Debts & Loans

A government paper which suggested charging interest on emergency state loans lent under the social fund has been criticised by politicians from all parties.

What is the social fund?

It is government money intended to help needy people such as those on low incomes, the elderly or disabled meet emergency expenses or one-off payments.

What costs does the fund cover?

It can help pay for funerals, cold weather, community care, maternity, crisis loans, budgeting loans and winter fuel for the over 60s.

How much money is available?

It depends what it is for. For instance, parents can get up to £500 to help buy equipment for a new baby but you can also apply for general loans of up to £1,500.

Do you have to pay the money back?

Again it depends on what type of payment has been made. Maternity grants, funeral payments and cold weather payments are not repayable.

However, budgeting loans and crisis loans need to be repaid, although no interest is currently charged.

Who qualifies for the social fund?

The fund is intended to help the UK's poorest people so most of the types of payment are only available to people on some form of benefit, such as Income Support or the Jobseeker's Allowance.

The Citizens Advice Bureau might also be able to help.

Is the social fund being changed?

The government says it is looking into how to improve help for the financially excluded, including offering free debt advice and other financial services.

The review is part of a Welfare Reform green paper published in July 2008. But it denies it is planning to charge interest on loans to those on benefits.

Some 1.2m people borrow £500m a year. It says a paper that proposed involving credit unions - which typically charge interest of 12% and 26.8% a year - with the fund was "poorly drafted".

Why is the social fund being reviewed?

The Joseph Rowntree Foundation says the fund's contribution to fighting poverty and social exclusion is limited. It wants to see quicker decisions on loan applications and says repaying loans further cuts the income of the poor.

How are decisions on loan applications made?

Community care grants, budgeting loans and crisis loans are decided at a job centre according to the individual merits of the case.

Other payments are also decided at job centres but laws govern who qualifies.