Crisis loan arrears hit £40m in region

Jobless people in the West Midlands are yet to pay back up to £40 million handed to them in short-term interest free loans to help cover urgent bills, figures revealed today.

Arrears on Job Centre 'crisis loans' in the UK rocketed by more than £110m to £437,488,000 in the 2009-10 financial year.

The loans are paid out to cover urgent payments for things like rent arrears, heating bills and general living expenses, but figures show the Department for Work and Pensions is waiting for huge quantities of the money to be repaid.

A total of around £229m was paid out in crisis loans in 2009-10, up from £167m the year before.

The number of people seeking the emergency financial help in the West Midlands rocketed by 37 per cent to £20m over the same time period.

The department declined to provide an exact figure for the arrears total in the West Midlands, but said loan payouts in the West Midlands account for nine per cent of the national bill.

The amount paid out in individual crisis loans varies from case to case, there is no fixed amount and payments depend on individual circumstances, savings, and whether or not they have borrowed before.

Repayment plans have to be agreed in advance, and applicants are warned in official publications that there must be "serious risk to the health and or safety of you, a member of your family, or someone you care for, if you do not get any money."

The Department for Work and Pensions today said it is working hard to reclaim the arrears — and launching reforms to the system to prevent abuse. Spokeswoman Tessa David said:

"The social fund helps people on very low incomes deal with sudden, unexpected costs, and problems getting affordable credit.

"However, it is important that this fund provides the right balance between supporting people who need it and fairness to the taxpayer.

"That's why we're reforming the system and localising elements to ensure that support is better targeted for those in the greatest need and the system is less open to misuse."