Saturday, January 04, 2014

Removing the safety net

A £180m-a-year hardship fund providing emergency help for low-income families who suffer sudden financial crisis as a result of domestic violence, ill-health or natural disaster such as flooding is to be scrapped. The schemes are comprised of two elements – crisis support, which is designed to help penniless people with vital short-term expenses such as food or clothes; and community care grants, which would help people in severe crisis obtain basic living essentials such as beds and cooking equipment.

Matthew Reed, chief executive of the Children's Society, said the removal of government funding for local crisis schemes was alarming. "This is yet another blow to what was once a critical safety net for families facing such unpredictable emergencies and disasters as flooding, or simply running out of money to buy food for their children or feed the electricity meter. We urgently need a clear commitment from government to provide local authorities with sustainable funding to support families facing an unexpected financial crisis. Without this, many more families will be forced to turn to food banks, or to use loan sharks or high-cost money lenders."Re

Though some councils will continue to fund some kind of local crisis fund, many will decide they can no longer afford it. In November, Nottinghamshire county council proposed to scrap its £2.1m welfare scheme in April as part of a £151m cuts programme. Many councils have set strict eligibility criteria – many exclude applicants who have received benefit sanctions, while others refuse to help low-paid working families – meaning that many applicants have been turned away.

More than three million low-income families risk missing out on the economic recovery even if wages start to keep pace with inflation, according to an analysis by the Resolution Foundation, an independent think-tank.  Small print of last year’s Autumn Statement, which will force the working poor to  “run uphill” and earn an  extra £1,000 a year just to stand still. The foundation has analysed the impact of the Chancellor’s decision to freeze the “work allowance” – the amount people can earn before their payment under universal credit starts to be withdrawn. The freeze means that even if their wages rise in line with the cost of living, their income will  fall in real terms because the allowance does not keep pace with inflation. In 2017, by when universal credit will be phased in, a couple with children who qualify would need to see their combined earnings rise by £985 to cancel out the income loss arising from this change.  The work allowance freeze will mean that a couple with children would take a £234 hit in 2017. Because they would keep only 24p of every £1 of any pay rise as they lose entitlement to universal credit, they would need to see their combined earnings rise by £985 just to stand still. Similarly, a single parent’s earnings would need to rise by £1,770 a year to compensate for their £421 loss. Single people would need a pay increase of £179 in 2017 to avoid the £62 loss from the freeze.

Donald Hirsch, director of the Centre for Research in Social Policy at Loughborough University and associate fellow of the Resolution Foundation, said: “This is not just another ‘cut’ but something more fundamental which will systematically make it harder for low-income households to benefit from recovery.”

The new research will fuel the debate over whether the Government’s strategy will ensure a “fair recovery for all”

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