Select Committee on Social Security Minutes of Evidence

Examination of Witnesses (Questions 400 - 419)



  400. But does your low paid administrative assistant consider that to be part of his or her remit at that stage, to give that advice?
  (Angela Eagle) I do not think the Benefits Agency would offer advice other than about the Social Fund system and the way it works. They are not financial advisers in that sense of the word. They may, if they know, say, "Why don't you try particular voluntary organisations or the local authority", but there is no training or guidelines or expectation in the system that they should.

  401. Is the Department, because it always keeps everything under review all the time, reviewing the prospect of turning some of these loans into grants?
  (Angela Eagle) We do keep things under review all the time and we have been looking at how the system could be reformed. We have reformed the Budgeting Loan system in a significant way. We have also put more money in. I would not sit here and say that we would not look at any suggestions to create grants, but the grant system was not that good either in that, as I said earlier, 17 per cent of the likely recipients who were eligible because of the benefits they were on got 80 per cent of the money. So even under the old system where you had grants rather than loans, what tended to happen was a minority of people got them and large swathes of people who would have been eligible did not get anything. So I am not certain that even the old system met the need there was. If you have grants for specific things, that means sometimes if somebody does not come under that particular grant specification you might not be able to help them, whereas in the system now you can. So there are advantages and disadvantages to moving into a more grant based system away from a loan system. There is also the issue of the money available in a loan system, when it is repaid it gets recycled and can therefore help more people.

  402. We picked up some evidence, and it is anecdotal, that some of the welfare rights workers were of the view that some of the staff were directing people more towards loans and away from grants. Have you got any view on that? Would that concern you if you felt it was happening?
  (Angela Eagle) It depends why they were doing it. If they were directing people who they knew would fail to get a Community Care Grant because they were not eligible, they were not on the appropriate benefits, to try a loan instead, that might just be saving them time. If they were doing it as a matter of course, then that would worry me.

  403. It is not a matter of policy?
  (Angela Eagle) No, it is not a matter of policy. Benefits Agency staff who know the system will try and direct people to the right part of the system, fitting in with their circumstances as they know them. That, I think, is legitimate, but what is not legitimate is to prevent anybody from applying for any of the grants. If you look at the reasons for refusal in the annexes at the back of the evidence we have given you, one of the largest reasons for refusal of all of these grants is that people simply are not on the appropriate benefits to be eligible for them in the first place.

  404. There were changes made to the system for budgeting loans in 1999 to make it simpler and quicker, but the refusal rate is now worrying. The figure is 647,000 refusals, and 40 per cent of the applications are now being refused. Does that not concern you?
  (Angela Eagle) The issue there is actually that that is not a reasonable comparison with the old system. The new system is much simpler to the extent that if you are on particular benefits and you do not have any debt in the Social Fund, you can get a loan. It essentially turns the Budgeting Loan system into a little bank. However, if you are at the £1,000 limit of your loan, you cannot get another loan until you have paid half of that off, which stops people topping up their loans and allows the money to be used for people who did not access it before. 82,000 more people got loans in the new budgeting system, it is faster, it is simpler to understand, it does not ask people what they want to use the loans for. When we came into Government and looked into it, I felt very strongly that if the money was going to be paid back why should poor people have to explain why they wanted to borrow it and what they were going to spend it on, so the new system is much faster in the way it works. It does take account of existing Social Fund debt as one of the criteria for giving further loans, and there are some examples of how that works if you want to see it. We suspect there was a debt hangover from the old system and from monitoring the system this year there is a 40 per cent fall, I believe, in refusals for existing debt. So I suspect that people have realised what the new rules are, have paid off the loan and are beginning to apply only when they know they will qualify. It is impossible to tell but I think it might have been a transitional issue in the move from the old to the new system.

  405. When we talk about net expenditure on loans, in what circumstances typically are loans not recovered?
  (Angela Eagle) If people disappear into work and we do not have a benefit to take it out at source. If they just leave the system then we often cannot trace them to repay the loan. We write off an amount of loan money which is irrecoverable every year. However, if they were to appear back on the system with their national insurance number, we could pick it up again. When Working Families Tax Credit was introduced, it meant we were not taking money off Working Families Tax Credit recipients to repay loans, so we had to make other arrangements with them. So there have been some changes there but it is really when they disappear into work, or disappear.

