Select Committee on Social Security Minutes of Evidence

Examination of Witness (Questions 40 - 52)



  40. We had an interesting discussion earlier about credit unions and other forms of alternative funding for groups with low incomes. Do you think that we should be considering the Social Fund as an alternative means of funding for a wider group of people, perhaps not just people who are on benefit but people on low incomes?
  (Ms Kempson) I have changed my mind on that. I used to think it should, indeed, I sat on Policy Action Team 14 and advocated that it should, be available to those on low wages. Since doing the most recent piece of work, I think the needs of the most vulnerable and the very poorest are not being met. All the while they are not being met I could not put my hand on my heart and say that the scheme should be widened to a broader group of people, not even if more money were made available. I think if more money were made available then we could do an awful lot better for the people who currently need it most.

  41. But in an ideal world, if we could make the Social Fund work better for the group whom it was targeted at now, would you then want to see it expanded? Is the only reason why you would not want to see it expanded because it is not meeting the needs of the most vulnerable now?
  (Ms Kempson) Supposedly, in an ideal world, every single one of us would like to apply to the Social Fund and get interest-free credit, and we see parents of students applying for student loans so that they can get access to a cheap source of credit. I think everybody would like it, of course; so that it is very difficult to know how far up the income scale one should go. I suppose, in an ideal world, yes, one would extend it to everybody who was on means-tested benefit, in an ideal world, or Working Families Tax Credit, we must include that now.

  42. Again, referring back to some comments that you made earlier about buy-out schemes, and you referred to a project in Cambridge, if the Social Fund were reformed, would you like to see Social Fund loans being made available to buy out existing debts, that, for example, the current client group have, because you have acknowledged that some of the existing clients also have debts from loan sharks and all sorts of people? Do you think that the Social Fund should be expanded to buy out those existing debts?
  (Ms Kempson) I think that is difficult. In effect, some people may well already be borrowing in order to pay back the loan shark, or, at least, in part. I think the attraction of the debt buy-out loans is that they can enable people to continue paying what they are already, or maybe slightly less, but with a proportion of that going into savings. And I think that is the real attraction of them, that it converts an existing borrowing partly into repaid borrowing and partly into savings, and that is what makes them particularly attractive, and can then open up access to credit union loans, because people have then got some savings by them.

  43. Just one more question. Do you have any other ideas for reform in the Budgeting Loans system that we should consider?
  (Ms Kempson) I have not come prepared with any, but I will ponder on that.[5]

  Mrs Humble: Thank you very much.


  44. Why is there not more research done in the field? Are we not all approaching this question with both hands tied behind our backs, because we really have no measure of the extent of indebtedness? I was quite taken aback when you said, if I understood you properly, that the last piece of substantive research was in 1990. Is this because Governments, or the Department, would find the answers embarrassing?
  (Ms Kempson) It is a major omission. The Family Expenditure Survey looks at levels of spending on credit, but that is all we have, we do not know how much people have borrowed—

  45. So spending on credit?
  (Ms Kempson) On credit, yes.

  46. That is different from a level of extant debt, of course?
  (Ms Kempson) We do not know how much they owe, we only know what they are spending, and that is the only Government survey that currently measures anything to do with credit.

  47. Is there any scientific, professional reason why that would be an impossible statistic to capture?
  (Ms Kempson) No; in fact, I know the Office of National Statistics is looking at a new survey, looking at individual wealth and assets which may also cover borrowing, to sit alongside two existing ones—the Family Resources Survey that covers household incomes and the Family Expenditure Survey that covers household expenditure.

  48. And that is ongoing?
  (Ms Kempson) They are investigating it currently, to see whether it could be done. It is definitely needed. I currently sit on a DTI task force, looking at overindebtedness, and we are sitting talking about ways of combatting overindebtedness, and yet we do not know what level of borrowing there is. It has to be done by a one-off survey, currently.

  49. So do I understand you to think that there may be some prospects that these questions may be addressed in the near future by ongoing work?
  (Ms Kempson) It looks as if that should be the case; but that will be right across the board, across the whole population, looking at levels of borrowing and sources of borrowing.

Mr King

  50. Surely, there is a place for some qualitative, in-depth research on small communities, which would give us a much clearer picture than these national surveys, because there is no way that they are going to get beneath the surface at all? And I am quite astonished that we keep meeting people whom we are looking to to give us some answers to these questions, yet the answer is consistently, "We don't know; we don't know what the poorest of people, how much debt they're in, and what their commitments are." I am quite astonished.
  (Ms Kempson) It was very striking, when we did the work for the DSS, in one of the areas where we were working, we had a very clear picture of the sources of credit available there and what people were doing. In one area, we did a whole series of focus groups, of people who were members of credit unions, or using the Social Fund, or people doing neither, and they painted very graphic pictures of illegal lending, very graphic pictures. To the extent they told us that you knew instantly, because people were getting off the bus with what they called Kwikies bags, Kwik Save bags, because they had to go to the DSS for vouchers, and the vouchers were for Kwik Save, and Kwik Save was not in that neighbourhood. So you knew, if somebody got off the bus, they had to scrounge the bus fare to get to the Kwik Save. But they said, "Oh, you see them getting off with the Kwik Save bags, and we all know that the loan shark's got them; and it happens to all of us," they said, "it happens to all of us, at some time or another, we have no choice." And they were telling us very graphically about all the practices that, anecdotally, we had only heard of before, that 75 per cent of benefit is taken, and they wait at the Post Office they hold the benefit book. So it was much more graphic and much more detailed than anything we had been told before.

  51. It sounds to me as if we have not really got much hope of buying out these people, in order to give low-cost loans, or zero interest rate loans, to people, because these characters are beyond the law, and there is no way that they are going to be bought off easily. It sounds to me as if they are really going to have to be taken on in a different way?
  (Ms Kempson) They are mostly used either because people cannot make ends meet and they have got a creditor pressing them to pay, and back to the benefit levels again, or they are used because people need to replace a cooker, and they have used up all the other sources of credit they have got available to them, and that is when they turn to them.


  52. Is there anything else you would like to say to us, just in conclusion?
  (Ms Kempson) I do not think so. I will probably think of a million things after I have left, but I cannot think of any now.

  Chairman: If you do, we are always in the market for any further thoughts. Thank you very much for your appearance this morning. I know these things take time, and your written evidence is very powerful and will help us enormously in our inquiry. Thank you very much for your appearance.

5   See Appendix 27 p. 217. Back

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