‘Replace loans with grant-based system’

A review of the Social Fund is needed to replace the loan system with one based on grants, a new report recommends.

Recipients of loans say repayments are too high and force them to live on less income, according to the study for the Joseph Rowntree Foundation.

The average weekly repayment rate was 8 per cent of income, but families with children were likely to borrow and repay more.

The Social Fund has three elements: community care grants, which are non-repayable and help people to live independently; repayable, interest-free budgeting loans to cover major expenses, such as furniture, incurred by benefit recipients; and repayable, interest-free crisis loans for people in emergencies.

Recipients favoured grants instead of loans because they would not need to be repaid. However, they preferred Social Fund loans to other credit options.

Child Poverty Action Group chief executive Kate Green said the system left families “struggling to repay loans from low weekly incomes”.