London Borough of Southwark: Innovative use of the Household Support Fund

In this case study Southwark Council explains how they used the Household Support Fund (HSF) in October 2021-March 2022 to break new ground in delivery of local welfare by:

• providing direct cash support to help low income households pay rising energy bills
• identifying eligible households and setting levels of support based on local welfare data and other data about the energy efficiency of the borough’s housing stock
• using the Post Office Payout service to disburse local welfare support for the first time
• working with its community sector to create a community referral pathway to support with energy bills for vulnerable low income households outside the benefit system and not known to the Council.

The Government announced the new Household Support Fund in the first week of October 2021, the same week as both the removal of the £20 a week Universal Credit uplift and a then shocking 12 per cent increase to the statutory energy price cap took effect. These changes would affect tens of thousands of low-income Southwark residents.

The new grant was the fifth in a series of what the Government sometimes called timely, targeted, and temporary boosts to Council’s local welfare budgets since the start of the pandemic. It was also by far the largest of these boosts in terms of cash value.

Southwark Council, like most London boroughs, had used previous funding boosts mainly to cover the costs of free school meals during school holidays for eligible children attending the borough’s schools. We would use the new funding to continue to do so for the autumn and winter of 2021/22. That support would be delivered by more than one hundred Southwark schools and would take the Council a long way to meeting the funding condition that at least half of the new grant must be used to support households with children.

The new grant was big enough and the conditions flexible enough to allow the Council to do more. However, we also recognised that it was far from adequate to fully compensate vulnerable, low-income households affected by the withdrawal of the UC uplift and an annualised increase in energy bills of about £140 (more for those who paid for their energy using a pre-payment meter). Taken in aggregate, we estimated that the value of the new grant would compensate affected households for less than one-sixth of lost income and higher household bills over the period of the grant that had to be used by 31 March 2022. We would be careful not to “oversell” the impact of the HSF.

The Council already operated a local welfare assistance scheme (Southwark Emergency Support Scheme or SESS) and had done so since responsibility for local welfare was first handed to Councils in 2013. For Southwark Council, like other local authorities, it had not been possible to provide for enhanced local welfare arrangements through its budget or business planning, or to invest in new delivery systems, given the short-term and uncertain nature of the Government funding boosts. None of these lasted for more than six months and the Government was invariably insistent that funding would cease at the end of the current period before announcing yet another new temporary boost – often rebranded, or with different values and conditions of use to its immediate predecessor. This situation gave local authorities and their partners’ very little time to mobilise or plan.

The main questions we faced following the announcement of the new Household Support Grant were:

• how should the available support be targeted to ensure the maximum reach and impact? (Policy)
• how could we ensure that support was easily accessible and effective for recipients? (Design)
• how could we keep administration costs down while ensuring support was distributed quickly and secure against fraud or abuse? (Delivery).

The Council quickly decided that most support should be targeted at the lowest income, working-age households who were typically reliant on the benefits system – increasingly Universal Credit - for some or all of their income and receiving help through the Council’s local council tax support scheme (LCTS).

These households, often including single-person households, were those likely to be most affected by the changes that had apparently prompted the Government to introduce the fund. Additionally, unlike low-income pension-age households, this cohort would not be automatically cushioned against the financial impact of increases in home energy bills in the coming winter (through the Warm Home Discount or Winter Fuel Allowance, for example).

We also knew that fuel poverty due to a combination of low income and energy inefficient or poorly insulated homes was a problem in our borough. Many low-income households had struggled to heat their homes even before the increase in the energy price cap. We concluded that the best way to use the fund to help these households would be through direct support to help pay increased energy bills. Households receiving help through the local council tax support scheme (LCTS) would be liable for council tax at the address and would almost certainly have responsibility for energy bills for their home. These households would be the main beneficiaries of support through the Household Support Fund. LCTS recipients already met the low-income condition and no further means-testing for this group would be required – immediately reducing administration costs.

Support would be provided through a new Southwark Council Energy Support Fund (SCESF). Different levels of support would be provided to households depending on their level of income (distinguishing between those on the lowest incomes and those on the very lowest incomes), the size of the property/ household (larger homes are more expensive to heat), and where data was available, the energy efficiency of their home (energy inefficient or poorly insulated homes are more expensive to heat). The average level of support provided would be about £65 - a sum roughly equivalent to half the annualised increase in energy bills due to the changes in the statutory energy price cap effective from October 2021. Those eligible for most support would receive £75, those receiving least support would receive £50. Payments would be made in the coldest winter months – January and February.

