Clause
13External
provider social
loans
Mr.
Clappison: I beg to move amendment 16, in
clause 13, page 17, line 38, leave
out paragraph
(b).
The
Chairman: With this it will be convenient to discuss
amendment 55, in
clause 13, page 17, line 38, at
end insert ‘and (c) in respect of
any sums charged as interest on the
loans.’.
Mr.
Clappison: We now come to the subject of the social fund.
The clause allows the Secretary of State to make arrangements with
external providers to make social loans in place of the present
arrangements with the DWP. It is important for the Committee to bear in
mind the background to the clause, which lies in the
Government’s consultation paper that was issued last November
and the subsequent Government response to the consultation that was
issued this month, which we understand to be the Government’s
current position on the matter. We welcome the proposals and the
interest that the Government express in having advance payments as a
way of obviating the need for crisis loans to be made in certain
circumstances, which is worth exploring. Ministers will recall an
occasion last autumn when the Government were facilitating, by way of a
statutory instrument, the transition of lone parents from income
support to jobseeker’s allowance, which left a gap in their
provision. To fill that gap, it was suggested that lone parents should
take out a crisis loan. We suggested at the time that this was not an
entirely satisfactory way of conducting things, and that it should not
be beyond the wit of Government to enable a claimant in such a
situation to receive an advance payment, rather than having to take out
a crisis loan as a result of changes that were being made by the
Government. That is worth
exploring. We
also note—and this is a very interesting development—that
the Government propose not to allow external providers to impose any
interest charges on those who receive loans from the social fund. That
was in the Government’s original consultation paper in November,
but they said clearly in their response to that consultation that they
did not intend to charge interest on social fund loans, including any
loan scheme set up by an external provider under arrangements with the
Secretary of State, and that nor do they have the legal powers to do
so. Several
interesting questions arise from that, not least when, and why, the
Government formed that intention, but perhaps for the purposes of this
debate, it would be reasonable to draw a veil over that subject. They
have set out their position—they do not intend that the external
providers should charge interest to people who are in need and receive
social loans—and therefore we do not need to take the matter any
further. It
might assist the Committee if I indicate now that I will not move
amendment 17, which would require the Government to produce a report
dealing with a number of matters, including the interest charged on
loans, as we now know that interest will not be charged. Also, I will
not moving the amendment in light of the fact that
the Government have indicated in the consultation paper that they will
take powers to allow external providers to make social loans, but that
they do not intend to use such powers yet. They will not use their
power to give external providers responsibility for providing loans.
They are setting out to undertake more consultation to develop the
plans further with relevant parties, which is perhaps another reason
why a report under amendment 17 would not be necessary.
There will be more consultation following that which took place in
November on these issues and on replacing crisis loans and the social
fund with a single
loan. That
brings me to amendment 16, which is still relevant as the Government
are proposing to take powers—although they do not have any
intention of using them at present—to enable external
organisations to make loans in place of the present arrangements in the
DWP. We know that if the powers were to be used, the external
organisations would be credit unions and similar organisations. We
acknowledged at the outset that they were worthy bodies and far better
than many of the alternatives available to people in
need. It
is important, however, when we are considering the powers and the
possibility of credit unions and similar organisations disbursing the
loans, rather than the DWP, to remember that such organisations face
expenses, which they normally defray from interest charged. Also,
credit unions need to exceed their operating expenses. We would ask the
Minister for a little more clarity and detail on this, given that we
now know that the credit unions and other organisations will not be
able to charge interest. As the Government take their proposals through
further consultation, what are their ideas on how external
organisations will defray the expenses that they will inevitably face
through having to undertake the task of disbursing the loans on behalf
of the Government? Will the Minister say whether, at this
stage—I know that this is all still subject to
consultation—the Government have any ideas about how that will
be
funded? Another
important aspect is the funding of the financial advice and additional
services that we apprehend from the consultation paper that the
Government still intend to provide. Financial advice is a good thing
for needy people who require social loans to provide the everyday items
that it is hard for them to pay for out of their benefits or other
income, and for people in crisis situations or facing a family or
household emergency. It is important for them to receive financial
advice and related services, but we would like to know how the
Government propose that they should be funded. They have made it clear
that the service is additional to what is already provided by the DWP,
so we need to know a little bit about
it. We
wonder whether part of the Government’s thinking is that
expenses in respect of the external provider will be paid out of the
social fund budget, with the risk being that that would reduce the
amount available for lending to social fund borrowers—who are,
as the Minister will accept, people in difficult
circumstances—or for people borrowing through crisis loans. We
need to know whether these provisions will reduce the amount available
to such people or whether there will be some other way in which the
expenses will be met. We put that to the Minister because we want to
know the Government’s thinking at this stage.
