Memorandum submitted by the Scotland Office
INTRODUCTION
1. The Government welcomes the opportunity
to contribute to the Committee's Inquiry into poverty in Scotland.
2. Since 1997, one of the Government's key
objectives has been to achieve high and stable levels of employment
so everyone can share in growing living standards. The aim is
to give everyone, irrespective of where they live, the opportunity
to work and encourage those who are able to work to do so. The
Government believes that helping more people to find work and
reducing the number of workless households is a key element in
reducing poverty during working life for individuals and their
children. Giving people the choice to work up to and beyond State
Pension Age is also providing them with the opportunity to work
and save longer towards a financially secure retirement.
3. The latest statistics showing the Government's
progress in tackling poverty in Scotland are attached at Annex
1. These show that the number of individuals in absolute low income
in Scotland has more than halved and the number of Scottish children
in poverty has fallen by well over 100,000 since 1997.
4. A number of Departments across Government
are responsible for addressing poverty and its impact. Her Majesty's
Revenue & Customs has responsibility for Child Benefit payments
and Tax Credits for families with children. The Department of
Trade & Industry has an interest in helping tackle over-indebtedness.
The Department for Work and Pensions is leading the Government's
efforts to tackle poverty across four key areas:
— The child poverty strategy.
— Improving child support.
— Tackling pensioner poverty.
5. UK Government Departments work closely
with the Scottish Executive, who use their devolved powers to
tackle particular aspects of poverty and social inclusion, through
the Closing the Opportunity Gap initiative. This looks to tackle
the worst effects of low income and disadvantage through a series
of measures which it can directly influence, using its own resources
and efforts to bring about long-lasting changes to people's lives.
The overall aims of CtOG are:
— to prevent individuals or
families falling into poverty;
— to provide routes out of poverty
for individuals and families; and
— to sustain individuals and
families in a lifestyle free from poverty.
WELFARE TO
WORK
6. Over the last 10 years the UK has established
one of the strongest labour markets in the world. There are now
more people in work than ever before and the UK has the best combination
of employment and unemployment of any major economy. The numbers
of people dependant on out-of-work benefits are down by around
one million since 1997, and the number on incapacity benefits
is now falling after decades of strong growth—down by over
25,000 in Scotland since 1997. The employment rate in Scotland
has moved from 2.1% below the GB average in 1997 to around 0.5%
above the average in 2005, with the majority of these new jobs
in the private sector.
7. The launch of the New Deal programmes
in 1997 was the first major step in helping people to move from
dependence on benefits to independence through work. These programmes
have now helped hundreds of thousands of people to move into work.
8. The second stage of reform was the creation
of Jobcentre Plus in 2001, which brought together the Employment
Service and the non-pension parts of the Benefits Agency to create
a single point of delivery for benefits and welfare to work support.
The creation of Jobcentre Plus has enabled the Government to further
extend welfare to work and the New Deal approach to other groups
of benefit claimants apart from just Job Seekers Allowance (JSA)
claimants. For example, the support on offer to lone parents has
been improved through mandatory work-focused interviews, specialist
adviser support and pilots including the Work Search Premium and
In Work Credit.
9. The next stage is to further extend welfare
reform to people who need more help and to support the most disadvantaged
in our communities back into the labour market. This is already
underway. Work-focused interviews for lone parents were extended
by the introduction of quarterly interviews for lone parents with
a youngest child aged 14 or over and strengthened by the introduction
of mandatory action plans in October 2005. The rollout of Pathways
to Work continues, it will be available to around 40% of Incapacity
Benefit claimants by December 2006 and will be extended across
the UK by April 2008. The Jobseekers' Allowance intervention regime
has also been strengthened to ensure that jobseekers do more to
find work, maintaining the record of progress on tackling unemployment.
10. The Government published A new deal
for welfare: Empowering people to work[1]
in January 2006. This set out a range of proposals, many of which
are currently being taken through Parliament as part of the Welfare
Reform Bill.
11. In April 2006 a revised Public Service
Agreement (PSA) target was introduced to increase the employment
rate in the 903 Local Authority Wards with the poorest initial
labour market position, taking into account the economic cycle.
This reflects the fact that policies need to target these smaller
concentrations of worklessness, and that resource needs to be
more efficiently targeted to those areas with greatest need.
