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This weekend the Department for Work and Pensions proposed applying store card interest rates to social fund loans. After cross party outrage, this mean-spirited suggestion was followed by a red-faced, whip-smart reversal, with spokespeople rigorously denying this was ever the plan.
There's one good thing about this fiasco: it's bought the iniquitous social fund back into the spotlight. Introduced in 1988, this is a finite amount of money administered locally, providing interest free loans to cover unexpected expenses.
The key word here is loan. Lumbering vulnerable claimants with debt when they are bedevilled by catastrophe and by their very nature poor was a bad idea in 1988, and it's a bad idea now. Perhaps it is time to abolish loans entirely, and reintroduce one-off grants.
Unemployment benefits were never generous, but were tailored to individual needs by additional payments. For example, one additional payment (much mourned in these days of fuel poverty) covered central heating, so that claimants were not penalised for finding warm accommodation. If a family had no washing machine, and required more trips to the launderette (because of a newborn baby, perhaps) then extra money was added to their weekly benefit. Amazingly, it was assumed that people took just one bath per week, so if a woman had recently given birth, she could claim for extra baths due to stitches.
During a crisis, single payments were available. These grants were payable in extreme circumstances not covered by weekly benefits, such as in one case I saw, when a claimant was left destitute after a fire.
Even then, a rigid and out-dated official DHSS list detailed how much was payable for each essential item. If you really did lose everything, the system decreed precisely how many knickers you should own (three pairs just so you know). Official policy ruled that claimants (or customers in current DWP parlance) were not entitled to a hoover without a dust allergy, or a fridge without the need to store medication.
Today's jobseeker's allowance still reflects that original flat rate, albeit without top-ups and tailoring. Basic benefits were always out of touch with modern life, and were never intended to cover extraordinary events. There is currently no leeway for the unexpected: claimants in dire circumstances must borrow from the DWP, and there is no guarantee they will get their money.
Benefit reform is well under way, and we must accept that claimants have jumped through all necessary hoops and are genuinely seeking work. Don't forget that budgeting loans are often provided when the DWP's own bureaucracy has failed, and benefits are missing, or delayed. It's inappropriate to charge interest in such instances (or at all).
Claimants are already squeezed. With unemployment escalating, people who never imagined they would claim benefits are cancelling insurance to buy food. Tenants might be topping up rent from their JSA under the equally controversial local housing allowance. It's no wonder that customers/clients (or are they victims?) turn to doorstep lenders. How else can they replace a boiler on £60 per week? Replacing loans with grants is the alternative, and not a loan shark government charging punitive interest.
• Penny Anderson blogs at www.rentergirl.blogspot.com
- Social exclusion
- Economic policy
- Welfare
- Personal loans
- Family finances
- Borrowing & debt
- Credit crunch
- Recession
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