Scottish Welfare Fund review: final report

4. Levels of funding

Key points

• Overall, spending on SWF by local authorities exceeded the budget allocated (including carried over underspend from previous years) in both 2019/20 (spending was 108% of budget) and 2021/22 (115% of budget).
• Although spending in 2020/21 was under the allocated budget, this reflected a very large (£22 million) additional injection of funds in response to the Covid-19 pandemic. The overall spend was 31% higher compared with 2019/20.
• There have been wide variations in levels of over- and underspending between different local authorities in Scotland. In 2021/22, 18 out of 32 local authorities overspent, with five overspending by 50% or more. However, six spent 70% or less of their allocated budget.
• There is no consistent pattern as to which local authorities over- or under-spend on budget. However, with notable exceptions, rural local authorities have been more likely to underspend, while those with higher than expected levels of demand (based on proxy indicators of need) are more likely to overspend.
• Other research has suggested that funding should be reallocated between low and high-demand local authorities. However, the review found that a majority of the areas identified as historically low spending local authorities were predicting overspends this year, indicating that any such reallocation would need to be undertaken with caution.
• Local authority managers felt funding for SWF was under significant strain: two thirds stated that the current level of Scottish Government funding for SWF in their area was 'a lot less than is required to meet local need'.
• The expectation among local authority managers interviewed for this review was that demand and need for Crisis Grants would continue to increase in the foreseeable future, with associated increased pressures on budgets. Meanwhile, the cost of delivering Community Care Grants was increasing as a result of inflation, even if demand was not increasing at the same rate as for Crisis Grants.
• Administrative funding was viewed as a major issue by local authorities – councils reported needing considerably more resource to be able to consistently process applications at current levels within the statutory timeframes.
• Around two thirds of councils currently topped up Scottish Government funding for the SWF with their own resources. There was concern among local authority managers about whether they would continue to be able to do so, given other pressures on local budgets.

The Scottish Welfare Fund is funded by the Scottish Government, who allocate funding for both the grants themselves and for administration costs to local authorities. Local authorities may also, if they choose, top-up the Scottish Government SWF allocation with their own funds as well as carrying forward any underspends from previous years.

The total Scottish Government budget for the Fund was £33 million a year from 2013/14 to 2019/20. It then increased to £35.5 million in 2020/21, with an additional allocation for £22 million in response to the Covid-19 pandemic. Funding remained at £35.5 million for 2021/22.^[44]

A key question for the review was whether levels of funding for the SWF are appropriate. This chapter examines this question, drawing on analysis of SWF data on spending over time and by local authority and how this compares with need and demand, as discussed in the previous chapter, and finally perceptions from local authority interviews and the evidence review of whether current funding levels are sufficient to meet local need for the Fund.

Patterns of spend over time

Analysis of SWF spend versus budget over the last three full financial years (2019/20, 2020/21 and 2021/22) demonstrates that that the budget was already under significant pressure pre-pandemic and that this pressure has not abated. By March 2020, across Scotland, 108% of the overall budget (including the overspend carried forward) had been spent. This fell back in 2020/21, as a result of the £22 million additional funding allocated to the Fund that year – 83% of the total £57.5 million budget was spent by March 2021, though this represented a 31% increase in expenditure compared with 2019/20. In 2021/22, the level of overspend was even higher than it had been in 2019/20 – 115% of the budget was spent by March 2022. Given the large underspend from 2020/21 carried forward into the 2021/22 budget, the overspend for 2022/23 might be predicted to be considerably higher still, in the absence of additional funding.

These Scotland-wide figures conceal wide variations in the level of over- or underspend versus budget between local authorities. In 2021/22, 18 local authorities exceeded their allocated Scottish Government budgets (including carried over underspend), including five that overspent by 50% of more. At the same time, there were a number of local authorities that significantly underspent their budget, including six that spent 70% or less of their allocated budget.

There is no completely consistent pattern as to which local authorities tend to spend more compared with their allocated budget. However, overall – but with some notable exceptions – consistent overspending tends to be more common in more urban and mixed local authorities while consistent underspending is more common in rural local authorities.

There also appears to be a relationship between higher or lower than expected levels of demand on the Fund (as indicated by comparison of applications with the proxy measures of need, discussed in the previous chapter) and budget over- or underspend. However, again, this pattern is not completely consistent – there are areas with overspends and lower or more average application rates, for example.^[45]

Moreover, interviews with local authorities for this review suggest that some of these historic patterns may be breaking down. A majority of the areas identified as previously underspending in the analysis of monitoring data stated that they were predicting to overspend on their SWF budgets this year, suggesting that past spending patterns may no longer be a completely reliable guide to current need.

Perceptions of funding levels

Current funding levels

Given the overall levels of overspend reported above, it is unsurprising that a majority of councils feel that funding for the SWF is under significant strain. In their responses to this review, two thirds (22 of 32) of local authorities stated that the current level of Scottish Government funding for the SWF in their area was 'a lot less than is required to meet local need'. Of the remaining 10 local authorities, five felt it was a 'little less than required', three that it was 'about sufficient', one that it was a little more than required and one did not answer, but when asked said funding levels were adequate with the council topping it up, but that they would be in difficulty without this.

Local authority managers were interviewed in April/May 2022. These interviews suggested that the picture of over- and underspend described above might already be partially out of date; areas that had not been consistently overspent in the past were predicting that they would overspend this year:

"It's probably been in the last year and a half. I would say there's been a noticeable increase around that timeframe. And I would probably say the way things are looking this year, it looks likely that's going to continue … We're expecting we'll overspend that budget again this year."