12. A need to tackle the problem of these
deprived wards has led to the development of the Government's
Cities Strategy. The aim is to bring together the public, private
and voluntary sectors into a consortium to improve the way support
for individual jobless people (particularly the most disadvantaged)
is co-ordinated and delivered on the ground.
13. Fifteen City Strategy Pathfinders have
been chosen (including Dundee, Edinburgh and Glasgow in Scotland).
The Government is currently working closely with the pathfinder
areas to develop a more detailed understanding of their requests,
to assist them with any further analysis, and to work up more
detailed responses.
14. This approach aligns closely with Workforce
Plus,[2]
the Scottish Executive's employability framework published in
June 2006, which aims for more effective local partnerships pooling
funds to help more people into work.
15. A range of Scottish Executive policies
and funding streams will contribute to the City Strategy: in particular,
Community Planning and the Community Regeneration Fund, Education
and Skills funding, and Working for Families Fund. Scottish Executive
officials are working closely with DWP and the local consortia
in Scotland to ensure that devolved policy areas can contribute
fully at a local level to the Strategy.
16. Within the Pathfinder area each consortium
is currently preparing a business plan and all three areas in
Scotland have indicated that they will be focussing heavily on
"economically inactive" clients, either in receipt of
Income Support or health related benefits such as Incapacity Benefit.
17. The ongoing results of DWP's welfare
to work programmes are published regularly on the Department's
website.[3]
The number of people moving into work through each of the New
Deals in Scotland and the trends in employment and benefit claimants
are shown at Annex 2.
WORKING FOR
FAMILIES
18. The Scottish Executive have allocated
funding of £50 million between 2004-08 to the Working for
Families (WFF) programme. Funding has been allocated to a number
of Scottish local authorities and is aimed at tackling family
and household disadvantage and exclusion. It is based around the
numbers of children in households dependent on key benefits as
childcare is by far the biggest barrier to improving parents'
employability. Parents in three main groups are given targeted
employability support: parents on a low income, lone parents and
parents with other household stresses.
THE CHILD
POVERTY STRATEGY
19. In the mid to late 1990's, the UK suffered
higher child poverty than nearly all other industrialised nations.
Over a period of 20 years, the proportion of children in relative
low-income households had more than doubled, one in five families
had no one in work and one in every three children was living
in poverty.
20. The Prime Minister responded to this
in March 1999 by making a pledge to eradicate child poverty within
a generation. The Government has set challenging targets to reduce
child poverty by a quarter by 2004-05, to halve it by 2010-11
and eradicate it by 2020.
21. Since 2004-05 the Government has measured
progress on child poverty using three indicators: absolute low
income, relative low income and relative low income and material
deprivation combined. The three tiered measure provides the right
balance between clarity and comprehensiveness. This measure was
the result of a year long consultation initiated by the DWP and
has been recognised by UNICEF as transparent, credible and not
too complicated to be useful.
22. Income will be measured using an internationally
recognised equivalence scale which is used alongside income before
housing costs: this is the international norm. The Government
will continue to publish both Before Housing Costs (BHC) and After
Housing Costs (AHC) data, within its Households Below Average
Income (HBAI) series.
23. The material deprivation tier in the
measure is designed to look specifically at living standards and
includes measures of quality of housing; so this tier will capture
directly the impact of housing costs on living standards. The
precise construction of the material deprivation indicator is
currently being analysed and the baseline will be set at a later
date.
24. The Government's strategy for tackling
child poverty is set out in Opportunity for All[4]
and in the July 2004 Child Poverty Review.[5]
The strategy consists of four key elements:
— To provide financial support for
families with more help for those who need it most when they need
it most.
— Provide employment opportunity for
all with work for those who can and support for those who cannot.
— Tackle material deprivation through
promoting financial inclusion and improving housing.
— Deliver excellent public services
to improve children's life chances and break cycles of deprivation.
25. Between 1998-99 and 2004-05 (the latest
data available) the number of children in relative low-income
households has fallen by 700,000 both Before and After Housing
Costs (BHC & AHC) or by 800,000 AHC since 1997.
|
| Comparison of the number of children living in poverty in England, Scotland and Wales on a BHC basis (three-year rolling average)
|
| Country | 1995-96 to 1997-98
| 2002-03 to 2004-05
|
| No.
| % | No.
| % |
|
| England | 2.53m
| 23 | 2.18m
| 20 |
| Scotland | 0.31m
| 28 | 0.22m
| 21 |
| Wales | 0.19m
| 28 | 0.15m
| 23 |
|
26. DWP's work towards the 2010 poverty target is being
revaluated in the light of missing the 2005 child poverty target.
