Lump-sum benefits urged to help poor: New research shows only a minority of low-income families avoid debt trap

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The Independent Online
LUMP-SUM payments to families on social security would be more effective than a rise in benefit levels of pounds 1 or pounds 2 a week, according to a report published today on the spending patterns of the poor.

Research by the Policy Studies Institute found that only a minority of low-income families managed to avoid falling into debt. Most received help from family and friends or suffered severe financial constraints to avoid the bailiffs.

'Offering them something to look forward to means providing some respite from the strict cutbacks in expenditure. One way of achieving this would be to offer long- term social security claimants, annual or even biennial lump-sum payments on top of their regular social security.

'Receiving pounds 50 or pounds 100 once a year would have a much greater impact than an extra pounds 1 or pounds 2 a week,' it said.

People on benefit adopted a 'hierarchy of strategies' to make ends meet with finding better-paid work and using savings at the top, and visiting pawnbrokers and indulging in petty crime at the bottom.

Elaine Kempson, one of the report's authors, said that about half of women with low incomes would go without food and other basic items at some time to provide for their children. 'It will always be the mothers that are denying themselves,' she said.

The study suggested that, apart from well-paid work, families most wanted greater flexibility from the benefit system so that casual, low- paid work did not automatically disqualify them from claiming social security.

Earners were very sensitive to the level at which they would be better off continuing to claim benefit rather than take up work with low wages. Although there was a reluctance to take on some low-paid jobs, the study found no evidence of a 'culture dependence on benefit' rather a simple calculation of the work/benefit equation.

'The disincentive to work was greater still if people were buying their home on a mortgage,' says the report. 'While claiming income support they received help with their mortgage interest payments. If they took a low-paid job, they received no assistance at all.

'This begs the question of whether social security is too generous, but the research shows that this is almost certainly not the case as most families find it hard to make ends meet. Rather, it suggests that a move from total dependence on benefit to total reliance on earned income is difficult'.

The study involved in- depth interviews with 74 families, 40 of which had lone parents, in inner-city areas of London, Manchester and the West Midlands. It found that those in poorly-paid jobs tended to use mainstream sources of credit, such as banks, credit cards and hire purchase to fund expenditure while the unemployed resorted to a 'cash' economy of doorstep lenders, pawnbrokers and the Social Fund.

Hard Times: How poor families make ends meet. Policy Studies Institute; 100 Park Village East, London NW1; pounds 17.95

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