Helping Those in Financial Hardship: The Running of the Social Fund

13 January 2005

Full report: Helping Those in Financial Hardship: The Running of the Social Fund

Sir John Bourn, head of the National Audit Office, reported today that the Social Fund plays an important role in helping people in financial hardship, and is reaching many of those in greatest need. But there is a risk that potentially eligible people are not aware of the Social Fund and that some Jobcentre Plus staff may not give appropriate advice because their own awareness of the Social Fund is limited. For those who do apply to the Social Fund, the quality of decision-making varies.

Around one-fifth of people in the United Kingdom live in low income households and over a quarter of households have no savings. However, only 47 per cent of people on low incomes responding to an NAO survey were aware of the Social Fund. Lone parent families and disabled people benefit most from the Social Fund, while take-up is low amongst pensioners and some ethnic minorities. Even when customers know about the Social Fund, they are not well informed about the different types of award or how much money they may receive. The Department needs to increase awareness of the Social Fund among its own staff and ensure that potential beneficiaries are better informed, for example, by staff automatically mentioning the Fund to new benefit claimants.

The quality of decision-making is a concern for some types of Social Fund award. In 2003-04, the Department made decisions on 4 million applications to the Social Fund. Speed in handling applications is important and most Jobcentre Plus districts meet their target for making decisions. Getting them right first time depends on staff knowledge and experience as well as obtaining the relevant evidence, but internal checks indicate that high numbers of initial decisions on some awards contain errors.

Customers are entitled to a review if dissatisfied with the decision, firstly by an internal decision-maker and then externally by the Independent Review Service. In 2003-04, the Internal Review Service overturned over 50 per cent of Community Care Grant decisions and 41 per cent of Crisis Loan decisions it received. The National Audit Office considers that the Department should take steps to improve its decision-making by introducing up-to-date, centrally co-ordinated Social Fund training.

The number of staff working on the Social Fund has fallen since 2001-02 while application volumes have increased. According to departmental data, staff cost per application is lower for the Social Fund than for some major benefits. But there are significant differences in staff cost per application across the 90 Jobcentre Plus districts. The Department is taking steps to reduce these variations by standardising working practices across the districts. Longer term efficiencies will require more fundamental change, including greater use of specialist teams and IT improvements.

The Department recovers a high proportion of loans paid out, mainly through automatic deduction from customers’ benefit payments. It is improving its debt recovery procedures for customers not on benefits, amongst whom debt has risen from £90 million to £180 million in the last 5 years. But more could be done to improve recovery from people with outstanding debt who return to benefits. Under present arrangements, the Department cannot recover Social Fund debt from tax credits, which an increasing number of customers are receiving in place of benefits.

"The Social Fund provides an important safety net for some of the most vulnerable in society, many of whom will have limited or no access to affordable credit and mainstream financial services. The Social Fund is reaching many people in need. But the Department needs to raise awareness of it both with potentially eligible customers and its own staff.

"I am pleased that the Department is improving its debt recovery procedures and standardising the process for dealing with Social Fund applications across the country. But I am concerned about the standard of decision-making on Social Fund applications, as evidenced by the high number of errors on certain awards."

Sir John Bourn, the head of the National Audit Office, 13 January 2005

Notes for Editors

  1. The Social Fund is administered by Jobcentre Plus and provides loans and grants to people to meet important or emergency expenses they cannot pay out of their regular income, for example for household appliances or to buy food if their benefit money is stolen. Discretionary awards (Budgeting Loans, Crisis Loans and Community Care Grants) are paid from a cash-limited budget while regulated awards (Cold Weather Payments, Funeral Payments, Sure Start Maternity Grants and Winter Fuel Payments) are paid to all entitled claimants.
  2. This report covers five types of Social Fund award: Budgeting Loans, Crisis Loans, Community Care Grants, Funeral Payments and Sure Start Maternity Grants. The two further types of award – Cold Weather Payments and Winter Fuel Payments – are excluded because they are usually paid automatically to entitled customers, ie no application is required. For the five types of award covered in this report, 3 million payments with a total value of £850 million were made in 2003-04, and £530 million (in loans) recovered.
  3. Press notices and reports are available from the date of publication on the NAO website, which is now at www.nao.org.uk. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
  4. The Comptroller and Auditor General, Sir John Bourn, is the head of the National Audit Office which employs some 800 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

Contact: Bill Schaper
PN: 03/05
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