Examination of Witnesses (Questions 896-899)
MR JAMES
PLASKITT
22 MAY 2006
Q896 Chairman: Minister, good afternoon
and welcome to the Committee. You are familiar with our Committee.
We have become highly civilised since your departure. Can I start
by referring to your speech to the financial inclusion task force
conference when you said that, with regard to promoting financial
inclusion, the government "can certainly get more out of
the opportunity which is created each time someone comes into
contact with the welfare state." What do you mean by this
and what action do you intend to undertake?
Mr Plaskitt: What I meant by that
is that our view is that too much of the welfare state has what
I call a passive relationship with our clients. That is to say,
they will engage with us. We will in a variety of ways support
people through the welfare system, perhaps deal with a crisis
or a difficult period in their lives and give some financial support,
perhaps in the form of cash or a benefit, but my own view is that
the welfare state is not particularly good at going beyond that
and asking questions about the circumstances that led someone
to find themselves in that situation. Once they are engaged with
us, I am posing the question what more can we do to help deal
with the circumstances that gave rise to the problem or the difficulty
that brought that person forward to engage with us in one way
or another. The second part of your question was what are we doing
about it. It may be helpful if I just very quickly list the five
main things that my department is doing to try and turn that programme
into reality. First of all, we have the growth fund. £36
million is behind that. This is to extend affordable credit. We
are contracting with 90 providers to provide those services. The
first payments will be made next month and we are confident that
through that we can look to about 100,000 more affordable loans
being made available. Secondly, we have the social fund. I think
you will be aware that the government has substantially increased
the funding for the social fund by £210 million. We have
reformed the budget loan scheme to make it easier and simpler.
I am interested in longer term reform of the social fund precisely
to develop the thought I have just expressed about making it engage
better. I had a meeting in January with major stakeholders and
next month I am meeting the credit unions to have a discussion
with them about how we might do longer term reform of the social
fund to engage better with our customers. Thirdly, we have the
affordable credit deduction scheme. This will allow responsible
lenders to recover credit where payment has fallen into arrears.
20 lenders are in discussion with us about this. They represent
credit unions and community development financial institutions.
The first arrangements on that will be in place by the end of
this year. Fourthly, we are reforming housing benefit, a very
large benefit. Many people engage with us there. When the Bill
comes before Parliament we will introduce the local housing allowance
and we have seen from the pilot that the local housing allowance
greatly facilitates financial inclusion amongst our customers.
Fifthly and finally, the Post Office Card Account. You will know
that for those who only hold the Post Office Card Account they
are financially excluded. That is not just my view but the view
of many witnesses who have been before your Committee. We have
been working with the Post Office over the last two years on how
we might deliver on our contractual undertaking that both of us
have to migrate people to accounts with more functions. Both my
department and the Post Office are piloting migration programmes.
New products are coming into place and we anticipate there being
a successor account to the Post Office Card Account. Our objective
here is to get a smooth transition by 2010 and there is an opportunity
here to help around a million people become financially included.
Q897 Kerry McCarthy: With the growth
fund, did you say 90 financial institutions have signed up to
deliver it?
Mr Plaskitt: Yes.
Q898 Kerry McCarthy: What is the
geographical spread that you expect of this money going out to
deprived areas?
Mr Plaskitt: We want the widest
possible spread on this. Of the 90 organisations we anticipate
doing contracts with, they cover almost all the main urban areas
and many of them also cover rural areas, so I think the geographical
footprint is going to be pretty extensive.
Q899 Kerry McCarthy: You are expecting
the contracts to be signed next month?
Mr Plaskitt: Our panel that does
these contracts meets later this week and will sign up the first
ones. We expect the first loans to be made very shortly, yes.
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