We
understand that, at the moment, the Government’s position is
fluid in respect of these issues, which are important for many needy
people and worthy of exploration. We want to play our part in eliciting
from the Government details about exactly how they are approaching
them.
Paul
Rowen: As the hon. Gentleman said earlier, in respect of
an aspect of amendment 55, we have already had an assurance from the
Government that interest will not be charged on loans. To save time
later on, I shall make some general remarks about clause 13 because it
raises important
issues. It
is important to look at the time scale that the Government have used
after 10 years of inactivity with regard to the social fund. A
consultation was launched in December 2008, but people were given less
than three weeks to respond to it, which is one third of what the
Government’s code of practice says should be the norm for any
such consultation. Before Christmas, an article in The Guardian
suggested that ridiculous interest rates would be charged, but the
Government have thankfully squashed that idea. However, we now have a
situation in which the Government say that they are going to carry out
further
consultation. I
respectfully suggest to the Government that, given the complete mess
that the policy appears to be in, the most appropriate approach would
be to withdraw clause 13 completely, carry out a proper, meaningful
consultation, discuss the matter with claimants—the people who
will actually be affected by such change—and then come forward
in the future with proposals that will work. It is clear, given what
has happened, that the proposals will not
work. Who
will be the providers? We know that the private sector has made it
clear
that “in
the current economic
climate” —I
am quoting the KPMG
report— “they
would not wish to fund a model lending to a deep sup-prime
sector.” If
the Government were to say, “We will go to non-governmental
organisations”, that would have some merit in the long term, but
NGOs are saying that although they are pleased to contribute, they have
received extremely short notice and they would need longer to talk
about it. If the Government are serious about wanting other providers
to run the social fund, this matter needs to be set in context with a
set of supports—whether financial advice or whether linked to
other issues—before we make such a
change. 6.45
pm There
could be merit in that proposal and in introducing external providers,
including NGOs and charities, and having them running the social fund,
but the proposal, as it stands, is half baked. With respect, it is a
classic example of what we heard about earlier: not putting into the
Bill provisions that could lead to complications. The Government have
not thought out what they are doing or how the proposal is going to
work, and the Bill does not include sufficient detail to make a
proposal work, should they want to introduce one. It would be far more
sensible if the Government withdrew the clause, went back to the
drawing board, and introduced a measure when they had a workable
proposal.
The
Parliamentary Under-Secretary of State for Work and Pensions (Kitty
Ussher): Good evening, Mr. Hood. As this is the
first time that I have risen to make a speech, may I say what a
pleasure it is to serve under your chairmanship, even though it is
rather late in the day to be doing so?
[Interruption.] It is never too late.
Since we have
already, in effect, moved on to the clause stand part debate, it might
be helpful if I explain what the clause intends to achieve. I
absolutely disagree with the hon. Member for Rochdale, who says that we
should withdraw it—I shall explain why. People who come to the
social fund are those whose finances are at their most precarious. They
come to us for help, and it would be irresponsible, when we have made
the policy decision to provide them with more support, not to take the
primary powers that will give us one avenue for doing so, because, as
well as requiring an emergency injection of finances immediately, each
person may be in a different situation from that of the person before
or after them. They may require a path out of debt, and that could
include, for example, information about low-cost insurance schemes that
their registered social landlord is able to provide; debt advice or
debt consolidation services; advocacy for dealing with the various
agencies, organisations or private companies that have contributed to
their situation; or flexible repayments. They may respond well to a
plan that migrates them from repaying a debt to a savings plan that
operates either at the same time that they are repaying their debt, or
after they have done so. Alternatively, they might be the type of
person for whom that would be entirely inappropriate. They could well
be the type of person who needs face-to-face support and advice, and a
number of issues might need to be considered in the round, including
more complicated things such as child
support. The
point is that we, as a delivery Department, may not be the people who,
for very good reasons, offer all those things as our core services.
