What cost survival?

Despite the government’s claim that it is reducing
poverty, thousands of UK citizens have to borrow to obtain domestic
goods, clothes and even food. Borrow from whom? The high street
banks don’t want them. In general, the poor have two options:
government Social Fund loans or commercial loan sharks.

Until the 1980s, people dependent on welfare benefits were
entitled to grants, often called single payments, to replace
worn-out fires, fridges, cookers and other essential items. Then
the Conservative government replaced most entitlements by Social
Fund loans, which were interest free but discretionary and limited
by the tight budgets of social security district offices. The loans
were – and are – repaid by compulsory deductions from benefits.
Families could have £5-£30 a week taken from what, even
the government acknowledged, was just enough to survive on.

The results were devastating. Research shows that most families
repaying Social Fund loans have found it difficult to meet the
costs of clothing, shoes and food. In some cases they ran out of
money altogether. I know a mother who just about gets through the
week but is at a loss if a household repair needs doing or if the
children want money for a school trip. Holidays are out of the

The unwelcome reappearance of pawnbrokers is a stark indication
that money can be made out of the poor. And there are shops that
also prey on them. They display notices with the words: “Unemployed
welcome, no credit checks, immediate delivery.” The catch is the
interest rates. One domestic item was in a window at £739 but,
with interest, the real cost was £1,636. Meanwhile national
companies send out smooth-talking door-to-door salespeople who
offer immediate loans or cheques. The interest rates can be 200 per
cent or more.

A dignified woman asked me to apply to a charity so that she
could buy Christmas presents for her child. Her furniture, cooker,
TV and clothes were obtained by expensive loans. She was cutting
down on her own food but still could not save for Christmas.

The Social Fund and private enterprise loans are separate but
linked. Claimants paying back large sums of money to the Social
Fund may be so short of cash they then also turn to the commercial
loan sharks.

I have been involved with a small hardship fund. In one year 54
per cent of the recipients of help were in hock both to the
government and the private loan companies. On the other hand, some
families are repaying so much to catalogues, shops and door-to-door
sharks that officials refuse their applications for Social Fund
loans on the grounds that they cannot afford to make repayments. In
short, they are too poor to be helped by the system that was set up
to help the poor. Both the government and commercial systems need

What should be done? Robin Cook had it right when, as
Labour’s shadow spokesperson on social security, he said: “I
would like to see the Social Fund go…if a family needs a new
cooker…it needs a single payment.”

Yet, on taking office, Labour did a U-turn and refused to
abolish the loans. The present Conservative spokesperson, David
Willetts, likewise is opposed to reform. So much for compassionate
Conservatism. Professor Gary Craig estimates that the
reintroduction of entitlements would cost £800m, which is just
chicken-feed. Yet all the political heavyweights support the
government burden on the poor.

What of the company loan sharks? The Debt on Our Doorstep
campaign, for which churches must take much credit, proposed that a
cap be placed on the interest rates which can be charged for
consumer goods. The government disagreed on the grounds that this
would interfere with the workings of the free market. Strange. I
remember when the free market was rightly called capitalism and I
supported the Labour Party because it existed to protect poor
people from the fat cats.

I hope all welfare workers will lobby their MPs to urge reforms
to the Social Fund and for restraints on loan sharks. But that is
not enough.

The real goal is to abolish the poverty which forces thousands
of citizens to borrow in order to survive. The government should
establish an independent inquiry – which includes people on low
incomes – to determine just how much money is required for a decent
lifestyle. It should then ensure that all families receive at least
that sum.

Bob Holman is associated with a locally run project in
Easterhouse, Glasgow.

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