Under current plans, the Local Welfare Assistance Fund, which provided £172m to local authorities this year to support crisis loans to vulnerable people, will be abolished from next April.
Following localisation of the money in 2013, councils have set up local assistance schemes for people including those at risk of homelessness, families struggling to afford food or care leavers setting up home.
However, as part of the 2013 Spending Review, the government said standalone funding would no longer be provided, with schemes instead funded from within the Revenue Support Grant in 2015/16.
Under this plan, councils would continue to decide what local provision to provide and at what cost, as ministers insisted they would be best placed to understand the needs of their local communities.
This was subsequently challenged in a judicial review, which led the government to hold a new consultation that was launched on Friday.
Three possible funding options were set out for the scheme from next April.
These included going ahead with plans to merge the funding into local government budgets, or maintaining separate welfare grants.
This could be done by either setting out how much of each authority’s Settlement Funding Assessment would notionally relate to local welfare provision based on previous trends, or by top slicing Revenue Support Grant funding to provide a dedicated fund.
The consultation stated that as the total money available to town halls would not change, this final option would therefore reduce the unringfenced funding available to unitary and top-tier authorities.
The consultation will close on November 21, and ministers stated they would make a decision on funding for 2015/16 in time for the provisional local government finance settlement in December.
