House of Commons Library

Localisation of the Social Fund

Published Friday, November 16, 2012

As a result of measures in the Welfare Reform Act 2012, certain elements of the discretionary Social Fund scheme will be replaced by new locally based provision delivered by local authorities in England and the devolved administrations in Scotland and Wales.

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The Social Fund was introduced in 1987-1988, following the “Fowler Reviews” of the social security system. Part of it covers payments including the Sure Start Maternity Grant, Funeral Payments, Winter Fuel Payments and Cold Weather Payments, which are paid according to provisions set down in regulations. The other part is the discretionary Social Fund, which is cash limited and provides loans and grants. It comprises Crisis Loans, Budgeting Loans, and non-repayable Community Care Grants (CCGs).

As a result of provisions in the Welfare Reform Act 2012, CCGs and Crisis Loans are being abolished from April 2013 and instead funding is being made available to local authorities in England and to the devolved administrations to provide such assistance in their areas as they see fit. The funding is not “ring-fenced” for any purpose, but the Government has set out in a “settlement letter” to local authorities what it expects the funding to be used for, the underlying principles, and expected outcomes.

Pressure groups and welfare rights organisations have voiced major concerns about the localisation of elements of the Social Fund. As well as concerns about the lack of ring-fencing, there are doubts about whether the funding to be transferred to local authorities will be sufficient to meet the needs of people in their areas. The Government has already introduced a series of measures to “manage” Crisis Loan demand back towards pre-2006 levels, in light of the sharp increase in applications for Crisis Loans in recent years. It argues that the sums being made available to local authorities, which includes additional amounts for administration and some start-up funding, will be sufficient to meet “legitimate demand”.

A report published by the Child Poverty Action Group in August 2012 concludes that while localisation of the Social Fund is an experiment which could have a range of positive impacts, providing a more responsive and integrated service for local residents, the Government must be prepared to rethink its approach if the reforms mean that low income families in crisis find themselves with nowhere to turn to.

The relevant provisions in the Welfare Reform Act 2012 extend to England, Wales and Scotland only, but the Northern Ireland Executive has also been consulting on proposals to replace CCGs and Crisis loans with a new system of “discretionary support.”

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