(Local authority manager 22)

One view among local SWF managers was that, in order to fully meet local need, the SWF would need to be funded to a level that councils could generally provide grants at low or medium priority, but that this was currently fairly rare in many areas. It was suggested that where funding for the SWF is tight, councils are forced to make stricter decisions with less discretion.

"Where you might think you have a lot of discretion, you don't really because the fund is cash limited."

(Local authority 6)

Around two thirds of areas reported that the council topped up their SWF funding, covering administration costs or, in some cases, both administration and additional funding for grants. This top up funding came from a variety of sources, including both general council funds, funding from other service areas, and sometimes specific funds, like Winter Support payments.

The decision to top up the SWF locally was viewed as a political one, taken because councillors wanted to be able to support people in need without restricting grants to only the 'highest most compelling' cases. Among those areas that did not receive top-up funding from their local authority, although general lack of resources was one factor, there was also a perception that some councils did not generally have a culture of providing additional resources for non-Council initiated schemes.

"We just live within our budget. Why should we be spending any more of the council's money when it is not a scheme coming from us?"

(Local authority 28)

Administrative funding

There was a strong consensus across local authorities that the amount of funding allocated by the Scottish Government for administration of the SWF was inadequate. Interviewees described having had to fund significantly more staff than the Scottish Government budget covered in order to be able to deliver the Fund. Around 1 in 3 provided figures (unprompted by the review team, so the figure may have been different if other local authorities had also provided this information) that indicated the administrative budget would need to at least double (sometimes more) in order to cover current administrative costs. There was a general consensus that the current Scottish Government allocation did not allow most local authorities to effectively administer the Fund to the required deadlines, with councils either topping up administration from their own resources and/or struggling to meet statutory time frames. This reflects Highland Council's response to the Scottish Parliament Social Security Committee's 2018 call for evidence on the Scottish Welfare Fund, which stated that just 60% of the administrative cost of operating the Highland Council's Scottish Welfare Fund were met by Scottish Government in 2017 (though this increased in 2018/19).^[46]

Local authority managers interviewed for this review noted that increased demand on the Fund was increasing administration costs, even if the number or size of awards was not increasing at the same rate, since teams were processing more applications. It was also suggested that the current administrative budget does not recognise ongoing non-staff costs, such as software and system development.

Managers suggested that additional administrative funding would enable local authorities not only to stick to the statutory timescales for decisions more consistently (see further discussion of timescales in chapter 6), but also potentially enhance their ability to provide more holistic support to applicants, such as delivering or linking with income maximisation work and working more closely with other partners (such as homelessness teams, or third sector partners). There was also a strong view among local authority managers that staff would benefit from more administrative funding: a number of areas described challenges around resilience and staff turnover in their team as a result of both increased volume of work and an associated increase in challenging cases and complaints. This view was echoed in interviews with staff responsible for day-to-day decision-making on SWF for this review, who identified high (and increased) workload as their biggest challenge in delivering the Fund effectively.

Future funding

The expectation among local authority managers interviewed for this review was that demand and need for Crisis Grants would continue to increase in the foreseeable future, with associated increased pressures on budgets. With respect to Community Care Grants, even if demand did not increase at the same level as for Crisis Grants, funding was still viewed as a challenge in the context of increasing prices for goods – a number of areas described having restricted grants to higher priority items because the cost of items had increased. The higher cost of goods in rural areas was noted to be a longer-standing challenge for fulfilling Community Care Grants in those parts of Scotland.

Local authorities were very concerned about future funding for the SWF. There was a belief among managers that, to date, they had been able to manage with a combination of previous years under-spends and additional Covid-related top up funding. However, finances were now coming under severe strain. A number of interviewees were concerned about whether their local authority would be able to continue to top up their SWF funding in the future, given other significant pressures on council budgets.

"The underfunding of the SWF has been on Scottish Government and local authority joint meeting agendas from the beginning of the fund. The demand for the scheme has increased significantly from the initial intention but the funding has not reflected that increase. Because of ongoing local authority budget constraints from 2023/24 onwards, it is likely that the resource currently being diverted to SWF administration will need to be reviewed and brought in line with statutory funding. Local authorities have been plugging the gap from their own budgets which will longer be possible."

(Local authority manager 31)

Various third sector organisations have also recently published research making the case for increased Scottish Government funding for the SWF, particularly in the light of additional external pressures on demand (welfare reform and the cost of living crisis). Inclusion Scotland^[47] cite more Crisis Grant applications, more repeat applications and more refused applications as an indicator that the Scottish Welfare Fund will in future either need to raise the threshold at which help is offered – thereby denying assistance to increasing numbers of those in desperate need – or the amount of Scottish Government funding supplied to local authorities to administer the Fund would have to increase. Homeless Action Scotland^[48] have argued that the level of SWF funding is critical to tenancy sustainability and would like to see this increased. The Menu for Change report recommended the Scottish Government consult local authorities to determine the budget needed to administer the fund to a high standard, including an increase to the SWF administrative budget as well as the overall programme budget to meet increased demand.^[49]

In addition to arguing for an increase to the size of the overall budget of the Fund to ensure it can better support the increasing number of low income households facing financial crisis in Scotland, IPPR suggest redistributing resources between underspending and over-spending local authorities.^[50] However, as discussed above, recent pressures mean that a number of areas that have historically been within their Scottish Government budgets were now predicting overspends. Moreover, as discussed in chapter 7, the relationship between over and underspending, outcomes and need is complex, making it difficult to predict the precise consequences of any such redistribution.