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The government has rejected a parliamentary committee's conclusion that the system of emergency loans and grants set up to help the most vulnerable in society undermines child poverty reduction strategies, rather than enhancing them.

"The government does not accept that the operation of the social fund works against its wider social policies, such as the eradication of child poverty," concluded the Department of Work and Pensions' (DWP) response to the House of Commons social security committee's report on the operation of the social fund.

The social fund was set up in the late 1980s as a cash safety net for vulnerable people. It comprises a mandatory fund, such as Sure Start maternity grants, and funeral, winter fuel and cold weather payments, and a discretionary fund of community care grants, budgeting loans and crisis loans.

"The discretionary social fund seems to us to be the forgotten end of the social security system," said the committee's scathing report in April (News, page 9, 12 April).

"At present, the huge gaps and inconsistencies caused by the inadequacies of the social fund risk undermining important initiatives aimed at tackling homelessness, helping victims of domestic violence re-establish their lives, supporting vulnerable people in the community and resettling people from institutions," it said.

The committee found the fund to be "adding to the poverty and social exclusion of families with children by in many cases denying them access to basic necessities and increasing their indebtedness."

It also called for an "urgent overhaul and an injection of funds".

But the DWP has rejected the charges, highlighting a "number of improvements" to the fund since Labour came to power in 1997.

It points to the new Sure Start maternity grants which currently triple the amount available under the old maternity payments scheme - although these grants form part of the mandatory fund that was not the main focus of the committee's criticisms.

"The government will continue to keep all elements of the social fund under review to see whether further improvements can be made to its operation and to ensure that the fund plays its part in reducing poverty in general," the government's response promises.

In reply to the committee's recommendation that failing more fundamental reform the community care grant budget should be "raised substantially", the government points out that the budget had been frozen since 1994 under the previous Conservative government.

"We have now increased it three times, including an above-inflation rise of 3 per cent for 2001-2," the government's response stated.

However, it fails to mention that between 1997 and 2001 the budget only rose from £97 million to £100 million - less than 4 per cent over a period of four years.