Examination of Witness (Questions 40 -
WEDNESDAY 7 FEBRUARY 2001
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
(Ms Kempson) I have not come prepared with any, but
I will ponder on that.
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 onesthe Family Resources Survey that covers household
incomes and the Family Expenditure Survey that covers household
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.
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
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