The most common and most likely answer to this crossword clue is the 7 letter word LOONIES
I've seen this crossword clue in Independent
L
O
O
N
I
E
S
Buddy explains!
The straight part
We know that "people soft in the head" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case people soft in the head = loonies.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does LOONIES mean?
LOONIES noun- The Canadian dollar (both the coin and the monetary unit).
- An insane or very foolish person.