28 November 2008
By Tash Shifrin
Credit unions could take over the running of the troubled Social Fund from Jobcentre Plus under measures being considered for next year's Welfare Reform Bill.
The move follows a series of criticisms by MPs and watchdogs of the fund, which provides discretionary loans and grants to people on low incomes. But the plan also fits in with the Department for Work and Pensions' strategy of opening up services to private and voluntary sector organisations.
Any new provider would take on a struggling service. Earlier this year the fund had its accounts qualified after the National Audit Office identified £85.3m of errors – more than 11% of all discretionary payments in 2007/08. The NAO attributed the errors to staff mistakes, with missing or inadequate paperwork also factors.
The fund, which provided £631m of loans in 2007/08, also came under fire in a scathing report by the Commons work and pensions select committee last year and faced renewed criticism from social fund commissioner Sir Richard Tilt in July.
And ministers have admitted that the number of staff handling discretionary payments fell by 10% over the year to April, despite applications for crisis loans soaring in 2007/08, up by 44% on the previous year. The rise in applications was attributed to last year's floods – and numbers could rocket again as the economic crisis worsens and unemployment rises.
But welfare minister Kitty Ussher said the plan to involve credit unions and voluntary organisations such as Citizens Advice would give claimants access to financial advice and savings facilities alongside loans and grants.
'The Social Fund does a good job of getting money to people in crisis or in budgeting difficulties but the one thing we have not been able to do is couple that with financial advice,' she said.
Under the proposals, due to go out to consultation this week, there would be 'far better, longer-term relationships between the individual and credit provider, with a more personalised and supportive service', Ussher argued.
The DWP is increasingly looking to outsource its services, despite union opposition. In June, Work and Pensions Secretary James Purnell announced a new 'right to bid', allowing potential suppliers to submit tenders for DWP services.
A spokesman for the civil servants' Public and Commercial Services union said: 'Credit unions are a good idea – we're setting one up. There could be a place for them to help Social Fund claimants. But we would have grave concerns about the third sector delivering and distributing the Social Fund.'
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