The 2005 target was expected to have been met by both ourselves
and independent academics at the Institute of Fiscal Studies.
The announcement published in March that we had missed this target
means that we have further to go to meet the 2010 halving target.
In Scotland, the Scottish Executive shares the UK Government's
target to eradicate child poverty by 2020. However, Scotland has
significantly exceeded the PSA Target set by the UK Government
of reducing child poverty by a quarter between 1998-99 and 2004-05.
Figures published in March 2006 show that in Scotland 100,000
children have been lifted out of relative low income—a reduction
of 34%.
27. On 27 June 2006, Jim Murphy Minister of State for
Employment and Welfare Reform announced the appointment of Lisa
Harker, former Chair of the Daycare Trust, to review DWP policies
and agencies to see what more can be done to achieve the 2010
target. Ms Harker's report "Delivering on Child Poverty:
what would it take?"[6]
was published in November 2006. It focused in particular on family,
skills and second earners.
28. Ministers have warmly welcomed the Harker report
which is considered a challenging but constructive critique of
DWP current child poverty strategy. The report also provides clear
recommendations for future policy development. The Department
is currently considering Ms Harker's recommendations in detail
to see how it can build on the significant progress already made.
The Department recognises that to sustain progress it needs to:
— continue to help lone parents into work;
— do more to help couple families by looking at
new ways of encouraging potential second earners into work;
— review and refocus the help we offer to partners
of benefit recipients based on the recent evaluation of the WFIP
and NDP;
— continue to ensure that people will be better
off in work than on benefit, and do more to improve skills and
progression in the labour market; and
— do more to help some of the more at risk families
at greater risk of poverty, like those with a disabled parent
or child, larger families from black and ethnic minority groups.
29. The Department of Work & Pension is currently
reviewing its child poverty strategy. The refreshed strategy will
be announced in the New Year.
TAX CREDITS
AND CHILD
BENEFIT
30. Tax Credits and Child Benefit are administered by
HM Revenue & Customs and provide support to low-income households
and many families with children within the UK.
31. Tax Credit aims to tackle poverty by keeping people
in work and supporting families. It provide support to 20 million
people, including six million families and over 10 million children.
In Scotland at December 2006 it provided support for over 400,000
families and nearly 600,000 children. Working parents in receipt
of Working Tax Credit can claim support with the cost of registered
childcare. For those on lower incomes, this can provide assistance
of up to 80% of approved childcare costs, helping parents enter
or sustain employment.
32. Child Benefit is available to anyone bringing up
a child or young person. Take up is estimated at around 98%. In
Scotland, it provides support for 600,000 families and one million
children.
IMPROVING CHILD
SUPPORT
33. Receipt of child maintenance currently helps to lift
around 100,000 children out of poverty. By the end of September
2006, 455,000 cases were in receipt of maintenance, or had a Maintenance
Direct arrangement in place. This equates to over 620,000 children.
The value of maintenance collected by the Agency, or arranged
via Maintenance Direct, totalled £855 million.[7]
34. In the Pre-Budget Report published on 6 December
the Government announced that by the end of 2008 the £10
per week disregard of child maintenance will be extended to all
parents on benefits who receive child maintenance. It is estimated
that around 40,000 parents with care could benefit from this change
and that 15,000 more children will receive the full amount of
maintenance paid by the non-resident parent.
35. On 9 February 2006 the Secretary of State for Work
and Pensions announced an Operational Improvement Plan to improve
the Agency's performance, and a redesign of the child support
system—to be led by Sir David Henshaw.
36. Sir David's report, Recovering child support:
routes to responsibility,[8]
was published on 24 July along with the Government's response
A fresh start: child support redesign—the Government's
response to Sir David Henshaw.[9].
37. The government believes that the approach set out
by Sir David will meet the key objectives set for the child support
system, which are to help tackle child poverty by ensuring that
more parents pay child maintenance, to promote parental responsibility
and to create a simple and transparent system which provides an
efficient and accessible professional service for customers in
the most cost effective way for the taxpayer.
