People on low incomes needing emergency financial help are likely to be faced with a 'postcode lottery' of provision following the abolition of the Social Fund, according to a new study. The Centre for Responsible Credit warns some people will be forced to turn to commercial high-cost lenders as a result.

The DWP-administered Social Fund – which provides community care grants, crisis loans for living expenses and budgeting loans – is being abolished from 1 April 2013, and the budget for the Fund is being devolved to local areas. Local councils in England, together with the Welsh and Scottish Governments, are now free to devise replacement schemes of their own using the money.

Key findings

• Local replacement schemes vary considerably, resulting in a 'postcode lottery' of support.
• Many local authorities are imposing tight eligibility criteria. Any assistance they give is less likely to involve cash payments, with in-kind support such as food parcels and voucher schemes used in their place.
• Most local authorities are not proposing to put loan schemes in place. But the capacity of third sector financial services providers, such as credit unions, to fill this gap also varies between areas.
• This is likely to force some people to turn to commercial high-cost credit to meet their immediate needs, with negative long-term impacts on their welfare.

Source: Damon Gibbons, Local Welfare Provision, Low-Income Households, and Third Sector Financial Services Provision, Centre for Responsible Credit
Links: Report | Summary | CfRC press release