Departments Directions Social Fund Guide
Part 9 - Transitional arrangements - dealing with loan applications received before 3 April 2006
Direction 1A
1. Transitional arrangements apply to all Budgeting Loan (BL), and Crisis Loan (CL), applications that are made before 3rd April 2006, but are determined on or after 3rd April 2006.
2. Direction 1A states that all loan applications made before 3rd April 2006, including any subsequent review, of the initial decision on those applications, are subject to the rules applying in the following directions in force before 3rd April 2006:
- Direction 9
- Direction 10
- Direction 18
- Direction 20
- Direction 21
- Direction 50
- Direction 51
- Direction 52
- Direction 53
3. SF Managers and all decision makers must ensure that loan applications dealt with in the transitional period are decided using the correct rules. SFCS will apply the old rules or the new rules according to whether the application date entered is before 3rd April, or on or after this date.
4. Staff must therefore enter the correct application date so that the correct directions are applied. This is especially crucial for the processing of BL applications where the SF system automatically applies rules on behalf of the decision maker.
5. When a pre 3rd April application date is entered on SFCS, any loan award due will be calculated using all the directions - including repayment terms – that applied before 3rd April 2006. This includes still applying the “old” maximum BL baseline amount in force at 31st March 2006.
6. All pre-3rd April BL applications can be processed using SFCS, as long as:
- the correct application date is entered
- the end of 2005/06 baseline amount does not change. (See para 13 below on BL baseline amounts).
7. Any CL application made before 3rd April 2006, but decided after, will be subject to the previous overall debt limits of £1,000. SFCS will apply this limit when calculating awards made on all applications that are input with a pre 3rd April application date. Again, the accuracy of user input is crucial or decision makers will not get accurate system support when making a decision on pre 3rd April applications.
8. For pre 3rd April CL applications, SFCS will continue to display standard repayment rates of 15 percent, and will allow a proposed weekly repayment rate of over 20% (up to 25%) without producing a system warning to the user.
9. However, there is nothing to prevent the decision maker from using the new broader repayment parameters for transitional CL applications. Also, SF policy strongly recommends that no repayment rate of over 20% be set on a CL, even on pre 3rd April applications.
Review decisions on pre 3rd April loan applications 10. The pre 3rd April 2006 Department’s directions, mentioned at para 2 above, will continue to apply to all pre 3rd April BL applications, whatever the date of the review application or review decision.
11. But note that when reviewing CLs, SF policy recommends that any repayment rate of over 20% be reduced to within the new broader parameters.
12. Decision makers will need to have access to the former version of the law in the Social Fund Guide until all review activity on pre 3rd April initial applications is completed.
BL baseline maximum amounts both pre and post April 0613. Area Decision Makers, SF Managers and decision makers should note that there will be 2 national BL baseline maximum amounts during the transitional period:
- one for the cases that have to be determined under the directions of the pre 3rd April scheme; and
- one for the revised scheme from 3rd April 2006.
14. Both of these figures need to be reflected in the Area Decision Maker’s guidance (see direction 41(d)).
15. The national BL baseline amount is the policy mechanism for keeping national spend within a given year’s budget. It is therefore subject to revision during the year.
16. If any changes have to be made to the national baseline during the budget year 2006/07, both the “old” and the “new” BL baseline maximum amounts will change. Any change must be reflected in the ADM guidance and be taken account of by decision makers
17. From 3rd April 2006, SF Managers will be able to enter and make changes to the national BL baseline for new 3rd April BL scheme only. However, the “old” national baseline can never be amended on SFCS and will remain the same value as the one that apply at 31 March 2006.
18. This means that if the recommended national BL baseline changes during 2006/07, the decision maker will need to change the threshold value via the clerical dialogue 95 so that the correct BL award is calculated.
Policy – pre 3 April 2006Direction 9 – Treatment of capital
9.(1) Where -
(a) the applicant, or his partner, is aged 60 or over and the total capital resources of the applicant and his partner exceed £1 000; or
(b) the applicant is, or if he has a partner, both are aged under 60 and the total capital resources of the applicant and his partner exceed £500.
any budgeting loan which would but for this direction be awarded shall be awarded only if, and to the extent that, the amount of the award is more than the excess.
