The Social Fund – A Eulogy

Among the flurry of votes in the House of Lords in relation to the Welfare Reform Bill (WRB), there was one amendment that received little notice – namely the defeat of a move to ensure that what’s left of the Social Fund will go to those intended, namely the poor.

Let’s then just give it a last farewell, although untypically for euologies, I’ll focus more on its short-comings rather than its advantages. The Social Fund was a lender of last resort for many who found themselves unable to stump up the cash for a new washing machine or a new bed. It’s crisis loans helped many to avoid homelessness or endanger their health. Its community grants enabled those who needed it to adapt their homes to a disability or a disease, so that they could stay in the Community.

Overall, the Social Fund was a force for good. But let’s not overlook that there were clear problems with it: assessing need and disbursement was slow, meaning that the loans and grants often arrived very late. In 2011, inspectors overturned nearly 42% of all decisions, indicating that the criteria for assessment are variable, resulting in insecurity for the applicants.

Far from ideal a situation. Still, it was there, and it was good to know it was there. In 2011, over 53,000 loans and grants were handed out. However, few will deny that there was scope for reform.

Life already became precarious for the Fund when the Welfare Reform Bill was announced. Few thought that the Social Fund would escape scrutiny, and many knew that “Reform” was more likely to be a death-sentence than a new lease of life. And a death-knell it was, even if the two thirds of the corpse are still on the life-support machine*.

In line with the 40% cut across all department dictum, 39% of the Fund were cut outright. 61% of the Fund’s budget, set aside for crisis loans and Community Care Grants will be devolved to local authorities, who have no statutory duty to use the money as social fund, but can do what they want with it. The amendment on the 25th of January sought to impose such a duty, but sadly, it failed.

It is just a question of time until most Local Authorities will have pulled the plug and spend the money elsewhere.

Therefore, let’s just take a moment to remember it’s passing.

But let’s take a longer moment to remember those it’s left behind. What will those people who need a new washing machine now do? Go without? Stop eating? Borrow from friends and family? Raid the Christmas money? Some will do this, or a combination thereof – budgeting strategies of those on low incomes are many and varied. Some will of course turn to the Provi, or Littlewood, or all the other high-cost lenders, mail order companies and legal loan sharks who have managed to convince politicians across the spectrum that they provide a necessary social service to the poor.

Hurray for free markets that ensure that people living of £60 benefits and without access to a bank loan can buy a washing machine at a mark-up price of £180 from Littlewoods, (45% more than for those of us with a access to a credit card).  Hurray for free markets that let people borrow money at usurious interest rates to buy a new mattress.

Well done, everyone. I really fail to understand the logic here: people who are already hard pushed to set aside money for emergencies have to take out loans that cost easily £80 per £100 borrowed**? And that’s a GOOD thing?

If you want to see a sure-fire way to entrench poverty, then this certainly is one. People who think this a viable solution demonstrate such a pitiful lack of imagination – the usual refrains of There Is No Alternative drowns out those with ideas and projects, it takes the wind out of efforts to develop affordable credit, to promote financial inclusion and to reform the UK Banking System. The TINA cries also prevent a serious discussion on benefit levels, income levels and cost of living, all things that are desperately needed in times when the gap between rich and poor continues to widen. Killing the Social Fund, even if it is in instalments, was exactly the step in the wrong direction. In the long list of failures to promote financial inclusion by successive governments, this is another sad item to add to it.

*Budgeting loans will be part of new Universal Credit system (details of how this Universal Credit will work shrouded in fog)

**quote retrieved on 30/1/2012 from the website for £100 loan repayable over 52 weeks. A loan of £500 costs £410 to repay.

Advertisements
This entry was posted in Affordable credit, General, Payday lending and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s