However, under the Bill, we will be the people who can take a primary
power and provide those who have the most precarious finances with the
advice and support that they need from the organisations that are best
placed to help them. That is why the clause must remain in the
Bill.
Paul
Rowen: I do not disagree with some of
the Minister’s points, but I ask her to point out the
additional services that she says could be better provided, because
proposed new part 8ZA of the Social Security Contributions and Benefits
Act 1992 is all about arrangements for external provider social loans,
for the transfer of loans, for an annual report on the operation of
arrangements, for repayments of external provider social loans, for the
power to restrict to social loans, and the supply of information to all
lenders making external social loans. The new arrangements that the
Minister talks about are not provided for anywhere in the clause. There
is not even a provision to introduce regulations, which is the usual
catch-all that the DWP introduce. In view of the Minister’s
limited consultation, would it not be best if the whole clause were
withdrawn, and if the Government went back to the drawing board and
came up with some arrangements—perhaps in the Lords—that
enabled the provisions that the Minister wants to be
introduced properly?
Kitty
Ussher: The hon. Gentleman is quite wrong. Subsections (5)
and (6) of proposed new section 140ZA make it quite clear that we have
the regulation-making power to do precisely that and to specify through
contracts.
Perhaps it
would be more profitable if I were to move on to the remarks made by
the hon. Member for Hertsmere. I welcome his broad support for what we
are trying to do and, indeed, I have seen Conservative party documents
stating that it supports credit unions. A letter was even sent to me
from an outside organisation explaining that it had been called in to
discuss the reform of the social fund with the hon. Member for
South-West Bedfordshire (Andrew Selous) and that it was greatly
encouraged that he was keen to explore ways of reworking the social
fund, perhaps involving partnerships with credit unions. I am delighted
that the Conservative party supports us—that is extremely
welcome.
John
Mason: Does the Minister agree, however, that some credit
unions are not keen to be involved in this kind of thing and that some
people in fact feel that credit unions in this country have suffered
compared with those in other countries, because they are associated too
closely with the public
sector?
Kitty
Ussher: I accept that not every credit union wants to get
involved, but if the hon. Gentleman were to look at the consultation
responses that we published today, he would see that a large number do.
The important thing to make crystal clear is that the Bill does not
impose a requirement on credit unions, or any other type of
organisation, to provide such loans. We are simply taking the power so
that, hypothetically, we could invite expressions of interest and
publish draft contracts under which such arrangements could work. The
hon. Member for Hertsmere is correct to say that we do not intend to
use the power at the
moment. Reference
has been made to the need for future consultation, with which we agree.
I would like to clarify that there will be two further sets of
consultation. As the hon. Gentleman said, the first will simply give
more detail about the type of arrangements that may exist if we use the
power in the future, while the second will go into far more detail
about how we would like to use the social fund to advance our aims of
financial inclusion, and perhaps deal with some simplification
measures, too. Returning to the point made by the hon. Member for
Rochdale, we are today taking the necessary primary powers so that,
hopefully, we will not have to return to primary legislation. We will
consult on the other powers as soon as we
can. I
hope that I can encourage hon. Members not to press amendments 16 and
55 to a Division. Amendment 16 would delete the paragraph enabling us
to pay the administrative costs of external providers with whom we
enter into a contract. In answer to the question from the hon. Member
for Hertsmere, we understand that, in addition to the provision of
loans, additional costs will be incurred as a result of such contracts,
and we intend to pay them. That is what proposed new section 140ZA(4)
sets out. It will not necessarily reduce the amount available elsewhere
because, of course, there will be costs for administering such loans
anyway. Furthermore, we hope that, as a result of our policy, more
people will be migrated off the social fund, which could also free up
resources. However, those decisions will be made in the round, across
Government, in order best to use taxpayers’ money to achieve our
public policy goals and in the overall public interest. I hope that
that answers hon. Members’
questions.
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