Changes To Crisis Loans from April 2011

tcr_3

Just a heads up. The Crisis Loan system is getting an overhaul from April 2011 to restrict the amount of money being paid out. Posting that news here because MSE were highlighting the availability of Crisis Loans only a few months ago.

The press announcement is as follows :-

"Urgent restrictions on Crisis Loans have been announced today in order to protect the discretionary Social Fund budget, which could run out before Christmas if current spending levels continue.

Crisis Loans were set up to meet immediate short-term needs in an emergency. Yet in the last seven years there have been over seven million claims from 400,000 regular users applying for 10 or more crisis loans. Since telephone claims were introduced in 2006 daily spend on the loans has tripled to £1million a day.

From April, the Department for Work and Pensions will no longer pay Crisis Loans for items such as cookers and beds, will limit the amount paid for living expenses and will set a cap of three Crisis Loans for general living expenses in a rolling year.

Minister for Pensions, Steve Webb said:

"It is clear that the system is acting as a sticking plaster that isn’t addressing the real problems that people are facing. We need to ensure that crisis loan support is correctly targeted at those who need it most and ensure we can still afford to pay Budgeting Loans. That’s why we’ve taken urgent action today to protect the budget.

"We don’t want to leave people on low incomes without the safety net of interest-free Budgeting Loans and then turning to loan sharks for help."

http://www.dwp.gov.uk/newsroom/press-releases/2011/mar-2011/dwp024-11.shtml

tcr_3

Just tagging on the little I know.

Crisis Loans for living expenses are calculated at 75% of the personal allowance rate (£65.45pw) from the date of application to the day before benefit/wages are due.

From April that's going down to 60%, bringing it into line with Hardship payment rates.

[Deleted User]

thanks for the info,i wont make any comments as that would risk the whole thread being moved to benefits bashers paradise,oops sorry discusion time as its known as in mse land

viktory

Indicative of the state of the benefits 'pot'.

dmg24

Good move - might stop people thinking they can apply for them to buy Christmas presents!

(Isn't it odd the posts you remember after such a long time!)

jaibaby

All fair what's been said, but there are some people that do really need them! A few years back when I was out of work, I claimed Income Support, had two young children. One morning, went to a cash machine, then onto a bus to the local supermarket to do the weekly shop, and had my purse stolen whilst getting on the bus. I had nothing. Couldn't even get home. I phoned them in the hope of getting a crisis loan, as that's what I thought I was in, but they refused. Ended up having to ask a man at the bus stop if he could borrow me money so I could get home. Spent the week sleeping at my brothers as had no food, electric or gas at home.

viktory

jaibaby wrote: »

All fair what's been said, but there are some people that do really need them!

Indeed. However, it is highly unlikely that people need ten a year. They will still be available, just less of them and slightly harder to get.

tcr_3

Ten a year ? I've seen applicants in their early 20's with over 100 applications.

And with an admin cost of nearly £30 a time, with a cash pay out frequently less than that, it's hardly surprising they're cracking down on them.

atomicsheep

half the people that apply for them dont seem to get that this is a limited source of cash.

It wouldnt be so bad for the government if they recovered the money more timeously.

In theory the money loaned is costing nothing other than administering the loan.
It is perceived that most crisis loans are used to buy electrical good, items in general, alcohol, clothing. Basically everything other than food

Therefore in theory it is a smaller dent in the government purse because if the above were true and Joe bloggs gets a crisis loan of £100.
He goes and buys a Hifi @ £100 he would still repay £100.
Then what happens to the money he has spent hmm?? 20% of that is taxable back to the government.

So he repays his £100 from his benefit, the government gets £20 back from his purchase.
Just need to minus the cost of the admin leaves negative £10 (approx)

Still costing the government money to supply the crisis loan yes. But in my out-the-box theory I think these applicants are a major part in the driving force in the retail economy to keep it going!





Or am I just crazy lol

welshmoneylover

atomicsheep wrote: »

half the people that apply for them dont seem to get that this is a limited source of cash.

It wouldnt be so bad for the government if they recovered the money more timeously.

In theory the money loaned is costing nothing other than administering the loan.
It is perceived that most crisis loans are used to buy electrical good, items in general, alcohol, clothing. Basically everything other than food

Therefore in theory it is a smaller dent in the government purse because if the above were true and Joe bloggs gets a crisis loan of £100.
He goes and buys a Hifi @ £100 he would still repay £100.
Then what happens to the money he has spent hmm?? 20% of that is taxable back to the government.

So he repays his £100 from his benefit, the government gets £20 back from his purchase.
Just need to minus the cost of the admin leaves negative £10 (approx)

Still costing the government money to supply the crisis loan yes. But in my out-the-box theory I think these applicants are a major part in the driving force in the retail economy to keep it going!





Or am I just crazy lol

Dunno, if I were in a situation of needing a CL the first thing I'd spend it on is booze :rotfl::o

Russe11

atomicsheep wrote: »

half the people that apply for them dont seem to get that this is a limited source of cash.

It wouldnt be so bad for the government if they recovered the money more timeously.

In theory the money loaned is costing nothing other than administering the loan.
It is perceived that most crisis loans are used to buy electrical good, items in general, alcohol, clothing. Basically everything other than food

Therefore in theory it is a smaller dent in the government purse because if the above were true and Joe bloggs gets a crisis loan of £100.
He goes and buys a Hifi @ £100 he would still repay £100.
Then what happens to the money he has spent hmm?? 20% of that is taxable back to the government.

So he repays his £100 from his benefit, the government gets £20 back from his purchase.
Just need to minus the cost of the admin leaves negative £10 (approx)

Still costing the government money to supply the crisis loan yes. But in my out-the-box theory I think these applicants are a major part in the driving force in the retail economy to keep it going!





Or am I just crazy lol

You misunderstand how VAT is calculated, but the money does just go around... it would have to be a £120 item VATinc at higher rate to be £20 worth.