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Archbishop of York and National Charity Warn of Changes to Social Fund

Thursday 18th July 2013

The Archbishop of York, Dr John Sentamu, and The Children’s Society have expressed concerns that some of the country’s poorest families could pay the biggest price for changes to a Government fund to help people in financial crisis.

The warning follows research by The Children’s Society which paints a disturbing picture of how changes to the Department for Work and Pensions’ (DWP) Social Fund could plunge hard-pressed families deeper into poverty. It reveals a postcode lottery is beginning to emerge, where the level of support depends on where you live, not on need.  

Backing the charity’s call for reforms to local welfare assistance schemes - set up following reforms to the Social Form – Dr Sentamu said: “The Children’s Society’s report reveals deeply worrying signs that families will be pushed deeper into poverty because of these reforms.

“With an unprecedented squeeze on household budgets, we must do everything possible to lift families out of poverty. As this report shows, some local authorities are putting essential support beyond the reach of vulnerable families.  This will only exacerbate their daily struggle to put food on the table or clothe their children. 6 out of 10 families in poverty have at least one adult in work – those who work hard are increasingly finding it hard to make ends meet. People are finding there is little choice but to go to legal loan sharks who charge extortionate repayment rates. That cannot be right.

“As a civilised society, we have a duty to help those most in need.  We must never turn our backs on them.”

In April this year, Community Care Grants (non-repayable grants to help people leaving prison or care settle in the Community) and Crisis Loans (for immediate short-term needs, such as emergency travel and hostel charges) were replaced with local welfare assistance schemes. Responsibility for delivering these schemes has transferred from the DWP to local authorities in England and the devolved governments in Wales and Scotland.  

Based on responses to Freedom of Information (FOI) sent by the charity to all local authorities in England, and a review of their local welfare assistance schemes, the report reveals:

  • A cut of £151 million (46%) in funding for local welfare assistance schemes compared to money spent on Community Care Grants and Crisis Loans through the Social Fund since 2010.1
  • Almost two-thirds (62%) of local authorities have removed access to loans.  This could drive people deeper into debt as they are forced to turn to loan sharks and commercial money lenders.
  • Where loans are available through welfare assistance schemes, most are made and collected through Credit Unions, which charge interest.  Interest free Crisis Loans were previously available through the Social Fund.
  • The vast majority (81%) of local schemes are replacing cash assistance support provided by the Social Fund with ‘in-kind’ benefits, such as food, clothing and pre-pay cards and vouchers. Unlike the cash assistance provided through Crisis Loans, money from ‘in-kind’ benefits is not reclaimed and reinvested.

Matthew Reed, Chief Executive of The Children’s Society, said: “Families are at risk of becoming the casualties of government changes to the Social Fund.  The changes could blight the lives of the most vulnerable and come at a time when reforms to the benefits system are beginning to hit children and their families hard.  By denying support to those most in need, many more families will become trapped in a vicious spiral of debt and despair.”

The report also found a number of councils imposing strict criteria, such as requiring claimants to prove they cannot borrow from family and friends or use credit cards and store cards to buy goods and services.  

A number of schemes also refused to accept applications from people under the age of 18.  Community Care Grants were previously available for 16 and 17-year-olds to settle into the community after leaving care. 

  • In response to the report, The Children’s Society is calling for:
    No further reduction in funding for welfare assistance schemes.  Local authorities must have the resources to offer the same level of support as previously available through Community Care Grants and Crisis Loans. 
  • Welfare assistance schemes to provide interest free loans for families in financial crisis. ‘In-kind’ support is not cost-effective and the loss of access to loans could push more families into poverty and spiralling debt.
  • Local authorities to establish fair and consistent eligibility criteria for people applying for support.  A person’s access to consumer credit should never be considered and 16 and 17-year-olds must not be excluded from the schemes.

The charity also wants all welfare assistance schemes to provide rent in advance, so people in financial crisis can pay their first month’s rent before taking up a private sector tenancy.  This was available through Crisis Loans, but is not being provided by some local authorities. 

1. In 2010/2011, £329m was allocated for Community Care Grants and Crisis Loans through the Social Fund.  For 2013/2014, £178m (a reduction of £151m) has been allocated to councils in England and the Welsh and Scottish governments to deliver equivalent schemes.  Money is not ring-fenced and there is no requirement for local authorities to provide these schemes.  

About The Children’s Society

The Children’s Society wants to create a society where children and young people are valued, respected and happy.  We are committed to helping vulnerable and disadvantaged young people, including children in care and young runaways.  We give a voice to disabled children, help young refugees rebuild their lives and provide relief for young carers.  Through our campaigns and research, we seek to influence policy and perceptions so that young people have a better chance in life.

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