AN £80,000 hardship fund is to be set up in Torbay to prevent cash-strapped families from 'falling over the edge of the abyss'.
With a new 25 per cent tax on council tax benefits proposed by the Government, many hard-up families who rely on housing benefits, council tax benefits and jobseekers' allowance to make ends meet could find themselves in even more financial difficulties.
The Government's intention is to achieve a 10 per cent reduction in council tax benefits expenditures.
Torbay's 2013/2014 funding will be slashed by 11.5 per cent.
Members of the overview and scrutiny committee said the number of vulnerable people being put at risk of falling into arrears on rent payments and facing eviction would increase.
Cllr Darren Cowell said: "This will have a serious impact on the vulnerable people especially the third of families in the Bay who are one bill away from falling into poverty.
"These changes will push people over the edge and will impact dramatically on their wellbeing
"We need to ensure the various agencies help people proactively so they don't end up in the hands of loan sharks.
"We need to work more closely with the third sector and voluntary sector to help people manage their finances so those who are close to the edge do not fall off the edge."
The council tax benefit cuts will not affect pensioners.
Those with more than £6,000 in savings will not be entitled to the council tax support while second adult rebates for working age households will be removed.
Cllr John Thomas, chairman of the overview and scrutiny committee, feared a proportion of vulnerable people could end up being made homeless.
He said: "If the cuts continue, the number of rough sleepers will increase."
Cllr Bobbie Davies said a 15 per cent cut to council tax benefits would be better as it would not impact on people's finances as much.
However, the choice of how much the benefits are cut is set by Government.
Cllr Ruth Pentney added: "Our residents must not be left to think that they will be left high and dry but we will do what we can to help them.
"We have to encourage them to come forward if they are in difficulty and not keep their problems for themselves or risk falling into arrears or find themselves homeless."
Cllr Mark Pountney said he thought the hardship fund was a 'modest figure'.
Cllr Alan Tyerman, executive lead for finance and audit, replied: "We don't know if £80,000 will be no way near enough to cope with demand or if it will be adequate.
"We know we will have to be flexible in this area for what will be our year one under the new arrangements."
Members of the committee voted unanimously to pass its recommendations regarding the hardship fund to the full council which will have a final say at its December 6 meeting.