Low income families in financial crisis are likely to be offered storecards and vouchers, not cash, under reforms that transfer responsibility for the social fund to local authorities.
The era of vouchers for the poor is very nearly upon us.
From next year, impoverished families who need a crisis loan to help them over a domestic disaster will be lucky if they get cash. Instead, they will probably be issued with a special Tesco or Sainsbury’s “storecard,” usable in a limited number of stores.
Some cards will be restricted to prevent the purchase of cigarettes and alcohol.
The move from cash to vouchers – which will also see recipients who need help to replace a broken fridge, say, being given chits redeemable only in acredited local furniture recycling projects – will come in next year when the social fund, currently administered by the Department for Work and Pensions (DWP), is devolved to local authority level.
Social fund vouchers will be one of the most visible aspects of the switch, which was introduced as part of the Welfare Reform Act. They are destined to become totemic signs-of-the-dismal-times, along with foodbank parcels.
Vouchers may please and shock people in equal measure. Either way, the locally-administered social fund has the potential to be a welfare disaster in the making, not least because the total budget available for social fund help is being cut at a time when demand from potential recipients is likely to soar.
According to the Child Poverty Action Group, which publishes an exploratory report on the devolved social fund today:
Local authorities are being handed a reduced pot of money, and an as yet undefined amount of support to administer it, at a time when significant changes in the social security system are likely to increase demand for this type of support.
The CPAG report has a sort of ‘bar-chart-of-doom’ (see page 15) which sets out the rising level of welfare benefit cuts in the years to 2014-15. So this year we can expect to see cuts of nearly £9bn. This is over twice the 2011-12 figure but only half the level of cuts in 2013-15. In other words, things may look grim now but the poorest families have as yet suffered just 45% of the welfare cuts in wait for them.
These cuts, coupled with the still stagnant economy and spiralling living costs, suggests demand for the social fund may rise. Yet ministers have decided that social fund expenditure (an all time high of £228m in 2010-11) will be stripped back to 2005-06 levels (and it will not be ringfenced, meaning that councils can choose to spend all or some of this money on other purposes).
So what could possibly go wrong? CPAG has been working closely with five unnamed London councils. The risks identified by these authorities include:
• It’s impossible to predict demand accurately – though the data suggests there won’t be enough money to go round. Although local eligibility criteria have not been agreed, one council estimates that it will have to turn away 800 families (about a quarter of the current total) in2013, including some who would have been previously eligible for support.
• Some authorities are likely to impose “local connection” eligibility rules (a kind of local-crisis-loans-for-local-people approach based on length of residency). Applicants who can’t prove this connection (perhaps because they have been forced to move as a result of domestic violence) may find themselves unable to get help (which could be good news for loan sharks).
• The cost of administering local social funds could be immense compared to the DWP’s current centralised call centre model. One council calculated that on a “basic administrative model” the costs of delivering the local fund would be an astonishing 20% of its entire value.
None of the councils CPAG talked to in the report were currently planning on providing cash support. The councils argue that vouchers (of the kind listed at the top of this article) are more cost effective (volume discounts arranged with suppliers will allow them help more families, they argue). Surveys suggest roughly half of recipients like vouchers, half don’t.
Charities, however, worry that vouchers are inflexible and stigmatise recipients. It is not clear, they point out, how a voucher can be issued to an applicant who needs immediate help because their gas or electricity has been disconnected, or how local social funds will cope with large scale disaster affecting the local area (such as flooding).
Who is most likely to be negatively affected by the changes? The main users of the community care grant element of the social fund (help to buy cookers, beds, clothes etc) are disabled people and single mothers; unemployed people account for over half of crisis loans (help with living costs, advanced rent payments to landlords).
It is still early days, says CPAG but it is crucial that ministers monitor the reforms, and keep an open mind about implementation:
“The government must be prepared to rethink the approach, and the amount of funding being made available, if the reforms mean that low-income families are left with nowhere to turn in a crisis.”