Supermarket teams up with council to give out 'crisis welfare payments' to neediest residents in form of prepaid cards

Asda has joined the UK's biggest local authority to provide emergency welfare to some of the country's poorest people.

Birmingham council, which represents around 1 million people, said that from 1 April Monday it would give out crisis welfare payments in the form of prepaid cards that could be redeemed only in Asda supermarkets.

The Labour authority said the cards – which Asda said were similar to their gift cards – would restrict spending to a list of predetermined goods, which would exclude tobacco, alcohol, phone-related expenditure and fuel.

As part of welfare changes in April, local authorities will take over running the non-statutory emergency welfare loans and grants known as the social fund, which are meant to help people deal with crises such as leaking roofs, broken boilers and lack of food.

After the Department for Work and Pensions said it would no longer administer social fund payments centrally, Birmingham said that, unlike other councils, it had decided not to give out small one-off cash grants and loans from its newly devolved £6.1m fund.

Instead it would offer prepaid Asda store cards and directly provide bigger items such as white goods to those in emergencies.

Last year the fund, described by Labour peer Lady Lister as "a safety net under the safety net", helped more than 50,000 people in financial crisis in the city.

The council said it was working out how to stop people purchasing inappropriate items but said the cards were not food vouchers or tokens, and were indistinguishable from other prepayment cards accepted by supermarket chains.

Other councils have said they would also use voucher schemes or plough their social fund budget into food banks. But Birmingham appears to be the first local authority to pair up with just one supermarket chain.

Asda, which is owned by US retail giant Walmart, said its low prices offered an "efficient use of the public purse".

Asked why Birmingham was restricing choice by partnering only with Asda, a council spokesman said the chain had been "the only main supermarket in the city willing to work with the council". He said the council hoped the scheme would be extended to other stores after a period of evaluation.

"The scheme is being introduced and will be closely monitored and evaluated for the first three to six months. This is so we can assess how the scheme is being used, by whom, and the levels of grant, crisis payments and overall expenditure.

"This will entail very close working with the supermarkets to address any issues that arise and make further improvements ."

The council added it had decided not to issue cash payments in order to "build in an element of control by utilising payment cards".

Asda said: "We responded to an approach from Birmingham city council, which was looking for a simple way of delivering social fund payments to claimants.

"Making money available via Asda gift cards rather than cash is a safe way to ensure claimants have access to a huge range of products at low prices, and is an efficient use of the public purse."

Claudia Wood, deputy director of thinktank Demos, said that by using store prepayment cards, it was not possible to stop people spending on certain products. "In a supermarket you can also buy alcohol, toys, pet food, lottery tickets, everything else … you can't stop particular products."

Wood, who recently wrote a report on prepay cards and the benefit system, said that – aside from officials going through receipts retrospectively – the only other way to ensure spending was restricted to certain items was to get checkout staff to monitor goods as they were being bought.

"The only thing you could do would be to have someone at the checkout picking out the things you're not allowed to use. But … the idea that checkout staff would be enforcing government policy is just ludicrous.

"[It would be] a massive inconvenience, really humiliating at the checkout, a massive imposition on staff to apply that ruling … It just wouldn't work … I don't think the supermarkets would stand for it."