Examination of Witnesses (Questions 900
- 920)
TUESDAY 27 NOVEMBER 2007
CAROLINE FLINT
MP, MR JONATHAN
PORTES, RT
HON JANE
KENNEDY MP AND
MR JONATHAN
ATHOW
Q900 Mr Devine:
How do you feel your relationship is with the Scottish Executive
or the Scottish Government and the Scottish administration, however
you want to describe it?
Jane Kennedy: I said earlier that,
to the best of my knowledge, we have a good working relationship.
The change of administration has not affected that. At official
level, there is a lot of very good, sensible work being done,
a lot of good policy development and a lot of sharing of information
and ideas to make sure that different policy initiatives do not
work against each other. To the best of my information, we have
a good working relationship.
Q901 Mr Devine:
The Joint Ministerial Council has poverty on the agenda?
Jane Kennedy: Yes. I do not think
it has met. We have a problem in that it has not met very often,
but I welcome the Scottish Executive's suggestion that it should
meet. Clearly it will be an item on the agenda.
Caroline Flint: We have a concordat
between the DWP and the Scottish Executive which basically sets
out the ground rules, if you like, for managing relationships
in terms of consultation, information, finance, access to services
and so forth. I have had a bilateral myself with one of the Scottish
ministers covering my area. In fact, I think she met with a number
of other government departments while she was in London and, with
the use of video conference, devolved administrations and ourselves
had a meeting around the establishment and the remit for the Employment
and Skills Commission. Some of it is that there is obviously a
lot of active stuff that goes on between officials across departments,
which is obviously important because that is part of working out
the detail. One of the issues is about the joint council and the
liaison arrangements, having a look at that as to how we take
that forward, because obviously it is not just Scotland. There
is Wales and Northern Ireland. I do not think there is a point
frankly in having just meetings for meetings' sake, but clearly
maybe something that helps us forward. One of the things we are
engaging with the Scottish Executive at the moment is we have
obviously established the Child Poverty Unit with officials from
the DWP and the Department of Children, Schools and Families.
Again, within that, we need to think about how we liaise with
colleagues in the devolved administrations. Overall, as you pointed
out today, what is happening on a UK-wide basis with something
like our child poverty targets, again sometimes it is also about
being able to pick up the phone and talk to each other and have
that more informal relationship which is important in all of this
too.
Q902 Mr Devine:
Was the concordat drawn up with your Department?
Caroline Flint: It was drawn up
in 2004. I just have here between ourselves and the Scottish Executive
so I cannot—
Mr Portes: Other departments have
their own.
Q903 Mr Devine:
Can we have a copy?
Caroline Flint: I am sure we can
provide a copy. I think when I was in the Department of Health
as a Health Minister we had one there as well, but I am happy
to send you one for the DWP.
Q904 Mr Devine:
Do you think the balance is right between the devolved and reserved
powers in tackling poverty?
Caroline Flint: Yes. Obviously,
in terms of our Department, there are some discussions around
employment and skills and how they are aligned and should employment
be devolved. Unfortunately, there is never going to be a perfect
system in all of this. We have moved from an era when, in my lifetime
I can remember it, the benefit service was over here and employment
was over there. We have brought those together—Jane was
part of that because she used to do this job—so that people
do not feel that their benefits are talked about in total isolation
from their ability to find work and stay in work. Having brought
those together, I think that is why there is still a need for
a UK-wide focus but, as I said earlier on, what we are looking
at in the DWP is, whilst we feel we should still hold the overall
reins, what more we can give in flexibility to sort out the problems
at a more local level. I have to say some of that is not necessarily
at national; it is much more local than national.
Q905 Ms Clark:
I have a couple of questions that have been put to us by various
organisations that we have met that are quite specific. Why should
not second and subsequent children receive the same level of child
benefit as the first child? The second issue is lone parent benefit,
to a great extent from working tax credit and couple families.
Should not working tax credit be increased for couple families?
Do you think that should be looked at again?
