The slew of headlines relating to the welfare reforms over the last few weeks have mainly focused on the ‘bedroom tax’ and benefit cap. Reforms to the Social Fund seem to have snuck under the radar, with little coverage of the abolition of national provision for certain loans and grants. But it’s important to uncover some of these changes and examine the effects they could have, particularly for the financially excluded. They are quite fiddly, so I’ve split my task in two. Today I’ll focus on the Social Fund and how it changed in April.

The Social Fund refers to several loan and grant facilities offered by the government. Before April of this year, it had two main strands: statutory payments, which are unaffected by welfare reform; and a discretionary scheme, comprising Budgeting Loans, Crisis Loans and Community Care Grants, which is where the reforms are focused.

  • Budgeting Loans: These were interest-free loans to help recipients spread the cost of one-off expenses, such as furniture or a winter coat. They were repayable by deduction from benefit payments. Applicants had to be recipients of Income Support, income-related Employment and Support Allowance, income-based Jobseeker’s Allowance, and Pension Credit  to be eligible. In 2011/12, over 1 million budgeting loans were awarded. The total spending amounted to nearly £450 million, and nearly £460 million was recovered.
  • Crisis Loans: These were interest-free loans to meet the costs of an emergency, also repayable by deduction from benefit payments. They fell into two categories: loans for general living expenses; and ‘alignment payments’ for benefit applicants awaiting a decision. In 2011/12 over 2 million payments were made, with an average value of £64. The total paid out was £133 million, and the total recovered was £148 million.
  • Community Care Grants: These were grants, rather than loans, to help individuals with specific needs to live independently in the community or to ease exceptional pressure on them and their families. As with Budgeting Loans, applicants had to be recipients of Income Support, income-related Employment and Support Allowance, income-based Jobseeker’s Allowance, and Pension Credit  to be eligible. In 2011/12, nearly £140 million-worth of grants were made, with an average value of £509 each.

The reforms

In England, as part of the welfare reforms, budgeting loans will be abolished as a separate scheme and rolled into the Universal Credit as a system of advances. The ‘alignment payment’ strand of Crisis Loans will be brought into the Universal Credit scheme in a similar way.

Community Care Grants and Crisis Loans for general living expenses have been abolished at the national level in England, and responsibility has been devolved to local councils (Scotland and Wales currently intend to retain some form of national provision). Councils have been allocated £178 million in funding for local provision of these services, but this is below the £193 million it cost in 2011/2012. Moreover, this £178 million is not ring-fenced—therefore, councils are under no obligation to provide these services in the first place.

So, what does this all mean? Tune in tomorrow for part two!

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