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Discretionary Social Fund Scheme

Volume 542: debated on Friday 23 March 2012

Last year I announced measures to manage crisis loan demand back towards pre-2006 levels, prior to reform of the discretionary elements of the Social Fund.

From April 2013 the existing crisis loans scheme will be abolished and replaced in part by new local provision by local authorities in England and the devolved Administrations in Scotland and Wales.

While the April 2011 measures have made a considerable contribution towards managing demand, further measures are required prior to the transfer of funding for the new local provision. I am therefore announcing two further changes to the crisis loan system.

From 9 April 2012:

For non-householders facing an emergency or disaster situation, the maximum crisis loan award in relation to living expenses will be based upon 30% of the appropriate benefit personal allowance rate, rather than the current rate of 60%. Householders and people without accommodation will continue to receive maximum awards based upon 60% of the appropriate benefit personal allowance rate.

Crisis loans awarded to alleviate hardship because child tax credits have not been received will be treated as alignment payments. This means that they will be exempt from the cap that restricts crisis loan living expense awards to 3 in a 12-month rolling period. (Alignment payments will be replaced by short-term advances from April 2013 and will continue to be administered by DWP).

Crisis loans for living expenses are awarded for two main reasons. To help:

A benefit claimant to bridge an income gap before their first full benefit or wages are paid; or

A person who faces other situations in which their normal income has been lost, stolen or is otherwise not available.

A person who does not have to maintain their own dwelling because they are living in the dwelling of someone else (who is liable for costs such as housing costs, council tax and mains fuel) does not need the same level of crisis loan award to mitigate a serious risk to their health or safety.

The maximum living expenses award in an emergency or disaster for a person who is without any type of accommodation will continue to be based upon 60% of the appropriate benefit personal allowance rate to take account of their special needs.

These changes do not alter the requirement of the Department to consider an applicant’s need for an award, whether or not they are a householder.

Copies of the amended Secretary of State “Directions and the Equality Impact Assessment” will be placed in the House Library later today.