Dr Naysmith

  406. I want to stick with loans and repayments but a slightly different aspect of them. According to Elaine Kempson, who gave us evidence, and other witnesses too, claimants claim that they have no idea why they are successful or not successful when they apply for grants.
  (Angela Eagle) Is this Community Care Grants?

  407. For loans, not grants, sorry. They say that afterwards, they do not now why they got it or they did not get it. The same applies for fixing the amount of repayment, they do not know how that is arrived at. Do you have any views on that? If so, do you think this could be remedied in some way?
  (Angela Eagle) The Budgeting Loan system now is very simple and people ought to be able to understand more than the old system why they have either succeeded or failed. They have to be on benefits for six months—

  408. If I can interrupt you, I think what they were saying was that are not told, they do not have an interaction with the staff.
  (Angela Eagle) The application forms make all of this clear, and the three application forms we have now are much clearer and easier to understand, and one would hope that staff could answer any questions they might have about a decision. There are some here if you want to have a look.[6] There are fairly extensive notes explaining, I hope in crystal, clear, plain English, how the systems work. Certainly with budgeting loans it should be easier now, because it is just your level of debt and your time on benefits whether you get a loan or not. On crisis loans, the issue is mainly whether your health and safety is at risk, and whether you need an immediate payment. The reasons typically are alignment, if money has been stolen and sudden disaster. If you are refused a loan, you can always ask and I would hope our staff would be able to explain it. I do not think there is in any bit of the population, those who use the Social Fund regularly or those who never come into contact with the benefit system, much understanding of how it works in detail and why it does things, which is one of the reasons why we are trying to develop the personal adviser process, so we can have a more robust dialogue and hopefully engender more understanding as to how the system works and why it has come up with a particular decision.

  409. Is it something the staff would expect to have to do, to explain how a decision had been arrived at?
  (Angela Eagle) Certainly if a claimant asks, our staff are trained to respond and try to have a dialogue which will allow the claimant to understand, especially after the introduction of decision-making and appeals, which fosters much more of that kind of dialogue at the front-end, if you want to call it that.

  410. Repaying a Social Fund loan takes a claimant's income as much as 15 per cent below the official poverty line. What is your view on the current levels of deductions from benefits to repay those loans?
  (Angela Eagle) I was not aware there was an official poverty line. There are different ways of repaying loans and which level of repayment you end up on depends on your existing indebtedness.

  411. That is one of the things which is not explained; what I was talking about earlier. Even so, what we are doing with some of the poorest people in society is taking them further into poverty by asking them to repay a loan.
  (Angela Eagle) We have just done some research which I can let you have a copy, of into the financial services which are available to the low paid, and they take out loans anyway.[7] At least the Social Fund loans are interest-free and available in circumstances which can be of assistance to them. If there was no Social Fund, they would still take out loans but they probably would take them out with organisations which are charging large amounts of interest. Which is why, for example, I am very anxious to do much more work with the credit unions and look at PAT 14 which is about the provision of financial services to the low paid and financial exclusion, because there is more we can do to keep people out of the hands of loan-sharks.

  412. I absolutely agree with you. I am very much an advocate of credit unions in all sorts of ways, but two or three times in taking evidence people have said that people who are applying for loans and applying to the Social Fund would not be members of credit unions because they were not able to keep up the initial payments in order to access a loan when they needed it, so we are talking in some ways about more desperate people here.
  (Angela Eagle) Yes. I think the way the loan repayments works does offer choices. If you already have existing debts, then the repayment rates are 5 or 10 per cent, not 15 per cent; if you have no existing debt it goes up to 15 per cent. If your circumstances change for the worse, you can get rescheduled debt, and I think 42,000 loans were rescheduled for lower repayments as a result of changes like that last year.

  413. This is one of the things given in evidence that people do not know about. They are not told they can reschedule their debts.
  (Angela Eagle) You cannot if you feel like it. You can if your circumstances change for the worse, and I would hope that the advice bureaux and our staff would make that knowledge available. It is available in the leaflets, I cannot force people to take account of it, but we would be happy to participate in any extra work to try to make that knowledge available. I am sure the Citizens Advice Bureaux and all the usual voluntary organisations know about it.

