Government announces £500m grants to help poorest households

The Government has announced £500m of grants to help families struggling with the cost of living to help households recover from the pandemic.

The new Household Support Fund will support millions of households in England and will be distributed by councils in England, who know their local areas best and can directly help those who need it most, including for example, through small grants to meet daily needs such as food, clothing, and utilities. Cash will be made available to Local Authorities in October 2021.

The Barnett formula will apply in the usual way to additional funding in England. The devolved administrations will therefore receive up to £79m of the £500m.

The Government says that with more people at work and the economy bouncing back, the Government is focused on investing in jobs and skills – increasing prospects and wages across the country – whilst ensuring those in greatest need can access vital support to help cover everyday costs. Alongside this, the government’s Plan for Jobs is helping people move back into employment so they can earn a regular wage, progress and increase their financial resilience.

Families will also continue to benefit from the energy price cap, recent rise in Local Housing Allowance and increases in the National Living Wage.

Thérèse Coffey, Secretary of State for Work and Pensions, said “Over the last year, we have helped millions of people provide for their families. Many are now back on their feet but we know that some may still need further support. Our targeted Household Support Fund is here to help those vulnerable households with essential costs as we push through the last stages of our recovery from the pandemic.”

Chancellor of the Exchequer, Rishi Sunak said “Everyone should be able to afford the essentials, and we are committed to ensuring that is the case. Our new Household Support Fund will provide a lifeline for those at risk of struggling to keep up with their bills over the winter, adding to the support the government is already providing to help people with the cost of living.”

The Government says that it has kept its Covid-related economic support in place until September, helping people through the toughest stages of the pandemic and well beyond the end of the roadmap, with more generous timelines than other countries in Europe. This new fund will run over winter and those in need of support should contact their local council who will help them access the fund.

The fund bolsters support from the Warm Home Discount which provides a £140 rebate on energy bills each winter to over 2.2 million low-income households and the Cold Weather Payment which provides £25 extra a week for poorer households when the temperature is consistently below zero.

The Barnett formula will apply in the usual way to additional funding in England, the devolved administrations will receive up to £79m of the £500m (£41m for the Scottish Government, £25m for the Welsh Government and £14m for the NI Executive). It will be for the devolved administrations to decide how to allocate this additional funding.

Richard Lane, Director of External Affairs at StepChange said “This fund will provide welcome financial relief to households who face a perfect storm of cuts to Universal Credit, rocketing energy bills and inflated food prices in the coming months. We agree with the Chancellor that absolutely everyone should be able to makes ends meet – for this to be a reality the Government must build on today’s announcement with plans to help households who are already struggling, including the 3 million people who’ve had to turn to high cost credit to get by since the start of the pandemic.”

“This must come in the form of sustained financial support, which the Government can begin to provide by reversing its decision to cut Universal Credit by £20 a week. For our clients who rely on it, this cut will see their average budget deficit triple from -£40 a month to -£126 a month.”

“A locally delivered grant fund is important for helping with emergency and crisis spends, and we would like to see this type of support extended to help tackle the millions in rent debt private tenants have amassed during the pandemic. But it must be matched by nationally delivered support, and £500m in a discretionary fund won’t plug the ongoing holes in household budgets, particularly when £6bn of Universal Credit is due to be cut.”

Helen Barnard, Deputy Director at the Joseph Rowntree Foundation, said “The Household Support Fund is an eleventh hour attempt to save face as the Government presses ahead with an unprecedented overnight cut to Universal Credit next week.”

“The support available through this fund is provided on a discretionary basis to families facing emergency situations. It does not come close to meeting the scale of the challenge facing millions families on low incomes as a cost-of-living crisis looms and our social security system is cut down to inadequate levels. By admitting today that families will need to apply for emergency grants to meet the cost of basics like food and heating through winter, it’s clear the Chancellor knows the damage the cut to Universal Credit will cause.”

“The temporary measure announced today will not fix the fundamental inadequacy of our social security system, but it does show the Government is capable of changing course. The Prime Minister and Chancellor cannot ignore the widespread concern about the cut, and must reverse it before it’s too late.”

Neil Kadagathur, CEO of Creditspring said “The new grants announced today will be a lifeline for many struggling households in what is shaping up to be a desperate few months with furlough ending, rising living costs and surging childcare fees as parents return to offices – all just before Christmas. Whilst any support is welcomed, this won’t be enough to stop many families falling behind on bills and having to seek high-cost, short term loans which can lead to spiralling debt. Currently, a quarter of UK adults struggle to access responsible credit and, unfortunately, it is often those most at risk who are faced with little option but to accept high interest credit from unscrupulous lenders with extortionate, unrealistic repayment terms, leading to a vicious circle that can make affordable credit even more difficult to secure in future.”

“Whilst the crackdown on payday lenders has cleaned up the industry, more needs to be done; after all, a third of all complaints to the Financial Ombudsman last year was around unaffordable credit – the most common issue. Responsible lenders will provide these near-prime borrowers with affordable, transparent terms to give them more control over their money and improve their credit score so they have more options in future. These lenders will be vital for many households over the coming months.”