Crisis Loan Funding

Hywel Williams Excerpts

Tuesday 19th June 2012 Westminster Hall

[Dr Whiteford]

The right hon. Gentleman makes a salient point, which backs up the point I am making.

I want to look back a little further, using information that had to be obtained from the Government under a freedom of information request by a non-profit company called Full Fact. Looking at that, we can see that, in reality, prior to 2006-07 and the start of the banking crisis, the amount spent on crisis loans was remarkably stable between 2000 and 2005-06. During that period, the gross amount spent on crisis loans did not fluctuate—up or down—by more than 5%, and spending dropped in 2003-04 and the following year. Although overall there was a slight upward trend prior to 2007, it would be misleading to compare that with the dramatic increase in applications and expenditure once people started to experience hardship, as work dried up and costs for basic foods and heating started to rise. I am concerned that we are still in that position and that we can expect demand to continue to rise for as long as the economic turmoil continues.

I am struck by briefings from Citizens Advice Scotland and others that outline the wide range of circumstances in which people try to access the social fund. Those seeking crisis loans and community care grants include people moving into independent living and those who need basic furniture to set up home after a family breakdown or a period of homelessness. They also include people with employment problems, those with complex benefits claims, who are caught in the quagmire of the system with no immediate source of money for food or heating until their claim is resolved, and those who incur unexpected travel costs due to the illness or hospitalisation of a close relative.

Those eligible for crisis loans face a wide range of circumstances, but what they all have in common are cash flow problems, compounded by an underlying low income. That is a temporary state of affairs for some, but some others, such as those who are disabled or have long-term health problems, have little financial resilience to deal with unexpected costs. They have limited means to absorb financial shocks, such as the cooker or fridge breaking down or the aftermath of exceptional events such as burst pipes or a break-in. Burst pipe problems came home to me in the past couple of very severe winters. People living in homes that are not well heated are often those who would particularly struggle if faced with having to redecorate or get a new carpet. Such events are not only a burden on those on very low incomes, but on anybody living on a modest income who has to count the pennies.

[Hywel Williams (Arfon) (PC)]

Does the hon. Lady share my despair at the report in The Guardian today and the series of reports that will come out this week? About 3.5 million families are one step away from disaster. They have no resources, no savings and are potential claimants of the social fund. The potential is enormous.

[Dr Whiteford]

The hon. Gentleman’s point is well made. There are connections to be made across a wide range of policy agendas. His point is particularly important because it acknowledges that the prolonged economic stagnation we are experiencing has eroded the savings and assets of many, not only the unemployed or disabled. For the very poorest however, things have become a lot more precarious. I am sure that many MPs here today will have cases in their constituencies and can think of people who have been living an insecure, hand-to-mouth existence for some time, because work is so hard to find in the current circumstances.

The situation with crisis loans presents us with risks and challenges. Welfare organisations have expressed marked concerns about what will happen in practice when the social fund disappears. Their chief concerns relate to ring-fencing and whether set eligibility criteria and binding policy guidance will be attached to the funding allocations. They fear that without ring-fencing and clear guidance, big disparities could emerge in different parts of the UK and that, at a time of substantial cuts in the public sector, it will be all too easy for allocated funding to be absorbed into more general social work budgets or used to plug funding shortfalls elsewhere.

Those are legitimate, serious concerns. I hope that the Government will take the opportunity today to offer reassurance that they will put in place robust measures to ensure that there is good provision across the country and to prevent wide divergences emerging.