38. Sir David concluded that the current child support
system cannot provide the basis for the radical shift in business
model which is needed to deliver the new system.
39. The Government agrees that there is a need for a
clean break from the past to create a fresh start for child support
arrangements and, as announced in the Queen's Speech, a Child
Support Bill will be introduced to take forward the Government's
proposals for improving the child support policy and delivery
framework.
40. On 13 December the Government published a White Paper
on Child Maintenance A new system of child maintenance.[10]
This paper sets out proposals to establish a new and radically
different organisation to administer child maintenance, underpinned
by an entirely new approach that encourages parents to take responsibility
for supporting their children financially backed up by a tough
enforcement regime for cases where this does not happen.
41. The reforms will help the child maintenance system
to achieve the important objectives of helping to tackle child
poverty, to promote parental responsibility, to provide a cost-effective
and professional service and to be simple and transparent.
42. The Government's key proposals for change are to:
— encourage parents to make their own arrangements
by, improving information and guidance and by removing the requirement
that all parents with care claiming benefit are treated as applying
for child maintenance;
— significantly increase the disregard;
— simplify and streamline the child maintenance
assessment process;
— improve the collection and enforcement processes
sending out a clear signal that non-payment of maintenance will
not be tolerated;
— increase efforts to collect and manage debt;
— establish a new Non Departmental Public Body with
responsibility for all aspects of the new child maintenance system,
including providing parents with information and guidance to help
them make their own arrangements and the calculation, collection
and enforcement of maintenance. The new body will replace the
Child Support Agency. It will be known as the Child Maintenance
and Enforcement Commission; and
— help wider Government policy on supporting families
by moving to a position where both parents names are always registered
on a birth certificate unless it would be unreasonable to do so.
We will only do this once we are sure that effective and robust
safeguards can be put in place to protect the welfare of children
and vulnerable mothers. The Scottish Executive will play an active
role in encouraging parents to jointly register the birth of their
child but do not intend to move from a voluntary system to one
of compulsion.
43. In the meantime the Child Support Agency's Operational
Improvement Plan will continue to focus on improving the Agency
by delivering a more efficient and effective service, with £120
million invested over the three years of the plan. All of this
supplements the Governments determination that parents must fulfil
their responsibility for maintaining their children.
TACKLING PENSIONER
POVERTY
44. The Government is committed to tackling pensioner
poverty. The strategy since 1997 has been to target help on the
poorest pensioners, those who need it most, whilst providing a
solid foundation of support for all.
45. As at May 2006, 282,420 people in Scotland were receiving
Pension Credit and in 2005-06 1,014,310 Winter Fuel Payments were
paid in Scotland. Figures to show the level of Pensioner Poverty
in Scotland and compared to other regions are shown in Annex 3. They
show that Scotland has the equal lowest rate of low-income for
pensioners compared to other regions.
46. There is no "official" measure of pensioner
poverty. The most commonly used measure for low-income is people
in households below 60% of median equivalised income. The amount
of income needed to keep a family above this low-income line depends
on the household, but for a single person this equates to £100
after housing costs and for a couple £183. This measure
is commonly used by international bodies such as EU institutions
and OECD.
47. The Government usually uses the relative low-income
measure after housing costs because relative low income shows
whether poorer pensioners are getting better off in comparison
with the rest of the population. After Housing Costs is better
for pensioners because their housing costs are more likely to
be fixed and they are increasingly likely to own their own homes.
48. The Government's first priority in 1997 was to tackle
the iniquitous system which saw pensioners having to live on £69
a week. The first stage to tackling this was to introduce the
Minimum Income Guarantee, which helped around two million of the
poorest pensioners.
49. Pension Credit replaced the Minimum Income Guarantee
in October 2003 and it is making a difference to the incomes of
thousands of older people by targeting money to today's poorest
pensioners. The poorest third of pensioners gain two-and a half-times
as much as if the same resources simply had been spent on a higher
basic state pension for all.
50. Pension Credit means that no one aged 60 or over
need live on an income of less than £114.05 a week (£174.05
for couples). People may be entitled to a higher guarantee level
if they are severely disabled, have caring responsibilities or
relevant housing costs.