(2) Subject to paragraph (4) in this direction, 'total capital resources' shall be calculated in accordance with -
(a) where the applicant or his partner is in receipt of income support, Chapter VI (capital) of Part V of, and Schedule 10 to, the Income Support (General) Regulations 1987
(b) where the applicant or his partner is in receipt of income-based jobseeker's allowance, Chapter VI (capital) of Part VII of, and Schedule 8 to, the Jobseeker's Allowance Regulations 1996
(c) where the applicant or his partner is in receipt of state pension credit, Part III (income and capital) and Schedule V to the State Pension Credit Regulations 2002.
(3) ln this direction any payment made to the applicant or to his partner under the Social Security (Back to Work Bonus) (No. 2) Regulations 1996 shall be treated as capital.
(4) There shall be disregarded from the total capital resources for the purposes of paragraph (2) -
(a) any payments made from the Family Fund to the applicant or to his partner or children.
Direction 10 – Budgeting Loan, minimum and maximum award
10. The minimum amount that may be awarded as a budgeting loan is £30. The maximum that may be awarded as a budgeting loan is the difference between any sum already repayable to the social fund by the applicant and his partner and £1000.
Direction 18 – Crisis Loans, amount to be awarded
18. (1) The maximum amount that may be awarded as a crisis loan in respect of living expenses for applicants, other than people whose income-based jobseeker's allowance is reduced by virtue of regulation 145 of the Jobseeker's Allowance Regulations 1996 (hardship cases), is the aggregate of -
(a) an amount equal to 75% of the appropriate income support personal allowance, or, as the case may be, income-based jobseeker's allowance personal allowance, for the applicant and any partner; and
(b) for each child, an amount equal to the income support personal allowance at the rate applicable to children before the first Monday in September following their 16th birthday, or, as the case may be, an amount equal to the income-based jobseeker's allowance personal allowance at the rate applicable to children before the first Monday in September following their 16th birthday;
but must not in any case exceed the difference between any sum already repayable to the social fund by the applicant and his partner and £1000.
(2) The maximum amount that may be awarded by way of a crisis loan in respect of living expenses to an applicant whose partner would, if he or she applied for a crisis loan, have had the expenses in respect of which a crisis loan may be awarded, restricted by direction 17(b) to (e) is the aggregate of -
(a) an amount equal to 75% of the appropriate income support personal allowance, or, as the case may be, income-based jobseeker's allowance personal allowance, for the applicant only; and
(b) for each child, an amount equal to the income support personal allowance at the rate applicable to children before the first Monday in September following their 16th birthday, or, as the case may be, an amount equal to the income-based jobseeker's allowance personal allowance at the rate applicable to children before the first Monday in September following their 16th birthday;
but must not in any case exceed the difference between any sum already repayable to the social fund by the applicant and his partner and £1000
(3) Where any step in the calculation under paragraph (1) or (2) results in a fraction of a penny, that fraction may be rounded up or down to the nearest penny.
Direction 20 – Crisis Loans, calculations of amounts for living expenses Jobseeker’s Allowance hardship cases
20. (1) The maximum amount that may be awarded as a crisis loan in respect of living expenses for applicants whose income-based jobseeker's allowance is reduced by virtue of regulation 145 (hardship cases) of the Jobseeker's Allowance Regulations 1996 is -
(a) the aggregate of -
(i) an amount equal to 75% of the appropriate income-based jobseeker's allowance personal allowance for the applicant and any partner; and
(ii) for each child, an amount equal to the income-based jobseeker's allowance personal allowance at the rate applicable to children before the first Monday in September following their 16th birthday; or
(b) the income-based jobseeker's allowance applicable amount payable in such circumstances
whichever is the lower, but must not in any case exceed the difference between any sum already repayable to the social fund by the applicant and his partner and £1000.
(2) Where any step in the calculation under paragraph (1) results in a fraction of a penny, that fraction may be rounded up or down to the nearest penny.
Direction 21 – Crisis Loans, maximum amounts
21. The maximum amount which may be awarded in respect of any item or service which is within Direction 3 (crisis loans) is the lesser of -
(a) in the case of an existing item, the cost of repair; or
(b) the reasonable costs of replacing an existing item, or purchasing a new item or service (including delivery and installation),
but the amount must not in any case exceed the difference between any sum already repayable to the social fund by the applicant and his partner and £1000.
