A Government scheme meant to help those most in need is increasing levels of poverty for some, according to a new report funded and published by the Joseph Rowntree Foundation. The Social Fund: Current role and future direction, drawing on group discussions with benefit recipients and taxpayers, calls for immediate reforms to the scheme and concludes that a radical review is needed.
The Social Fund is meant to help people on a low income, predominately those on means-tested benefits, with necessary or emergency expenses that could not otherwise be met. It provides financial support in the form of grants or repayable interest-free loans.
According to the report, however, the Social Fund has sometimes failed those most in need. The overwhelming experience of participants was that the Social Fund was not helping them meet their needs as applications were refused or only a partial award was granted. There was confusion about how grants and loans were awarded, with a successful outcome often attributed simply to luck. Many felt decisions took too long. Even though the Social Fund was an option for many, some used other more expensive forms of credit because there was a guarantee of an immediate response when needed.
When people 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 saved up for possessions such as TVs or cars.
Lead author, 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."
Researchers found that the average weekly repayment rate was a twelfth of weekly income. Many were paying more than this. Kate Legge added, "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."
Many participants felt living on benefits was "hard" or a "struggle" and made a distinction between "living" and "having a life". Their weekly incomes only stretched to covering low-cost foods and essential utility bills and often they didn't have enough to buy clothes and shoes for their children. The main issue for Social Fund applicants is not the principle of having to repay a loan but the rate of the repayment, which is felt to be too high. For benefit recipients, the impact of loan repayments deductions is that they are obliged to economise even further. Average repayments ranged from around £10 a week taken from Income Support to around £7 a week taken from Jobseeker's Allowance, but could be as high as £45 a week.
As one participant 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".
Receipt of the part of the Social Fund that deals with irregular, lumpy expenditure on necessities varied. Families with dependent children, disabled people and tenants were found to be more likely to receive the fund. Pensioners were less likely to receive an award - as were people from households headed by a member of an ethnic minority, who, among those eligible, were found to be three or four times less likely to receive Budgeting Loans.
The research team used an innovative participatory approach engaging people from different income groups to explore reform of the Social Fund. The immediate and long term reforms to the existing scheme proposed by the authors are:
The researchers propose replacement of the existing discretionary scheme with five new types of awards, including regular winter grants and regular start of school grants.
Kate Legge added, "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."
