Changes to the Crisis Loan rules are being introduced from 4 April 2011, which will help to control expenditure, reduce abuse of the system and ensure funds are used for those in genuine need.

The three planned changes to the Crisis Loan system will mean that the Department will:

  • No longer pay Crisis Loans for items – cookers, beds for example. Rent in advance, charges for board and lodging, accommodation and residential charges for hostels are the only exceptions to this. There will be continuing support from the Community Care Grant scheme for people who meet the qualifying conditions
  • Customers not eligible for a Community Care Grant will be considered for a Crisis Loan if there has been a disaster impacting themselves or their household, such as flooding
  • Reduce the daily rate paid for living expenses from 75 per cent down to 60 per cent of benefit rate. This will align with the position for Jobseeker’s Allowance cases paid at the hardship rate
  • Restrict Crisis Loan awards for living expenses in a rolling twelve-month period to a maximum of three. This policy was tested by Jobcentre Plus in 2009/10
  • Since 2006, the number of Crisis Loan awards has tripled and continues to grow, largely independent of the recession. The changes to the Crisis Loan scheme from April will help to manage demand back towards pre-2006 levels.

This will ensure funding for Community Care Grants is protected and that DWP is able to pay Budgeting Loans throughout the year. Without these measures, Budgeting Loans would need to be withdrawn before Christmas. This would leave significant numbers of people on low incomes with little alternative but to turn to high-cost or illegal lending.