“MILLIONS of pounds in emergency welfare handouts are being squandered on holidays and nights out.” Daily Express, 14 February 2011

The Daily Express yesterday called for an end to 'hole in wall' benefit loans, claiming that the “millions” of pounds handed out as emergency welfare payments are being “squandered” on holidays and nights out.

As part of our continued series of factchecks looking at the reports in the Express since they withdrew from the Press Complaints Commission, we thought we would take a closer look.

The payments they are referring to here are Social Fund Crisis Loans, interest-free government loans of up to £1,500 for those in a financial emergency.

However it seems that the figures from the Department for Work and Pensions (DWP) don't quite back up the Express' claim. Yes, significant amounts are paid out in such loans, but we have found no figures assessing the extent to which this money was “squandered” as the Express suggests.

Analysis

According to the DWP, crisis loans are intended to cover 'immediate short-term needs arising in an emergency or because of a disaster', for example after a robbery or burglary, or a fire or a flood; when expenses need to be met to protect the health or safety of an individual.

But how much is being spent on these loans?

The Express states that 'hundreds of thousands of people are abusing the system which is costing £1 million a day.' They go on to cite that the average payment to successful applicants is 'just under £100 a day'.

According to figures published by the DWP last week, gross expenditure on crisis loans was £232.5 million in 2010. If we take all the days in the year, this averages out to £637,000 a day. If we amend the calculation to include only the 260 or so working days in a year, we are still only left with an average figure of £894,000.

The Express also rounds up the estimation for the average payment made by the Fund; according to the Fund's Annual Report the figure is approximately £82.

The figures show that millions have been spent on the loans, but tell us little on their own about who gets these loans and how the money is spent.

Eligibility for an award is judged on the individual circumstances of the applicant, the calculation being made on the basis of how much would be needed to get the individual over the period of crisis. DWP guidance states that the conditions for eligibility are “strict”.

Qualitative research carried out on behalf of the Department through correspondence with Jobcentre Plus customers states that “there were a small number of customer comments about applicants who misused the Social Fund” with some self-declarations from claimants reporting “partial use of local money to afford luxuries and entertainment that they could not normally afford”.

They state that for many people, the Social Fund can “become a way of life” as checks are no more stringent for repeat than for first time applicants, although this is an area for change identified in a DWP paper on Social Fund reform in March 2010.

The figures published last week, also show that 3 per cent of applicants for loans made ten or more applications in 2010, although there is no further detail on how such applicants used the money.

We asked the DWP if any data exists on the extent of system abuse by recipients of crisis loan payments, but they were only able to point us back to the Annual Report, which didn't put a figure on it.

In the absence of any statistical estimates on the proportion of crisis loan expenditure that does not meet the criteria for loan eligibility, we cannot then verify the Express' claims that 'millions' of pounds have been squandered through misuse of the payments.

Conclusion

Although rightly conveying that the issue of Social Fund reform is high on the Department for Work and Pensions agenda, the Express do seem to have embellished the facts and figures in the DWP research to support their claim that crisis loans are being used as 'wads of cash to be frittered away' by "hundreds of thousands of people".

How accurate this claim might be, however, is still unclear – until more statistics are made available or more research is undertaken, there is no way to quantify the extent to which the system is being abused.