  414. We have talked already about the advantages of the present system offering loans rather than grants under the old system, but returning to what I said at the start, some of these people cannot really afford to pay loans back at all and in those circumstances would grants not be better than crisis loans for buying cookers and things like that?
  (Angela Eagle) There is a discussion to be had about the appropriate balance of grants and loans, with the inflexibility that some grants introduce in the way in which the money is spent. We have a certain balance at the moment and it is perfectly possible for the Committee to think we have the wrong balance. I personally think we have got a reasonable balance, but I am not complacent about the real need and hardship there is out there. I do not think the Social Fund is the only way of dealing with it, which is why I made the statement I made at the beginning of evidence. It is important that we do not get fixated on the Social Fund as the only way of handling this, there are other structures we can put in place as a Government, and I hope in our welfare system, to help move people past these events when they are stuck on very low incomes and give them assistance to make progress in their lives and get out of that situation. I think it is important as a Government that we concentrate on that as well as the Social Fund itself.

Ms Buck

  415. Setting aside the pounds and pence element of this, which is what we have concentrated on so far, the evidence we have had from charities, from the Child Poverty Action Group, local government and other bodies on the ground, was really quite devastating as a criticism of people's interaction with the service. As I am sure you will know, we actually had a panel of people who themselves had been clients of the Social Fund at different stages, and there does seem to be quite a serious gulf, which is by no means this Government's fault, but a serious gulf between the perceptions of users of the service and the perceptions of almost everybody who is delivering it at different stages. One of the things which worried me most in that was the extent to which when people do get access to a competent specialist advice service, their chances of getting a result are dramatically increased. That comes back to a number of different points which have come at you recently, which is about the quality of staff and the quality of advice. Does it worry you that if people are able to get hold of a CAB adviser their chances of getting a result are exponentially increased? If so, what does it tell us about what we need to do about staffing?
  (Angela Eagle) I think it is an issue which you could extend far beyond the Social Fund in the welfare system.

  416. Indeed.
  (Angela Eagle) We have a complex system, it is a mature system from that point of view, it has got lots of linked benefits and it is very complicated. Some of the answer will lie in the kind of simplifications we have introduced in respect of the budgeting loans system, which is much simpler and easier to use than the old one used to be. However, I think other bits of it rely on us moving away from the unwritten assumption which always used to be the case prior to 1997, that somehow there was perfect knowledge of the benefits system out there which could be assumed on the part of claimants, therefore it was the claimant's job to do all the work within the system to get out of it what their entitlements were. I think we have changed that assumption in introducing personal advisers, in trying to have much more open access to the system, introducing a personal adviser capacity. This is in particular respect to working age people and pensioners at the moment but needs to be extended throughout the system, to get the case and for us to take it round the system and deal with an individual's needs in that way. It takes a long time to change a system which we inherited which was the other way around to that. It does worry me that you have to have a degree in benefit rules in order to access the system. That is a bit of an exaggeration. Our staff do the best they can, I think, but we do need to try to strengthen the ability of the system itself to take up somebody's circumstances and needs and make sure they get access to everything they are entitled to.

  417. I accept all that and I think the whole personal adviser approach is a really good one, but the people we are talking about here are the people for whom everything else has failed, and that is the difference in the system. They hit the Social Fund when everything else has gone pear-shaped. When do you foresee a time when somebody approaching a time of special need or crisis will actually, through the Social Fund, first meet a personal adviser who will help them? At what point can you say these people, the neediest of needy, are going to get their personal advisers?
  (Angela Eagle) I think as personal advisers come into the system more, as the system tries to co-ordinate within itself via the ONE process, via the working age process, any of that, this will increasingly be taken up, but there are no immediate plans to apply personal adviser services to the Social Fund individually and separately from everything else. I think it will come as part of the transformation of the process as a whole.

  418. If that is not on the agenda then at the moment, we are not going to provide a holistic approach to people in this category—
  (Angela Eagle) I hope we are but—

  419. Well, not this year.
  (Angela Eagle) There have been no decisions taken, for example, as to whether the Social Fund sits in the Working Age Agency—how it sits in the transformation and the decoupling in the welfare system of the Pensions Directorate and the Working Age Agency. We are still examining all of that as part of our plans to transform the service in that way. It will happen as the service is transformed, it will not be left out on its own like some sort of left-over.

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