51. For the first time, Pension Credit provides more
money to people aged 65 and over who have made modest provision
for their retirement, through savings or a second pension, for
example. The savings credit can provide up to an extra £17.88
a week for single pensioners (£23.58 for couples). Because
of this extra money, Pension Credit means that those who have
saved above the savings credit threshold will be better off for
having saved.
52. There are over 3.3 million individuals (2.7 million
households) in Great Britain now receiving Pension Credit with
an average weekly award of £46.75. (May 2006 figures)
53. The Pension Service has a network of pension centres
across England, Scotland and Wales, providing a primarily telephone
based service, In addition a local service, working closely with
local partners, offers a range of services tailored to pension
customers' needs. The Pension Service also provides an alternative
local service visit for customers who are unable to use the phone.
54. Pensioners have also benefited from a number of policies
over the last eight years:
— Above inflation increases in basic State Pension
in 2001, 2002 and 2003.
— Winter Fuel Payments: worth £200 per household
for those aged 60 to79 and £300 per household for those aged
80 or over.
— Free TV licences for around 3.5 million households
with someone aged 75 or over.
— Free eye tests were restored for all pensioners
in April 1999.
— The Warm Front Scheme in England provides for
£300 million over three years to enable pensioners on Pension
Credit to have central heating systems installed free of charge,
and to provide a £300 discount on all central heating systems
to all other pensioners who do not already have one. Its equivalent
in Scotland—Home Heat and Central Heating Programme—helped
almost 30,000 households in 2005-06.
— The "national concessionary travel scheme"
which has provided free bus travel throughout Scotland for older
and disabled people since April 2006.
— Free Personal Care introduced by the Scottish
Executive in 2002
55. These measures have combined to reduce pensioner
poverty. Between 1996/97 and 2004-05 number of pensioners in relative
low income, measured after housing costs (AHC), have fallen by
over a third from 2.8 million to 1.8 million (a fall from 28%
to 17% of pensioners). The number in absolute low income, measured
after housing costs, have fallen by two-thirds—2.8 million
to 0.7 million—down from 28% to 7%.
56. For the first time in a period of sustained growth,
pensioners are no more likely to be living in poverty than a person
of working age (after housing costs). On average a pensioner household
is £1,400 a year better off in 2006-07 because of tax and
benefit changes than under the 1997 system. Those in the poorest
third of households are £2,000 a year better off.
57. We have now turned our attention to a pensions solution
for the next generation of pensioners while at the same time,
we will continue to protect the poorest pensioners from poverty,
and ensure that all pensioners share in the growing wealth of
society. The Pensions Bill introduced in Parliament on 6 December,[11]
sets out the Government's proposals for an affordable and sustainable
pensions system which meets the needs of generations to come and
encourages people to save for their retirement.
58. The reforms model a pension solution for the next
generation of pensioners to meet the demographic challenges of
the 21 century. This follows the thrust of the Pensions Commission's
findings—that there is no current pensions crisis.
59. Proposals in the Bill will:
— make it easier for more people to save more for
their retirement. Long term reform to State Second Pension and
auto-enrolment in personal accounts will help low earners build
up better pensions in their own right.
— make state pensions simpler and more generous,
ensuring pensioners share in the rising national prosperity and
providing a solid foundation for additional saving;
— make the State Pension fairer and more widely
available;
— support and encourage extended working lives;
and
— streamline the regulatory environment for private
pensions.
60. For today's pensioners, the reform package delivers:
— Uprating of the Pension Credit guarantee credit
by earnings from 2008- securing all pensioners against poverty.
— Reforms to basic state pension coverage to accelerate
improvements in women's entitlement—the proportion of women
reaching State Pension age with full BSP increases from around
half in 2010 under the current system, to around three quarters
when qualifying years are reduced to 30.
— Earnings uprating of the basic state pension from
2012 or by the end of the next Parliament at the latest, subject
to affordability and the fiscal position, which will benefit many
of today's pensioners later on in their retirement. Over 11 million
pensioners will gain from our commitment to uprate the basic state
pension in line with earnings growth.
TACKLING FUEL
POVERTY
62. The UK Government is working with the devolved administrations
to tackle fuel poverty, defined as where a household has to spend
more than 10% of its income on fuel to maintain an adequate standard
of warmth. Recent rises in energy prices pose challenges in this
area. However, the Government remains committed to working with
stakeholders.