Direction 50 - The initial test
50. (1) In determining whether to make an award of a budgeting loan to the applicant or the amount to be awarded, the decision maker shall have regard to the following personal circumstances of the applicant:
(a) subject to paragraphs (2) and (3) below, the period of time in respect of which the applicant has, at the date of the determination of the application, been continuously in receipt of a qualifying benefit, or payments on account of such a benefit, or was the partner of a person receiving a qualifying benefit or payments on account of such a benefit;
(b) the number of persons who are members of the applicant's household at the date of the determination.
(2) For the purposes of paragraph (1)(a) above, the applicant or, as the case may be, his partner:
(a) shall be treated as having been in receipt of a qualifying benefit or payments on account of such a benefit during any period of 28 days or less:
(i) in respect of which neither of them was in receipt of such a benefit or payments on account of such a benefit; and
(ii) which falls immediately between periods in respect of which either of them was in receipt of such a benefit or payments on account of such benefit;
(b) shall be treated as having been in receipt of a qualifying benefit during any period of time which would have formed part of the qualifying period as described in paragraph (1)(a) but for the fact that payment of a qualifying benefit was received retrospectively in respect of that period.
(3) For the purposes of paragraph (1)(a) above, the decision maker shall not have regard to any period in respect of which the applicant or his partner was in receipt of a qualifying benefit or payments on account of such a benefit which is more than three years prior to the date of determination.
(4) For the purposes of paragraph (1)(b) above, a person shall be treated as being, or not being, a member of the applicant's household at the date of the determination in accordance with regulation 16 of the Income Support (General) Regulations 1987 or, as the case may be, in accordance with regulation 78 of the Jobseeker's Allowance Regulations 1996.
(5) Where the applicant or his partner is in receipt of state pension credit, or payments on account of state pension credit, at the date of the determination, for the purposes of paragraph (1)(b) a person shall be treated as being, or not being, a member of the applicant’s household at that date in accordance with regulation 16 of the Income Support (General) Regulations 1987.
(6) In this direction, “qualifying benefit” and “or payments on account of such a benefit” shall have the same meaning as in direction 8(1)(a).
Direction 51 – The wider test
51. (1) Where, having regard to the applicant's personal circumstances as specified in direction 50(1)(a) and (b), no budgeting loan may be awarded, the decision maker shall determine whether to make an award of a budgeting loan, and the amount of that award, by having regard instead to the personal circumstances specified in direction 50(1)(a) and (b), those personal circumstances as are specified in sub-paragraphs (a) to (c) of this paragraph, and also to paragraph (2) below:
(a) subject to paragraphs (2), (3) and (4) below, any period in respect of which the applicant was in receipt of Working Families Tax Credit, Child Tax Credit at a rate higher than the appropriate maximum family element as specified in regulation 7(3) of the Child Tax Credit Regulations 2002, Working Tax Credit with a disability or a severe disability element as specified in regulation 20(1)(b) & (f) of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002, Housing Benefit or Council Tax Benefit (the "secondary benefits"), or was the partner of a person receiving a secondary benefit, except where such period ended more than 28 days before the date upon which he was first in receipt of a qualifying benefit or payments on account of such a benefit as determined for the purposes of direction 50(1)(a) ('the secondary qualifying period'); and
(b) all persons who share the applicant's private residence but are not members of the same household as defined by regulation 16 of the Income Support (General) Regulations 1987 or, as the case may be, regulation 78 of the Jobseeker's Allowance Regulations 1996 at the date of the determination and who are either in receipt of a qualifying benefit or payments on account of such a benefit, or are the partner or dependant of those persons; and
(c) where the applicant or his partner is pregnant, any unborn child who is likely to become a member of the applicant's household.
(2) Where:
(a) the applicant has outstanding debt arising from a previous budgeting loan awarded on a date when the applicant had a partner and/or dependants; and
(b) at the date of determination of the current budgeting loan application, the applicant's applicable amount for the purposes of his entitlement to income support or to income-based Jobseeker's allowance, does not include any amount in respect of that partner or dependants; and
(c) the current application for a budgeting loan has been made as a consequence of the applicant's separation from that partner and/or dependants; that budgeting loan shall be disregarded for the purposes of calculating the applicant's existing debt in accordance with direction 53(2)(b).
