Some of the country's poorest families could be forced to turn to loan sharks, following changes to the Department for Work and Pensions' (DWP) Social Fund. That's the worrying conclusion from our report, Nowhere to Turn? Changes to Emergency Support, on local welfare assistance schemes.
Backed by the Archbishop of York, Dr John Sentamu, the report highlights the potential impact these changes to the Social Fund could have on some of the country's poorest families. It warns that many more families could be forced into a vicious spiral of debt.
As part of the government's drive towards greater localism, two main elements of the Social Fund - Community Care Grants and Crisis Loans - were abolished in April. Responsibility for delivering the replacement schemes was passed to councils in England.
Crisis Loans provided support for immediate short-term needs, such as food, help to prevent the gas and electricity from being cut off and emergency travel to visit a sick relative. Community Care Grants were non-repayable grants to help children and adults leaving care settle into the community, such supporting care leavers to set up home.
Our report examined the support provided by new welfare assistance schemes. We found that only around a quarter (23%) of the schemes are providing loans. Without loans, the money is not repaid and re-invested in the schemes. This means that less support will be available for those in desperate need.
It also shows that the vast majority (81%) are replacing cash assistance - previously provided by the Social Fund - with 'in-kind' support, such as food bank vouchers and pre-pay store cards. These can often only be used in certain stores that may be difficult or expensive for families to get to.
Some councils are also imposing strict criteria for people to qualify for support. Examples include requiring claimants to show they cannot borrow from friends or family, and do not have access to consumer credit, such as credit and store cards. And some schemes are denying access to 16 and 17-year-olds preventing some young care leavers from getting support.
By making it harder for those in need to get emergency support, the changes could force people to turn to loan sharks and sink deeper into debt. With over one million households being forced to take out payday loans every month as they struggle to meet the rising cost of living already, the demand for emergency support from vulnerable groups could significantly increase.
Crisis Loans were a lifeline for 35-year-old Sarah Davies from the South West, following the breakdown of her relationship with her ex-partner. Overnight, Sarah became a single mum with a two-year-old son to bring up. On the verge of being forced to a loan shark, Sarah heard about Crisis Loans and successfully applied. By having access to an interest-free emergency cash loan, and with support from The Children's Society, Sarah was able to put food on the table for her son Matthew and prevent her gas and electricity from being cut off. Changes to the Social Fund would make it harder for her to get that vital support now.
We know that councils face an unprecedented squeeze on budgets, with money allocated for the welfare assistance schemes cut by nearly 50%. And many local authorities have made real efforts to introduce effective replacement schemes. But to prevent children and their families from becoming the casualties of changes to the Social Fund, a number of important steps must be taken.
First, with government support, local authorities should make it a priority to find ways of providing interest free loans through their welfare assistance schemes. For example, the government could administer a loan scheme which allows local authorities to recover the money directly through deductions from benefits.
Fair and consistent eligibility criteria must also be established to avoid a postcode lottery. Support must always be provided based on need, not where you live.
Finally, The Children's Society is calling for no further cuts in funding for welfare assistance schemes. Adequate resources must be provided to support those most in need.
The Social Fund was the last line of defence for many vulnerable families. Some of the poorest in society will pay a heavy price if we fail to prevent those in crisis from being pushed further to the margins.
The Children's Society has created an interactive map for people to find out what replacement schemes are being provided by their local authority. Visit their website for more info: childrenssociety.org.uk/local-assistance