17 Jul 2013

We have joined forces with the Archbishop of York, Dr John Sentamu, to warn that some of the country’s poorest families could pay the biggest price for changes to a government fund for people in financial crisis.

Our new report, Nowhere to turn? Changes to emergency support, reveals that money given to local authorities to replace the Department for Work and Pension’s (DWP) Social Fund has almost been halved (46% reduction), compared to equivalent spending since 2010.

It also shows that almost two-thirds (62%) of local authorities are no longer providing interest-free emergency loans through their replacement schemes. We fear this could drive vulnerable families deeper into debt, as they are forced to turn to loan sharks and high cost money lenders.

In April this year, Community Care Grants (non-repayable grants to help people leaving care settle into the community) and Crisis Loans (for immediate short-term needs, such as food, preventing families from having their gas or electricity cut off and travel to visit a sick relative), were replaced with Local Welfare Assistance Schemes (see footnote 1).

Family support decided by geography

The Archbishop of York, Dr John Sentamu, said: 'As this report shows, some local authorities are putting emergency support beyond the reach of many vulnerable families. It is more important than ever to ensure the safety net that Crisis Loans provide to families in need, remains in place across the country.

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

We are also concerned that a postcode lottery, where the level of support a family gets depends on where they live, is beginning to emerge.

Matthew Reed, our Chief Executive, said: 'Families are at risk of becoming the casualties of government changes to the Social Fund.  These could blight the lives of the most vulnerable and come at a time as other major reforms to the welfare system risk making families more reliant on emergency support. By denying help to those most in need, many more families will become trapped in a vicious spiral of debt and despair.'

The findings aren't pretty

The report paints a disturbing picture of how changes to the Social Fund could plunge hard-pressed families deeper into poverty. It is based on responses to Freedom of Information (FOI) requests sent to all local authorities in England, and a review of their local welfare assistance schemes.

It also reveals:

  • A real-terms 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 (see footnote 2).
  • The majority of schemes are not providing interest-free emergency loans. While some schemes are making loans available through credit unions, which charge a low rate of interest, many are not. We fear this could force people to turn to loan sharks and sink further into a spiral of debt. The loss of loans means local authorities are no longer able to help fund their schemes through money repaid by claimants. 
  • The vast majority (81%) of local schemes are replacing cash assistance support, provided by the Social Fund, with 'in-kind' benefits, such as food bank vouchers and pre-paid store cards.

More strict criteria applied

The report 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. In many cases, local authorities were also excluding low income working families. This could force people to take on unsustainable levels of debt and increase demand for support through local welfare schemes. 

A number of schemes are also refusing to accept applications from people under the age of 18. Community Care Grants were a lifeline to help 16 and 17-year-olds settle into the community after leaving care (see footnote 3).

'We must do everything possible to lift families out of poverty'

Backing the charity’s call for reforms to local welfare assistance schemes - set up following changes to the Social Fund – Dr Sentamu added: 'The Children’s Society’s report reveals deeply worrying signs that families could face severe financial hardship because of these reforms.

'Crisis Loans form the final safety net for many families between financial crisis and outright destitution. With an unprecedented squeeze on household budgets, we must do everything possible to lift families out of poverty and give real help to vulnerable families who require help right now.

'Six out of ten families in poverty have at least one adult in work – those who work hard are increasingly finding it difficult to make ends meet. And in some cases, working families are completely excluded from emergency support.  This leaves little choice but for them to turn to legal loan sharks, who charge extortionate repayment rates. That cannot be right.'

Necessary changes

In response to the report, we are calling for:

  • No further reduction in funding for welfare assistance schemes. Adequate resources must be provided to support those most in need.
  • The government must support local authorities to ensure welfare assistance schemes provide interest free loans for families in financial crisis 
  • Local authorities must not restrict access to the new schemes by imposing tougher criteria for claimants. A person’s access to expensive consumer credit, should never be considered. Low income families, and 16 and 17-year-olds, must not be excluded from the schemes.
  • Welfare assistance schemes should help to provide rent in advance, so people who are homeless, or in financial crisis, can secure a place to live. Rent in advance helps people to pay their first month’s rent, before taking up a private sector tenancy. It was available through Crisis Loans, but is not being provided by some local authorities. 

Support from Methodist and Catholic church leaders

These calls are also being backed by church leaders from the Methodist and Roman Catholic Church.

The President of the Methodist Conference, Revd Ruth Gee, said: 'The Social Fund was the last line of defence for vulnerable families – money was lent to people in desperate situations.  Advisers and claimants understood how the Fund worked, and those who were in distress could usually get a small emergency loan. This is no longer the case.

'This research from The Children’s Society shows that support has been dramatically cut, with a confusing morass of different complex systems spreading across the country. Where can vulnerable people now go? Our fear is that it will be into the hands of loan sharks and payday lenders.'

Bishop Terrence Brain, Chair of the Caritas Social Action Network (CSAN), said: 'We are witnessing increasing numbers of families struggling with substantive changes to the benefit system. It is now more important than ever that a robust safety net exists for people in crisis. Today’s findings from The Children’s Society raise real concerns that families in need of emergency support will be forced to turn to payday loans and other high interest lenders.'

Ends

Media enquiries

For more information, please call Andrew Cooper, Media Officer, on 020 7841 4422 or email andrew.cooper@childrenssociety.org.uk.

For out-of-hours enquiries please call 07810 796 508.

Notes to editors

  • The Children’s Society has created an interactive map for people to find out what replacement schemes are being provided by their local authority.
  • 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.

Footnotes

1. Responsibility for delivering the Local Welfare Assistance Schemes was transferred from the DWP to local authorities in England and the devolved governments in Wales and Scotland. (Return to text.)

2. 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. (Return to text.)

3. In 2012, almost 3500 care leavers were aged 16 and 17. (Return to text.)