Cutting crisis loans

PeoplePoverty
ViewsJanuary 20th, 2012

Cuts Watch Cymru is a coalition of third sector organisations in Wales who are concerned with the impact of the spending cuts on people in Wales.  There are almost 700,000 people in Wales already living beneath the official poverty line – that’s 23% of our population.  Cuts Watch Cymru members have grave concerns that thousands more people across Wales will be plunged into poverty as a result of the changes.
The Bevan Foundation is responsible for the research component of the campaign.  At this stage, we have specifically chosen to focus on the welfare reforms.  We have selected a series of reductions and changes in the welfare system which have already happened, or are about to happen, to investigate further.  We are looking at a wide range of areas, including the social fund, housing, disability welfare, and out of work benefits.
The first phase of our research puts the social fund centre-stage.  One of the changes to the social fund we are examining is the limiting of crisis loans (loans given to people who find themselves in urgent need of money to cover their immediate needs, which are repaid through the benefits system) to just three per year by the current UK Government.  The UK Governments spending reductions were perhaps responsible for this change.  Indeed spending on crisis loans has risen sharply in recent years, as more people have come to rely on the money.  At a UK level spending on the crisis loan increased from 20.1m in 2005/2006 to 67.1m in 2009/2010, with an average award given to each individual of £58.
But this increase in spend would merely reflects an increase in need over this time.  The fund is only paid to people if they can demonstrate that it is a real emergency, and they are in urgent need of the money for essentials such as food.  The UK Governments reduction has effectively put a limit on the number of such emergencies people are ‘allowed’ to have each year.  Early findings from our research show that people quickly reach their annual crisis allowance, and are then left to fend for themselves without any safety net at all.  It is also important to remember that the money is paid as a loan – it is not free money – recipients do have the money taken off their benefits.  The resource is a vital lifeline to many individuals who find themselves in dire need of money to feed themselves.  In many senses this is a moral question – is it acceptable today for people in this country to go without food?  We need to realize that every day in this country people not too far away are doing just that.  Reductions to the crisis loan is one last cut too far, given the black hole left in the lives of many families in Wales, who are going hungry without this essential lifeline.
The social fund (crisis loans and community care grants) is to be devolved to Wales from 2013.  Our research is timely given the current Welsh Governments consultation which opened at the beginning of this year and is accepting responses up until the end of March.  They want people’s views on how best to manage the fund, including issues such as how it should be delivered, the criteria for entitlement, integration with existing services etc.  This is very welcome.  It gives us the opportunity to design a system which can give the most vulnerable people the emergency support they need, when they need it.  However, before making any hasty decisions we need to know three things.  Firstly, who and where are the most vulnerable people?  What kind of emergencies do they find themselves in?  And what is the best thing we can do to overcome these emergencies?  The solutions may not always lie in handing out cash.  Advice and a social scaffold might be the best solution sometimes.  From talking to those who depend upon the crisis loan, the Bevan Foundation’s research will contribute ideas and solutions for building a stronger safety net for people in Wales.

 

Michael Donnelly is Research and Policy Officer at the Bevan Foundation

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