63. In Scotland fuel poverty more than halved between
1996 and 2002, down from 738,000 households to 286,000 households
although indications are that rising energy prices are creating
a slight rise in that number.
64. The Scottish Executive is working to ensure that
all social sector housing in Scotland is required to meet the
Scottish Housing Quality Standard which included effective insulation
and central heating by 2015.
WINTER FUEL
PAYMENTS
65. This Government introduced Winter Fuel Payments in
the winter of 1997-98 to provide help to pensioner households
towards their heaviest winter fuel bill. The majority of payments
were made to people over state pension age who were in receipt
of one of the qualifying benefits—principally Retirement
Pension. Payments were also made to people getting a pensioner
premium—payable from age 60—with their Income Support
or income-based Jobseeker's Allowance. Winter Fuel Payments are
not taxable.
66. Around 1 million people aged 60 or over in over 700,000
households in Scotland benefit from Winter Fuel Payments.
HOUSING AND
COUNCIL TAX
BENEFIT
67. Housing Benefit is important in helping people with
low incomes to pay for rented accommodation whether they are in
or out of work. In Scotland just under 0.5 million people receive
benefit and just over 50% of claimants are local authority tenants.
68. The Government has embarked on a programme of reform
of housing benefit, the central element of which is the introduction
of a Local Housing Allowance (LHA). The LHA is being tested in
eighteen local authorities—Pathfinder Authorities—across
the country. Two are in Scotland, in Edinburgh and Argyll &
Bute.
69. The fundamental aims of the LHA scheme are to promote:
— Fairness: LHA bases the maximum amount paid to
tenants on the size, composition and location of the household.
Therefore, two households in similar circumstances in the same
area will be entitled to similar amount of benefits.
— Choice: tenants are able to take on greater responsibility
and choose how to spend their income in a similar way to tenants
who are not in receipt of benefits. Like other tenants they are
able to choose whether to rent a larger property, or spend less
on housing and increase their available income.
— Transparency: The current link between Housing
Benefit and individual rents is complex and does not set out clearly
what level of state support is available for people on low incomes.
A clear and transparent set of allowance rates helps tenants (and
landlords) know how much financial help is available from the
state. Tenants are able to compare how much support is available
towards their housing costs in different areas and for different
property sizes.
— Personal responsibility: Empowering people to
budget for and to pay their rent themselves, rather than having
it paid for them, helps develop the skills unemployed tenants
will need as they move back into work. Currently around 40% of
Housing Benefit payments in the private rented sector are made
to tenants, with the remainder paid straight to landlords. The
Government believes that, where possible, local housing allowance
should be paid to tenants, as are most other benefits and tax
credits.
— Financial inclusion—Ideally, people should
have their housing payments paid into a bank account and set up
a standing order to pay the rent to their landlord. This has the
advantage of being a safe and secure method of payment and provides
certainty for landlords that rent will be paid.
— Improved administration and reduced barriers to
work—For working age tenants, LHA provides a greater certainty
about what help is available in and out of work. A simpler system
also helps speed up administration of housing payments, giving
tenants more confidence when starting a job that any in-work benefit
will be paid quickly. A more transparent system may also improve
the ability of individuals to move between areas and to take advantage
of employment opportunities.
70. Council Tax Benefit is available to those on low
incomes who are liable for council tax. Around one quarter of
Scottish households receive this benefit, 78% of whom receive
100% of their council tax bill. Over half of all council tax benefit
recipients are pensioner households. Average council tax increases
in Scotland have been below 5% in each year since 1999-2000.
TACKLING OVERINDEBTEDNESS
& FINANCIAL INCLUSION
71. The UK Government is well aware that for many low
income households access to mainstream financial services which
includes affordable credit and debt advice can be limited. The
UK Government's strategy for financial inclusion has focussed
on three priority areas:
— Access to affordable credit;
— Access to face to face money advice.
72. The Scottish Executive through its Financial Inclusion
Action Plan has provided funding of over £10.6 million to
the 11 most financially excluded local authorities in Scotland.
The plan also encourages the growth of Credit Unions as well as
promoting financial capability to help people to manage their
finances better.
73. This action plan sends a clear message that credit
unions have a role to play in tackling financial exclusion. Credit
Unions provide personal financial services to their members- principally
access to low cost flexible loans and secure savings. There are
currently 131 credit unions across Scotland and, as at February
2006, 179,000 adults are now members, with total assets of the
country's 131 unions standing at a record £185 million.
