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LGA - Local safety net uncertainty risks households facing debt and financial exclusion
Millions of low-income households facing financial difficulty, growing rent arrears and debt could improve their life chances if councils received the funding they need to provide a vital local safety net.
The Local Government Association is calling on the Government to use the Spending Review to consider and fully fund the role of councils in supporting low-income households.
The LGA also wants the Government to better evaluate how local financial support can reduce the demand for other high-cost public services, such as health, housing and social care.
Councils used to receive specific government funding for local welfare schemes but this stopped in 2015. It was being used to pay for short-term crisis support, to support people through change, for example moving on from a period of homelessness, and to prevent financial hardship.
Having lost 60p out of every £1 it had from government to spend on services since 2010, providing crisis payments and in-kind support to those in need from local budgets has become a stretch too far for many councils.
This has led to many having to either scale back or close these schemes completely in recent years.
Councils have received £800 million to provide Discretionary Housing Payments (DHPs) to residents between 2015 and 2020. This is given by the Government to help support households affected by the removal of the spare room subsidy, Universal Credit, the benefit cap, and changes to Local Housing Allowance (LHA) rates.
However, this funding is increasingly having to be used to make up systemic shortfalls and there is no guarantee that it will continue itself after 2020.
The LGA is today publishing a new report ‘Reshaping Financial Support’ which sets out how councils are working with low-income households, improving advice provision and amending debt collection practices.
It plans to deliver some pathfinders with partners and councils later in 2019 to take forward the report’s recommendations and further develop and explore local approaches to strengthening and delivering financial support.
Cllr Richard Watts, Chair of the LGA’s Resources Board, said:
“In spite of financial challenges, many councils are still finding ways to provide direct and indirect financial support to those in financial difficulty or at risk of financial exclusion because of the vital role it plays in preventing crisis and improving people’s lives. It also reduces the need for more costly interventions, for example, housing, health and social care services.
“This is becoming increasingly difficult and huge concerns remain about the future of local welfare funding into the next decade.
“The reasons households get into debt or financial difficulty can be complex. Debt is often a symptom of wider problems, as well as a cause. Councils need the resources and capacity to disentangle and address complex issues, focus on prevention and bring services together.
“Unless local support is effective there is a risk that we entrench poverty and its associated problems.
“It is vital that the Government’s forthcoming Spending Review recognises the importance of local support to achieving its wider aims in reforming the welfare system and improving outcomes for low-income households.”
Notes to editors
- ‘Reshaping financial support’ is a report for the LGA from the Centre for Responsible Credit and University of Brighton. It examined how 10 councils have been targeting their limited resources to provide immediate support and help people become more financially resilient in the longer-term.
- In 2017/18, councils reported spending 28 per cent of their DHP allocation on the benefit cap. In some areas this is significantly higher. Nearly half of councils’ spending on DHP because of the benefit cap is recorded as being “to help with ongoing rental costs” for reasons other than “seeking employment” or “moving house”. At the same time, in high cost areas of the country, some councils report spending a significant portion of the DHP allocation to support households in temporary accommodation.
- Research commissioned by the Money Advice Service indicates that over eight million people (around 15 per cent of the total UK population) are currently over-indebted. The debt advice charity StepChange estimates that nearly four million people on lower incomes resorted to using high-cost credit to meet day-to-day living costs in 2017.
Spending Review 2019
Without a sustainable funding, your council can't deliver the essential services that keep your communities running; securing the financial sustainability of local services must be the top priority for the Spending Review later this year.
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