Headlines: June 1st, 2006

A Government scheme that is meant to help those people who are most in need is in fact making things worse for some of them. A new study of the Social Fund shows that it is increasing levels of poverty for some of Britain’s worst off people. The report, funded and published by the Joseph Rowntree Foundation, calls for immediate reforms of the system.”The Social Fund: Current role and future direction” draws on group discussions with benefit recipients and taxpayers and concludes that a radical review is needed of the working of the Fund, which was set up in 1988 to help people on a low income, predominately those on means-tested benefits. It provides grants or repayable interest-free loans.

The report, though, says it has sometimes failed those most in need and that the overwhelming experience was that it was not meeting their needs as applications were refused or only partial awards were granted. The report also identifies confusion about how grants and loans are awarded. Often, it says, successful outcomes were attributed simply to luck and many people felt decisions took too long.

The authors say although the Fund is an option for many people some of them used more expensive forms of credit because they were guaranteed an immediate response when they needed it. For those who ran out of money coping tactics included not paying utility bills, going without meals or heating, taking out commercial loans, borrowing money from family or friends, and selling possessions such as televisions and cars.

The report’s lead author, Kate Legge of Nottingham University, said that in its present form the Social Fund was making only a limited contribution to meeting the Government’s objectives of combating poverty and social exclusion. The research team suggests a number of immediate and long term reforms. In the short term the report calls for same-day decisions on a Crisis Loan applications with decisions on Community Care Grants and Budgeting Loans to be made within five working days. It also wants to see more flexible repayment rates, a faster appeals process and more information and advertising of the scheme.

Looking to the longer term, the report’s authors say radical reform is needed and any new scheme would need to be more grant-based because of evidence that repayment of loans leads to hardship. The reformed scheme would also require substantial extra funding and should be transparent with clearer entitlement criteria and decision-making and would need to be underpinned by a generally agreed list of ‘essential items’ that people with a low income have a right to access. The researchers propose replacing the existing discretionary scheme with five new types of awards, including regular winter and start of school grants.

Kate Legge said, “In contrast to other loans, awards from the Social Fund are more likely to be used for food, housing and furnishing and less likely to be used for recreation. We conclude that a fundamental review of the scheme is required. The evidence that loan repayment leads to hardship suggests that any new scheme ought to be more grant-based.”

The full report is published by the Joseph Rowntree Foundation and will be available from http://www.jrf.org.uk/bookshop