Social Fund Localisation

A new CfRC report warns that the abolition of the Discretionary Social Fund and its replacement, in England, with new local authority welfare schemes will result in a ‘postcode lottery’ of support and will increase the number of vulnerable households relying on food parcels and high cost money lenders to meet essential needs.

Department for Work and Pensions (DWP) support for people faced with an emergency or in need of help to furnish their home to an acceptable standard has already been significantly reduced since the election of the Coalition Government in 2010. This has led to a doubling in the numbers of people turning to charities and food banks for help and the high cost credit sector, which includes door to door moneylenders and payday loan companies, is booming.

The position is set to worsen further, as the national scheme of crisis loans and community care grants was abolished on 1st April 2013 and, in its place, local authorities have created their own welfare schemes. Provision will be reduced because:

  • The introduction of ‘local welfare provision’ is being accompanied by a budget cut of £37 million (equivalent to 17 per cent of the total) compared to DWP spending on support in 2011/12; and


  • Many local authorities are failing to operate interest free crisis loan schemes, meaning that they will lose the benefit of recycling loan repayments (over half of crisis loans made under the Social Fund scheme were funded through the collection of loan repayments).

There will also be a ‘postcode lottery’ of support in England. Although new national schemes have been put in place in Scotland and Wales the budget to support local welfare schemes has been distributed across more than 150 upper tier local authorities in England. Reviewing a sample of these schemes the CfRC has found that there will be significant variations in eligibility criteria, access arrangements; the level and type of support that they provide, and the speed and quality of their decision making.

Many local authorities are requiring applicants to demonstrate that they have a ‘local connection’ – and in some cases will refuse help to people that have not lived in the area for 6 months.

Commenting on the nature of the schemes being put in place in England, CfRC Director, Damon Gibbons, said:

“Many local authorities have put in place tight eligibility criteria and their assistance is less likely to involve cash payments: with in-kind support such as food parcels and voucher schemes used in their place. People are also likely to be passed from one local authority to another, which is reminiscent of the Poor Law. There can be no doubt that more people will struggle to get the help they need from the new local schemes, and many of them will turn to high cost lenders instead. And we know that those credit repayments will mean more people going hungry and without sufficient heating.”

The CfRC report also points out how DWP has failed to ensure a clear role for credit unions, community development finance institutions (CDFIs) and social enterprises in the delivery of local welfare schemes. These ‘third sector lenders’ are playing a part in a minority of local authority areas, with some local authorities proposing to under-write loans against default and subsidise their administration in order to allow them to be made on an interest-free basis. In these areas, credit unions will also be able to provide savings and budgeting accounts to help people better manage their money moving forwards.

However, the capacity of third sector financial services providers varies between areas, and most local authorities are not proposing to put loan schemes in place. DWP has not joined up its plans to expand the capacity of these lenders with local welfare schemes or with other initiatives to support benefit claimants to manage their money more effectively.

Commenting on these aspects of the report Damon Gibbons said:

“DWP should link its investment in credit unions and CDFIs with the local Delivery Partnerships it is developing to support the personal budgeting needs of Universal Credit claimants. These local Delivery Partnerships should be required to ensure ‘local welfare loan schemes’ and budgeting accounts are made available to Universal Credit claimants.”

A copy of the full report can be downloaded here, and an Executive Summary can be obtained here.