We were also aware that an unknown but potentially significant number of equally low-income working-age and pension-age households might not have access to the benefits system or find themselves in need for other reasons. For those not claiming benefits or who were not known to the Council, we would work with our local community sector through the Southwark Community Support Alliance or community hub.

Community partners including foodbanks, churches, advice organisations, tenants and residents associations, and other mutual aid groups would refer vulnerable users of their services who were known to them but not known to the Council after carrying out a very light touch eligibility test. Referrals would be made using a simple online form or by phone. After carrying out some basic checks, the Council would provide the household with a fixed level of cash support (£65) with energy bills through the new SCESF.

The second question was less easy to answer. Previous local welfare boosts and the Council’s existing local welfare assistance scheme had been delivered mostly in the form of vouchers – usually supermarket gift vouchers – to ensure that vulnerable households had access to food and other essentials. Fuel voucher options were available but it quickly became apparent that limitations on their use meant they were not a practical option.

For example, they could only be used by households who paid for their energy using a prepayment meter, and are not accepted by the country’s major home energy supplier British Gas. When we surveyed potential recipients, we found that only fifty percent used a prepayment meter and that British Gas was the main supplier among respondents. Discussion with other local authorities that were already using fuel vouchers revealed other issues such as widely reported problems experienced by customers when attempting to redeem vouchers at neighbourhood stores.

Other non-voucher payment options were considered but these required the recipient to have a bank account, email address, or smartphone. Even where the eligible household met these requirements, the Council did not always hold this information in its records and would have to ask the recipient to provide them before any payment could be made – driving up administration costs and creating barriers to support.

Among all the options we considered, Post Office Payout (POP) stood out and we quickly concluded that it offered the best option in terms of accessibility  and effectiveness. The recipient is sent a letter by post (1st class) containing a unique bar code that may be redeemed at any Post Office counter for the specified cash amount on production of the letter and a form of ID.

The POP system’s simple design, tailored to meet the needs of those likely to be excluded, partly reflects the Post Office’s wider statutory social obligations and its status as a financial service provider of last resort for low-income and financially excluded households. There are twenty-eight Post Office branches that are easily accessible to Southwark residents – about one branch for every square kilometre of the borough. There is also something about the Post Office brand – almost universally recognised and trusted - and the vast majority of adults in the UK know where their local Post Office is and visit a Post office branch at least once a year.

With POP, we don’t need any information about recipients apart from their names and addresses and we already hold that information for all households in receipt of LCTS. The barcoded letter is time-limited and we set a one-month deadline for recipients to redeem their vouchers (this was mainly to ensure compliance with the Government imposed 31 March deadline).

The audit trail for payments available to users via the Post Office Payout portal is simple and easy to use: we know exactly where payments were redeemed, when, and by whom – or if they are redeemed at all. To deal with situations where vulnerable recipients are unable to visit a Post Office and have no one who can do this for them, we set in place arrangements so that they could ask for a volunteer from the community hub to visit their home and either take them to the Post Office to redeem their voucher, or do so on their behalf.

Question three was partly answered by our responses to questions one and two. What we were most keen to avoid was a new system where eligible households were required to apply for support from the new Household Support fund or to provide information as a condition of access to support. The Council’s allocation from the Household Support Fund was inclusive of administration costs which of course meant that the more the Council spent on administration, the less was available for the vulnerable, low-income households for whom this grant was intended.

Any application-based system would likely entail very significant administration costs – chiefly the costs of staff required to receive, process, and decide what could be a very large number of applications. An application based system would also create barriers to support and would likely result in households needing support missing out either because they did not apply or did not provide information requested.

