The Great Social Fund Robbery

The demolition of the Social Fund, the system of loans and grants used to support people on low incomes in an emergency, or to help people rebuild shattered lives, begins in earnest in just two months.

Whilst the Bedroom Tax and Council Tax Benefit cuts have grabbed the headlines, this nasty little reform will be devastating for those in the most difficult circumstances.

Whether it’s young people leaving care and moving into a flat for the first time, people leaving supported housing to live independently, or those whose lives have been ravaged by fire, flood , crime or homelessness, the Social Fund has provided scant though vital support in a crisis.  Much of this is to be swept away as Crisis Loans and Community Care Grants are handed over to Local Authorities to administer.  How this will work is currently anyone’s guess, as most of them have yet to publish any details of how they will manage the new scheme which is due to begin in less than two months.

Funding has been made available to local councils to provide some form of emergency support, but there is no requirement on them to spend it this way.  With many Councils already desperately short of funds it is inevitable that much of this money is likely to be swallowed up to cover other shortfalls.

There are currently three types of payments made from the Social Fund.  These are Budgeting Loans, Community Care Grants and Crisis Loans.  Crisis Loans are split into two types: ‘alignment payments’ paid out when someone is awaiting a benefits decision, and loans to cover household emergencies.  The average Crisis Loan is just £50 and according to DWP documents (PDF)  around two thirds of loans (66%) were ‘alignment payments’ in 2009/10.

Budgeting Loans, which are interest free loans claimants may be eligible for to cover household expenses, such as a new oven, are to be brought under the Universal Credit regime, along with ‘alignment payments’.  Predictably, clear details of how this will work in practice are not yet available.

Community Care grants and emergency Crisis Loans will now be managed by local councils.  In 2011/12 Community Care Grants cost £139.2 million.  Crisis Loans in total cost a further £133 million, which suggests around a third, £44 million (based on the previous year’s figures, none for this period appear to be available) went towards emergency payments.  This makes a total of £183 million of the kind of payments which will be handed over to Local Authorities to manage.  Despite this just £178 million will be available to local councils.

Now this looks like a cut, and if you happen to be trying to claim a Crisis Loan it is.  But like so many of Iain Duncan Smith’s bodged reforms, this will actually end up costing the tax payer more money.

The key word is ‘loan’.  As every claimant knows, Crisis Loans are recovered from benefits, meaning repayments are almost impossible to avoid.  This is backed up by the DWP’s own Social Fund Annual Report 2011/12 (PDF)  which clearly states:

“Loan recoveries during the year were £607.5 million against a cautious forecast of recovery of £590 million at the beginning of 2011/12. Recoveries provided 100% of the funds needed to meet gross loans expenditure.”

Local councils will not have the same powers to recover loans, and most of those that are actually bothering to think about the imminent reforms are looking into voucher or smart card systems.  So instead of a centralised, moderately efficient, interest free loan scheme for claimants, there is to be a chaotic postcode lottery which will cost more than the system it is replacing.  It seems that despite banker imposed austerity, when it comes to attacking the poorest and most vulnerable Iain Duncan Smith has been handed a blank cheque by the Treasury.

Already IDS had slashed Crisis Loans by viciously cutting the amount deemed necessary to survive from 75% of single person’s benefits to 60% – just £42 a week.  And now they are likely to be cut again, with no legal protection if Council’s simply decide to trouser the cash to spend on the Mayor’s breakfast budget. Whilst claimants are no longer likely to have to pay money back, that will be of cold comfort to someone who’s been burnt out of their flat and is fobbed off with a paltry Poundstretchers voucher from the local council.

The impact on Community Care grants is likely to be equally devastating.  Already the grants are notoriously difficult to access.  Now in some parts of the UK they could disappear completely.  This could mean a young person leaving care and moving into a bedsit with no money available to buy an oven, a fridge, bedding or even a bed.  As ever it will be disabled people and single parents already in poverty who will bear the brunt of the cuts: 35% of Community Care grants go to disabled people and a further 26% to lone parents.

The great social fund robbery will not affect as many people as the bedroom tax, or the other welfare cuts.  But the people it does affect will be those in society who are desperately in need of help and have nowhere else to turn.  Once again this Government of millionaires are looking down their noses at the very poorest as they proceed to try and kick them to death.

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