Thursday, 3 March 2011

Welfare ‘reform’: Coalition scraps crisis loans

A fund that helps low-income families with living costs that are not covered by weekly benefits is set to be scrapped under the government's benefit reforms, it has emerged. The discretionary Social Fund is made up of grants and some repayable "crisis loans". It is given to local authorities to disburse in their area to families and individuals most in need. But in an open ministerial letter and a call for evidence from the Department for Work and Pensions, it is proposed that the crisis loans and grants offered through the Social Fund be scrapped and replaced with locally-based provision, funded by central government.

The call for evidence states: "We firmly believe that the abolition of the discretionary elements of the Social Fund and their replacement with a combination of modernised national service and new locally-based and designed discretionary provision will deliver a more responsive, better targeted and relevant service. Individual local authorities will be given the funding and flexibility to redesign the emergency provision for vulnerable groups according to local circumstances, in order to meet severe hardship in the way they think best." But charity Family Action, which provides grants to families in need who are unable to access the Social Fund, has warned that the move will push some families to use high interest lenders and loan sharks. The charity also fears that if the money is not ring-fenced the reforms could lead to a postcode lottery of different entitlements in different areas.

Family Action chief executive Helen Dent said: "The Social Fund is being portrayed as a sticking plaster when it is a smart intervention. Community care grants prevent places in hospitals, refuges and hostels being blocked, funding cookers means families do not resort to takeaways or handouts from food banks. The government needs to think again. Vulnerable families turn to the Social Fund in times of crisis. And when the Social Fund turns them away, often because they have run out of money or people cannot afford to repay the loan, they have to turn to charities like Family Action. Many do not have access to bank accounts or credit apart from at a very high rate. This is why applications to the Social Fund are not a feckless or irresponsible act but rational consumer choices. The reform of the social fund that is proposed could lead to many households seeking credit from high-interest lenders."

In the ministerial open letter, pensions minister Steve Webb and junior minister Andrew Stunnell said at present the Social Fund is poorly targeted. "The Social Fund has been an important part of welfare provision for more than 20 years, providing financial support to some of the most vulnerable individuals and families in Great Britain. However, as we develop our plans to modernise the benefits system and introduce universal credit, it is increasingly clear that some of the support offered through the Social Fund is poorly targeted and expensive to administer," the letter states. "We believe that as we move forward with our plans to reform welfare, local government in England has a role to play in delivering the most discretionary elements of the scheme. Local knowledge, professional expertise and links with existing services will all contribute to better informed decision-making, which in turn will result in the improved targeting of resources."

Janaki Mahadevan
Children & Young People Now