The fact that the Council already operated an application-based, local welfare assistance scheme (Southwark Emergency Support - with a separate budget, policy, and eligibility criteria) that would continue to operate as normal alongside the new Household Support fund, made it easier to implement our preferred approach. This meant that the Council could offer four separate routes to local welfare support that were not necessarily mutually exclusive and that ensured the widest possible coverage while keeping administrative costs down:

• Southwark Energy Support (Main scheme) – targeted at selected LCTS claimants (working-age or pensioners not receiving Pension Credit Guarantee) and funded from Household Support Grant
• Southwark Energy Support (Community Referral Pathway) – based on referrals from community partners of households who are vulnerable pay energy bills but do not claim welfare benefits and are not known to the Council. Funded from Household Support Grant.
• Southwark Emergency Support – based on individual applications from households facing an emergency and unable to meet their immediate basic needs for food, fuel, or other essentials. Not funded from Household Support Grant.
• Holiday Free School Meals – targeted at children of low-income families on school rolls and eligible for free school meals (free school meals is a passported benefit based on entitlement to other income-related benefits. It is a statutory scheme run by the Department for Education but administered by local authorities and schools. There is no statutory provision for free school meals during school holidays). Funded from Household Support Grant.

For what we called our main scheme, the households identified as eligible for support without having to apply were current LCTS claimants and claiming other income-related benefits. All would have passed through a verification gateway when they first applied for that support. They will have completed an application and provided proof of ID and other evidence to the Council or the DWP in support of their claim. They may have been asked to provide further verification of their circumstances during the life of their claim. We could see no valid reason why they should be required to do so again as a condition of access to the Household Support fund. Post Office Payout offers a further layer of security against fraud or abuse as recipients must go to a Post Office and present the letter and proof of their ID before the bar-coded letter may be redeemed by Post Office staff.

For households referred by community partners via the community referral pathway (CRP), the Council delegated responsibility for identifying and referring eligible households to the partners - all of which signed a Memorandum of Understanding with the Council. Partners were not funded separately by the Council to make referrals and our shared assumption was that those referred would be those who had made contact with partner organisations for other reasons. For example, a household visiting a foodbank to seek emergency food support could be identified by foodbank staff or volunteers as eligible for help with energy costs and, where they consented, referred to the Council in a matter of minutes using a simple e-form. The Council would carry out no further means-testing on the household referred but would carry out simple checks for example to ensure that the household referred were resident in the borough and that they had not received support or were not due to receive support through the main scheme.

The new fund would not be widely publicised. No information was posted on the Council website and communication was limited to those identified as eligible through the main scheme or who had been referred by community partners.

Post Office Payout had stood out as the preferred option for several reasons, including costs. It was the lowest cost option among all those we considered by a considerable margin and the low costs of procurement were matched by the simplicity and ease of use. We post the funds required to our account and then upload a file containing the names and addresses of those to receive a barcoded letter and the specified amount (£) into an online portal. The Post Office and Royal Mail do everything else – printing, dispatching, and delivering the bar-coded letters and then redeeming those letters on presentation at Post Office counters.

Additionally, the Post Office has a unique status as a supplier, and the procurement of the Post Office Payout service is very straightforward for Councils able to take advantage of the Crown Services Commercial Framework - further reducing time, effort, and cost. Southwark Council was not previously a user of Post Office Payout but was able to complete procurement in just a few weeks in November and December last year.

For the Holiday Free School Meals element of the Council’s programme, it is greatly to the credit of the more than one hundred participating schools that they absorbed all costs of administration within their own budgets

The original Household Support Fund ended on 31 March so we can now make an early assessment of our earlier decisions and draw tentative lessons as the Council considers best use of its new allocation from the extended fund.

The original grant was used in full, on time, and funding conditions were met. More than fifty percent of the grant was used to provide support for low income families with children. The fund was used exclusively to provide support with food and fuel to low income households most vulnerable to impacts of increased energy bills and cost of living.

Total administration costs represented just over 5 per cent of the Council’s total allocation. Those costs were somewhat inflated by the procurement and set up of Post Office Payout that we would not expect to repeat for future rounds of Household Support Fund.

Our approach could be described as “administration light” but “communication heavy”. Recipients of Southwark Council Energy Support (SCESF) were contacted by letter at least three times and sometimes more often. There was additional contact by text and email with many recipients. The rationale was to ensure that recipients did not contact the Council by phone or visit face to face services because they did not understand the bar-coded letter or why they had received it. We believe this approach was largely successful and was made possible because the Council continued to operate its existing local welfare scheme alongside the HSF. This meant that support was available to any Southwark resident applying for it and who met the eligibility criteria.