(3) For the purposes of paragraph (1)(a) above, the decision maker shall not have regard to any period (or part period) in respect of which the applicant or his partner was in receipt of a secondary benefit
(a) which is more than three years prior to the date of the determination;
(b) which, when added to the period of time in respect of which the applicant, or as the case may be, his partner, has at the date of the determination, continuously been in receipt of a qualifying benefit, exceeds three years;
(c) or which overlaps with any period of receipt of a qualifying benefit such as is specified in sub-paragraph (3)(b)
(4) For the purposes of paragraph (1)(a) and subject to paragraph (5) below, where the applicant or his partner was in receipt of two or more secondary benefits during the period specified in paragraph (3) above, either simultaneously or concurrently, the decision maker shall have regard to the secondary benefit which the applicant or, as the case may be, his partner had been in receipt of for the longest continuous period.
(5) For the purposes of paragraph (1)(a) above, any period of 28 days or less in respect of which the applicant or, as the case may be, his partner, has not been in receipt of any secondary benefit shall be disregarded but only where that period separates two periods in respect of which the applicant or, as the case may be, his partner, was in receipt of the same secondary benefit.
(6) For the purposes of paragraph (1)(a) above, the applicant or his partner shall be treated as having been in receipt of a secondary benefit during any period of time which would have formed part of the secondary qualifying period as described in paragraph (1)(a) but for the fact that payment of a secondary benefit was received retrospectively in respect of that period.
(7) For the purposes of paragraph (1)(b) above, a person shall be treated as being, or not being, a member of the applicant’s household at the date of the determination in accordance with regulation 16 of the Income Support (General) Regulations 1987 or, as the case may be, in accordance with regulation 78 of the Jobseeker’s Allowance Regulations 1996 and where the applicant or his partner is in receipt of state pension credit, or payments on account of state pension credit at the date of the determination direction 50(5) shall have effect.
(8) In this direction, “qualifying benefit” and “payments on account of such a benefit” shall have the same meaning as in direction 8(1)(a).
Direction 52 – Weightings for personal circumstances
52. (1) The priority of a budgeting loan application shall first be determined by looking at the applicant's personal circumstances in accordance with direction 50 and the weighting values accorded to those personal circumstances as specified in the following sub-paragraphs:
(a) in relation to the period in respect of which the applicant has at the date of determination been continuously in receipt of a qualifying benefit or payments on account of such a benefit, as defined in direction 8(1)(a) or was the partner of a person in receipt of a qualifying benefit or payments on account of such a benefit;
(i) where that period is equal to, or exceeds, the maximum period specified in direction 50(3), the weighting value shall be one and a half times the minimum period of 26 weeks specified in direction 8(1)(c);
(ii) where that period exceeds 26 weeks but is less than the maximum period specified in direction 50(3), the proportion of the weighting value specified in sub-paragraph (i) above to be attributed shall be the proportion of the difference between the minimum and maximum periods represented by that period.
(b) where the applicant has a partner, the second adult in the household shall be treated as having a weighting value of one third of the applicant;
(c) where there are children aged 18 and under in the applicant's household:
(i) the first child shall be treated as having a weighting value of two thirds of the applicant;
(ii) the second child and any subsequent children shall each be treated as having a weighting value of one third of the applicant.
(2) Where the effect of applying the weighting values specified in paragraph (1) above in relation to the applicant's personal circumstances as specified in direction 50(1)(a) and (b) is not such as to enable a budgeting loan to be awarded, the priority of the application shall instead be determined by reference to the applicant's personal circumstances as specified in direction 51(1), the relevant weighting values specified in paragraph (1) above, and to the following sub-paragraphs:
(a) the period of time in respect of which the applicant or, as the case may be, his partner, has at the date of determination been continuously in receipt of a secondary benefit as defined in direction 51(1)(a), shall be cumulated with the period specified in paragraph (1)(a) above and the cumulative period shall be treated as being a period such as is specified in paragraph 1(a) for the purpose of calculating the weighting value which applies in respect of that period:
(i) where that period is equal to, or exceeds, the maximum period specified in direction 50(3), the weighting value shall be one and a half times the minimum period of time in receipt of a qualifying benefit or payments on account of such a benefit, as specified in direction 8(1)(c), of 26 weeks;
(ii) where that period exceeds 26 weeks but is less than the maximum period specified in direction 50(3), the proportionate weighting value shall be equivalent to that specified in paragraph (1)(a)(ii) above.