ILLEGAL MONEY
LENDING LOAN
SHARKS
74. The Illegal Money Lending pilot was set up in response
to the 2001 Labour election manifesto commitment to tackle illegal
money lending. Under the pilot, DTI is funding two better resourced
and dedicated teams specifically investigating offences of illegal
money lending. The teams are based in the Trading Standards Departments
of Glasgow and Birmingham. The pilot was launched in autumn 2004
and is funded until March 2007.
75. Since inception the Scottish Illegal Money Lending
Unit (based in Glasgow) has opened 115 cases. The Unit has reported
10 cases involving 18 individuals to the Procurator Fiscal and
a total of 22 warrants have been executed. Two cases have been
brought to court in Scotland and further cases are being prepared
involving 12 individuals.
76. The Glasgow team's most successful prosecution was
in August 2006. Following a tip-off to the Loan Shark Hotline
and a three-month undercover operation, the defendant was sentenced
to 10 months in prison and restraining orders were placed on around
£150k worth of assets. He operated his business from within
the Argosy Bar, Paisley Road West Glasgow and targeted those on
benefits, single mothers and alcoholics over a 20-year period.
The typical loan amount was £50. He charged interest
at the rate of 25% per week, which equates to an APR of 11 million%.
He had around 30 clients at the time that the Unit carried out
their investigation.
77. The pilot has had a clear impact in identifying cases
of illegal money lending, instituting proceedings against illegal
money lenders, and securing prosecutions (with others expected
to follow). Where illegal money lenders have been removed, the
unit has worked to replace the money lender with appropriate money
advice and signposting to other sources of credit. This has had
an impact on the quality of life of the victims and in some cases
on the entire community in which the lender operated.
78. The information available from the pilots has been
supplemented by research commissioned by DTI. The aim of the research
was to map the scope and extent of illegal money lending nationally,
to classify the different types of illegal money lenders and their
impact, and to identify the drivers behind illegal money lenders.
The research has drawn on the findings of the pilot teams, as
well as other sources, and will help to inform policy decisions
about the future of the project.
79. DTI has commissioned research to map scope and extent
of illegal. money lending in the UK and to examine some of
the drivers behind the use of illegal lenders. It draws on the
findings of the pilot teams, as well as other sources, and will
help to inform policy decisions about the future of the project
and related issues.
DEBT
80. The National Debtline (NDL) is a national telephone
helpline for people with debt problems in England, Wales and Scotland.
The service is free, confidential and independent. National Debtline
is now part of the Money Advice Trust, a registered charity.
81. The Scottish Executive currently provides £100,000
per annum to the Helpline (this is the second year of a three
year funding agreement.) Around 6% of National Debtline clients
come from Scotland. The Money Advice Trust also runs a Business
Debtline which was launched in Scotland at the beginning of 2006.
82. Citizens Advice Scotland is provided with funding
by the Department of Trade and Industry and the Scottish Executive
to assist people with queries relating to benefits and debt. In
2005-06, 17% of their enquiries to bureaux were about handling
debt. There are 60 Citizens Advice bureaux across Scotland, with
76 offices and 146 service centres.
Scotland Office
January 2007
1
http://www.dwp.gov.uk/welfarereform/legislation_green_paper.asp Back
2
http://www.scotland.gov.uk/Publications/2006/06/12094904/0 Back
3
www.dwp.gov.uk/resourcecentre/research_analysis_stats.asp Back
4
http://www.dwp.gov.uk/ofa/background/ Back
5
http://www.hm-treasury.gov.uk/spending_review/spend_sr04/associated_documents/spending_sr04_childpoverty.cfm Back
6
http://www.dwp.gov.uk/publications/dwp/2006/harker/ Back
7
Latest data: http://www.dwp.gov.uk/asd/asd1/child_support/csa_quarterly_sep06.asp Back
8
http://www.dwp.gov.uk/childsupport/henshaw_report.asp Back
9
http://www.dwp.gov.uk/childsupport/gov_response.asp Back
10
http://www.dwp.gov.uk/childmaintenance/ Back
11
http://www.dwp.gov.uk/pensionsreform/towards.asp Back
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