About thirteen thousand children attending Southwark schools and eligible for free school meals received support equivalent to cost of free school meals during the autumn half-term, Christmas, February half-terms and Easter holidays. This included children who attended schools in Southwark but lived in other boroughs. Each school has its own arrangements for providing support and most was provided in the form of supermarket gift cards or vouchers.

About twenty thousand households received support through the Southwark Energy Support Fund in the form of bar-coded letters through the Post Office Payout system. Just over 85 per cent of those receiving bar-coded letters redeemed their letter and collected a cash payment at Post Office counters. The Council surveyed early recipients of bar-coded letters and results were encouraging. The vast majority of respondents – well over ninety percent – reported that they had redeemed their bar-coded letter, had found it easy to do so, and that they had used the cash to pay for energy.

The largest groups of recipients were lone parent households and older single adults – often in their fifties and sixties but not at state pension age. Support for pension-age residents was limited to those not receiving Pension Credit but claiming LCTS.

However, some questions remain. Fifteen percent of vouchers or bar-coded letters issued were unredeemed at the end of the period and we do not fully understand the reasons for this. Vouchers began to be sent at scale in early January (approximately five hundred per day initially, before rising to one thousand per day). As the first expiry date for unredeemed vouchers approached, the Council contacted recipients in early February, urging them to redeem their vouchers before they expired. Those reminders prompted contact from many recipients saying that they had not received their barcoded letters. We do not fully understand reasons for this but became aware of evidence published by the Royal Mail on its website that postal delivery performance had fallen below normal standards in some postcode districts due to high levels of staff sickness absence and other seasonal pressures before and after Christmas.

Whatever their actual cause, these issues persisted throughout the period when bar-coded letters were sent. The Council eventually abandoned reminders and instead issued replacement bar-coded letters in any case where the original had expired.

Before issuing bar-coded letters at scale from January, the council carried out a small pilot to test the system before Christmas. Bar-coded letters were sent to 161 eligible households on the Kingswood Estate – a council housing estate in the far south of the borough with a parade of shops at its centre that included a Post Office branch. Redemption rates were low initially for the pilot and the Council issued two reminders – mostly by text and email - before vouchers were due to expire in January. 85 per cent of vouchers were redeemed before they expired.

The Council attempted to make contact with all those who had not redeemed vouchers before the expiry date – doing so in person or by phone. Contact led to several bar-coded letters being reissued but also revealed issues of extreme vulnerability, often linked to poor mental health among some residents. For example, some recipients would experience periods of crisis when they would not leave their homes or would not open post. Others were vulnerable, very isolated and without networks of support. We are also aware from previous experience that some residents are content to apply for and receive benefits offered in the form of discounts or rebates – such as LCTS which is a discount – but are unwilling to apply for or accept benefits of equivalent value where these are paid in cash.

Additional interventions eventually pushed redemption rate for the pilot to just over 90 per cent. It was not possible to repeat the level of intervention during the pilot for the whole scheme but we will shortly more closely evaluate the experience of the pilot with a view to drawing lessons for the next round of Household Support Fund and the longer term.

The Community Referral Pathway (CRP) was a completely new and untested approach that looked to build on a surge in community activism and volunteering during the pandemic. It would provide new routes to support outside more traditional, bureaucratic channels or gateways so that support available through voluntary, community based altruism and philanthropic effort could be complemented by discretionary local or national state support. It would also ensure wider coverage so that support was available to vulnerable households outside the benefit system who might otherwise be excluded.

The referral based approach and Memorandum of Understanding described in para 16 represented an attempt to square the circle of accountability for use of public money that can sometimes be an obstacle to community based or led efforts of this kind.

The CRP concept was first proposed by community groups themselves and was eventually developed as a collaboration between Council officers and representatives of larger community partners and those with greatest capacity. The CRP was launched under the umbrella of the Southwark Community Support Alliance, a local network of community organisations, just before Christmas and remained open for referrals until the last week of March. Partners were encouraged to create their own informal referrals systems with their own networks of smaller grassroots groups but the Council would only accept referrals from formal partners who had signed an MOU.

