Clause 13
Welfare Reform Bill
6:30 pm
James Clappison (Shadow Minister, Work & Pensions; Hertsmere, Conservative)
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.