(b) where there are persons in the same private residence as the applicant to whom direction 51(1)(b) applies at the date of the determination and who are either in receipt of a qualifying benefit or payments on account of such benefit, or are the partner or dependant of those persons (the "secondary family"):
(i) any adult in the secondary family shall each be treated as having a weighting value of one-third of the applicant;
(ii) where one or more dependant children are members of the applicant's household and one or more dependant children are members of the secondary family, the first and subsequent children in the secondary family shall each be treated as having a weighting value of one-third of the applicant; but
(iii) where the applicant's household contains no dependent children but one or more dependant children are members of the secondary family, the first child therein shall be treated as having a weighting value of two-thirds of the applicant, and the second and any subsequent children, one-third each.
(3) For the purposes of paragraphs (1) and (2) of this direction, weighting values shall be determined on the basis that the weighting value to be attached:
(a) to a period of continuous receipt of a qualifying benefit or payments on account of such a benefit, of exactly 26 weeks; and
(b) to a household containing only the applicant, shall, in both cases, be 1.
(4) The applicant's circumstances as specified in direction 50(1)(a) and (b) and direction 51(1)(a) to (c) as weighted by paragraphs (1) and (2) above, shall determine each applicant's relative priority, by:
(a) providing that identical personal circumstances will always result in identical weightings, and therefore identical priority levels; and
(b) ensuring that the differential in priority between two different sets of personal circumstances will always remain constant; and
(c) ensuring that the differential in priority will be reflected in the limit on the maximum amount of budgeting loan each applicant can borrow, as contained in guidance issued by the Area Decision Maker under direction 41.
(5) Paragraph 2(b) of direction 50 and paragraph 6 of direction 51 shall have effect for the purposes of paragraphs 1 and 2 of this direction.
Direction 53 – What to award
53. (1) Where the priority of the application has been determined in accordance with the applicant's personal circumstances as specified in direction 50, and the weighting values applying to those personal circumstances as specified in direction 52, the decision maker will then determine the maximum amount of budgeting loan the applicant may borrow appropriate to those personal circumstances by reference to direction 40 and the guidance of his area decision maker (the "maximum amount").
(2) Subject to paragraphs (3) to (5) below and to directions 9 to 11, the amount of the award shall be determined in accordance with the following sub-paragraphs:
(a) where neither the applicant nor his partner has any existing budgeting loan debt, the maximum loan which could be awarded shall be the maximum amount, so that:
(i) where the amount applied for is equal to or below the maximum amount, the applicant shall be awarded that amount;
(ii) where the amount applied for exceeds the maximum amount, the amount of the applicant's award shall be restricted to the maximum amount;
(b) where either the applicant, or his partner, or both, has existing budgeting loan debt, the total of the existing and proposed debt must not exceed the maximum amount, so that:
(i) where the amount applied for would result in the total of existing and proposed debt being equal to or below the maximum amount, the applicant shall be awarded the amount applied for;
(ii) where the amount applied for would result in the total of proposed and existing debt exceeding the maximum amount, the amount of the applicant's award shall be restricted to the amount which results in the total of the applicant's existing and proposed debt being equal to the maximum amount,
and for the purpose of this paragraph, "proposed debt" means the total of the existing debt and the amount applied for.
(3) No award will be made where, having applied paragraphs (2)(a) and (b) above a budgeting loan could not be awarded or could be awarded but only for less than £30, and the applicant has not declared personal circumstances as specified in direction 51(1), or satisfies the provisions of direction 51(2).
(4) Where having applied paragraphs (2)(a) and (b) above a budgeting loan could not be awarded or could only be awarded for less than £30, and the applicant has declared personal circumstances as specified in direction 51(1)(a) to (c), or the applicant satisfies the provisions of direction 51(2), or both, the application shall be determined on the basis of such weighting values applied to those personal circumstances as specified in direction 52(2), before determining the amount of the award in accordance with paragraph (2) above, and (5) below.
(5) No award shall be made where, having applied paragraph (4) above a budgeting loan cannot be awarded on the basis of paragraphs (2)(a) and (b) above, or could only be awarded for less than £30.
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