£300k was earmarked to meet the cost of up to four thousand referrals through Community Referral Pathway but in the end only about one sixth of that budget was used. Just under nine hundred referrals were received and some did not result in a payment either because the household had received or was due to receive support through the main scheme, or because the household was ineligible for other reasons – for example where they lived outside the borough.

Sixteen community organisations enrolled to take part in the CRP – including food banks, churches, tenant and resident associations, advice organisations and mutual aid groups some of which had emerged during the pandemic and provided services mainly for black, Asian and other ethnic minority groups. Some were local branches or affiliates of national organisations including for example, Age UK, Christians Against Poverty, the Trussell Trust, and Citizens Advice.

Enrolment by partners was slow initially but more did so over time and the March deadline meant that time was very limited. Referrals numbers were also low initially but built over time as community groups mobilised more effectively. The number of referrals peaked in the last two weeks of the CRP before it closed on 31 March.

The CRP was not in place for long enough to make a proper evaluation of its effectiveness – though we believe it showed promise. The community partners demonstrated a strong commitment and a significant number of vulnerable households received support who likely would not have done so otherwise. The extension of the Household Support Fund provides an opportunity to further develop what is still an experimental concept and evaluate outcomes properly.

The Council’s decision to use POP and pay recipients in cash was mainly the result of pragmatic considerations following discovery that the use of fuel vouchers on a large scale would not be a viable option. However, use of cash was a breach with the Council’s previous approach to delivery of local welfare which had always been provided in kind – as vouchers or furniture, bedding and white goods – with very few exceptions. Governments’ responses to the economic impacts of the pandemic, nationally and internationally, may prove to have been a watershed on the use of cash as a means of disbursing emergency aid. The unprecedented use of cash transfers on a huge scale to support household incomes most notably through furlough schemes, seems to imply recognition that household’s may experience economic shocks for reasons entirely outside their control and require state support. The pandemic was one such example – rising energy prices are another.

These crises took place as evidence from around the world had begun to demonstrate that poor households generally use cash well and that that money, not assistance in kind, is the most efficient and effective way to distribute emergency aid and social programmes. Evidence also suggests that low income households will use emergency aid in the form of cash to pay for food and essentials in any event. More locally, feedback on use of vouchers in our own borough, while generally positive, has included concerns that the vouchers for a high-end supermarket brand may limit choice, personal autonomy, or dignity. Vouchers with restricted use may limit access to more culturally appropriate food among our Latin American and African populations for example and could prevent lowest income households who may usually shop elsewhere such as at local street markets from making best use of the funding.

Previous decisions not to provide local welfare assistance in the form of cash appear not to have been based on solid evidence that the poorer and more economically vulnerable households likely to apply for local welfare should not be paid in cash – though anecdotes about misuse abound and there appear to be underlying concerns that cash payments could foster dependency. We already know that low income households are more likely to prefer to manage their money using cash and the international evidence appears to strongly support greater use of cash transfers for those facing an emergency – compared with support provided in kind – in the future. The Government decision to provide emergency financial support as Council Tax Rebates to lower income households as cash payments paid to bank accounts or by other means including options such as POP may be further evidence of a shift in UK policy direction.

The Council relied mainly on its own LCTS data to identify households eligible for support through the SCESF (main scheme) and segment them between households on lowest incomes and households with the very lowest incomes, and take account of the size of the property and household. What this meant, for example, is that those receiving the maximum discount available under the Council’s LCTS scheme and living in a large property received more support, while those receiving less than the maximum discount and living in a smaller property received a bit less support.

We also relied on data published by BEIS on the energy efficiency of the borough’s housing stock. That data-set was far from complete and is not always up to date but where it was available we were able to take the energy inefficiency of the home into account and give those living in the least energy efficient homes more support.

Last year the Department for Work and Pensions had begun sharing UC claimant data with local authorities at postcode level. This was not useful as a means of identifying households eligible for support through the Southwark Council Energy Support Fund (SCESF) but the DWP has indicated that it expects to provide enhanced UC claimant data to local authorities from spring this year. DWP say that we may use the data to, for example, identify households claiming UC and affected by the benefit cap or bedroom tax. We are yet to see the new data and it may not be available in time to be useful for purpose of identifying eligible households for the new Household Support Fund or to inform decisions on what level of support different households should receive. Access to the new data is nonetheless very welcome.

Eugene Nixon, [email protected]