Labour accused of victimising poor over social security loans

The government was accused of victimising the poor last night after new figures showed that the number of rejected applications for social fund loans had soared to 360,000 in the past year.

The government was accused of victimising the poor last night after new figures showed that the number of rejected applications for social fund loans had soared to 360,000 in the past year.

The loans, which range from £30 to £1,000, are intended to help the poorest in society pay for essentials that are hard to budget for, such as children's shoes, clothing and furniture.

But strict new rules on eligibility introduced in April 1999 by Alistair Darling, the Secretary of State for Social Security, mean that the number of failed applications has risen 32-fold in the past year alone.

According to the annual report of the Benefits Agency, 11,000 people in 1998/9 were refused the loans on grounds of inability to pay, but the figure leapt to 362,000 in 1999/2000.

Social fund loans, available to people on Income Support or Jobseeker's Allowance, have to be repaid from benefits, which critics claim forces people into yet more poverty.

Under the new rules, anyone who has not paid off large chunks of previous loans cannot apply for new ones. The Department for Social Security says that this "encourages responsibility", but welfare campaigners say that many people cannot repay all the loans.

Steve Webb, the Liberal Democrat social security spokesman, called on the Government to award grants instead. "By clamping down on money for basic essentials such as children's shoes, clothing and furniture, the Government is clearly failing the very poorest in society," he said.

A spokesman for the department said the reforms were meant to open up loans for new claimants and pointed out that the amount paid out had risen from £344m in 1998/99 to £396m in 1999/2000.