[UK] Poverty sceme 'Failing the Poor'

from Community Newswire

By Rosamond Hutt, Community Newswire

A report by a social policy research and development charity has found a Government scheme to help those who are most in need is increasing the levels of poverty for some people.

The study by the Joseph Rowntree Foundation showed the Social Fund was failing to help those on low incomes who needed money in an emergency, causing some people to turn to more expensive commercial lenders instead.

The charity said there were also problems with the rate at which people had to repay Social Fund loans from their benefits, which further reduced the incomes of some of the poorest members of society.

It is calling for immediate reforms to the scheme including more flexible repayments rates, a faster appeals process and for the fund to be better advertised.

It also wants same-day decisions for people applying for crisis loans, and decisions to be made within five working days for people applying for other forms of help.

The Social Fund was set up to help people on low incomes, particularly means-tested benefits, to meet necessary or emergency expenses that they would not otherwise be able to afford.

It provides people with financial support in the form of grants or repayable interest-free loans.

But the report, which was based on discussions with those receiving benefits, found that the overwhelming experience of people was that the fund was not helping them to meet their needs as applications were often refused or only partially awarded.

There was also confusion among people as to how loans and grants were awarded, with people often attributing success to luck, while others complained that it took too long to get a decision.

Although the fund was an option for many people, some turned to other more expensive forms of credit, such as commercial loans, because they knew they would get an immediate response.

Other ways of coping with a financial shortfall included going without meals or heating, not paying utility bills, borrowing money from family or friends and selling possessions such as televisions and cars.

The research also found many people felt the rate at which they had to repay the loan was too high, with people repaying money at an average rate of one twelfth of their weekly income, and many paying more than this.

It said repayments ranged from around £7 a week taken from Jobseeker's Allowance and £10 a week from Income Support, to as high as £45 a week.

One applicant, who had to pay back £25 a week, said: "If you had that much a week to spend you would not need to borrow it in the first place."

Lead author of the report Kate Legge, of Nottingham University, said: "In its current form, the Social Fund is making only a limited contribution to meeting the Government's objectives of combating poverty and social exclusion.

"The repayment of these loans from benefits just serves to further reduce the income of some of the poorest members of society."

Many of those interviewed for the study claimed they were already struggling to live on benefits, with their weekly incomes only stretching to cover low-cost foods and essential utility bills and they often did not have enough money to buy clothes and shoes for their children.

Ms Legge said: "As families with children tend to borrow more than other groups, they also tend to repay more per week and at a higher repayment rate. Ultimately this results in an increased risk of child poverty."

The research also found that families with children, disabled people and tenants were more likely to receive money from the fund for irregular expenditure than pensioners or people from an ethnic minority, who were three or four times less likely among those who were eligible to receive a budgeting loan.

As well as the immediate reforms, the report's authors are also calling for long-term changes to the scheme. Their recommendations include making it more grant-based because of the hardship caused by repaying loans and providing substantial extra funding.

It should also be made more transparent, with the entitlement criteria and decision-making process made clearer, and there should be an agreed list of essential items that people on low incomes have a right to access.

The researchers proposed replacing the existing discretionary scheme with five new types of awards, including special "winter" and "start-of-school" grants.

Ms Legge added: "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 report, titled The Social Fund: Current Role and Future Direction, is available from the charity's website at www.jrf.org.uk/bookshop