linked agendas.

4. We see much potential here for extending access to no cost and low cost credit to support anti-poverty objectives. At the same time we would not wish the desire to develop (low) interest bearing credit to undermine the role of grants or interest free loans for the poorest people.

5. At the moment the Social Fund is failing to meet even current levels of demand let alone extend its reach to more individuals in order to support anti-poverty objectives. Large numbers of individuals are refused loans or grants yet when their cases are reviewed the decisions not to make awards are often overturned. For those who do receive help, they are often not given enough to cover the costs of the goods or services they are purchasing. This means that they are then forced to seek alternative sources of credit to make up the shortfalls pushing people towards relying on charitable aid or (probably much more often) towards high interest rates and disreputable lenders.

6. The Social Fund simply isn't playing the role it should in helping to alleviate some of the worst symptoms of poverty and exclusion. Rather when people are wrongly turned down, or are not given enough in grant or loan monies, their problems can sometimes be compounded. The fact that the system cannot cope with current demand also means that it is not promoted to people. So many of the most vulnerable do not know it exists.

7. This submission comes from not one organisation but from five, we have been working together on the Social Fund because we share an analysis of many of the problems and would like to see policy reforms both to increase the generosity of what has been done through the fund and urge both policy and administrative reform to its functioning.

8. At a level of principle the need for the Social Fund in its current form demonstrates inadequacies in other areas of income maintenance. If incomes and savings are so low that lumpy needs like the cooker breaking cause a sudden crisis, initial income or savings were simply not high enough to overcome this problem, and this implies benefit inadequacy. If the Social Fund (such as crisis loans) is used to cover alignment payments between other systems this also implies the fund is picking up the pieces for failures elsewhere. Nevertheless we are where we are implying a continuing need for the Social Fund.

9. Many reform ideas have been more positive, implying new ways of using the fund (or related policy) to tackle material hardship and to improve social and financial inclusion. We support innovative thinking around the development of the fund but urge that its essential purpose of meeting the costs of essential items for the poorest families is not lost.

10. We hope this note is useful in shaping the Committee's session with the Minister. The submission discusses administrative concerns, the link with financial inclusion and then sets out the key principles which we believe must underpin any reform. Though we do not discuss the fund's failings in depth (these have been raised elsewhere and the Committee will be well aware of these given its previous interest) we have included several examples from the Family Welfare Association as an appendix, which powerfully illustrate the material circumstances of some of those who require specific support.