Jane Kennedy: We do recognise
the greater risk of poverty for children in larger families. We
accept that there is a risk. We estimate that the risk of child
poverty is 19% of one child families, 18% of two child families
and 26% of three child families and 40% of four child families.
The risk of poverty for families with four or more children has
fallen the most quickly of any of those groups, by 30% since 1997
compared to the risk for all children which fell by 18%. When
we committed in 2004 to the Child Poverty Review, we undertook
that we would look to improve this position further. It is possible
to say now that the risk of poverty has fallen most quickly for
large families, largely due to the increasing generosity of the
per child element of child tax credit. I know that there are representations
being made. We keep all of these matters under review. I know
that is a stock phrase but it is nonetheless true.
Q906 Ms Clark:
The other issue was about working tax credit. What we have been
told is that lone parents benefit to a far greater extent as a
result of working tax credit and it has been suggested to us that
working tax credit should be increased for couple families.
Jane Kennedy: Again, I am aware
of those representations. I am looking at all of the policies
as they relate to tax credits. At the moment, tax credits do treat
couple and lone parent households equally rather than favouring
any one arrangement. The levels of financial support that the
household gets are determined upon the need of that particular
household, based on the number of children and the overall household
income. Children of lone parents are twice as likely to be in
poverty as those in couples. That is a fact that we cannot get
away from. Children in lone parent families continue to have a
35% higher risk of poverty than those in couples, which we estimate
is about 18%. There are reasons why the support is targeted in
the way that it is. Those reasons are very sound reasons. I am
aware that there are representations being made. We have about
six million families who receive tax credits. Of those, 3.6 million
couples receive working tax credit and child tax credit and 3.5
million couples with children receive child tax credit as well.
Most recipients of tax credits are actually couples. In terms
of expenditure, lone parents account for about 54% of expenditure
overall. In terms of the range of support that is available, you
can see that the heaviest focus is upon those that we perceive
to be at the greatest risk of poverty.
Q907 Ms Clark:
The evidence we have heard is that that policy has been very successful
and that lone parent families have benefited greatly as a result
of that policy. The organisations that we have taken evidence
from have been very fair in saying that but then what they have
gone on to say is that the group now—because it is not being
targeted, if you like—that they feel is losing out compared
with other groups is couple families. I just wonder if that is
maybe something that could be fed into the process and looked
at again.
Caroline Flint: Not on the tax
credit side but just maybe on the employment side, one of the
things we are working on is where we identify low income families
where there could be one person working. What could we do to support
the other partner into possibly work to help boost the family
income, because that is the other factor. It is not necessarily
just an issue around the tax credits; it is also about where the
partner is working as well. For example, in a number of ways through
the service, we offer opportunities for partners to come in and
talk about their own needs in terms of both basic skills but also
finding work and child care for them as well. I think that has
become more of a feature and will become more of a feature in
terms of some of our engagement support. The other thing we also
are embarking on, which I am pleased to see is happening—sometimes
when we talk about children it is usually just in relation to
lone parents. The fact is there are a lot of our claimants who
are in partner couple who have children as well. We are looking,
as part of our initial conversations with new claimants, particularly
on JSA—it seems ridiculous we do not, but to make it much
more the rule rather than the exception that we should ask about
their child care needs as well because again for that family,
even if there is a couple family and it is the man who is seeking
work, the child care could be as important to them for sustainability
as for a lone parent.
Q908 Mr Devine:
One of the things that is striking in the evidence we have taken
is that literally every group we have met has said effectively
there is a difference in rural poverty compared to urban poverty.
Do you agree with that? Is the government focusing and does it
have different strategies for rural communities and for urban
communities?
Caroline Flint: Logistically it
presents some challenges. In terms of the overall look in terms
of levels of poverty, the indications would sometimes show that
the levels are not as high or as intense in some of our more urban
communities, but that does not mean that there is not often hidden
poverty in rural areas, masked by people who have second homes
or have sufficient resources to themselves and their families.
From a delivery side of it, it is how can we deliver because obviously
establishing offices everywhere with the small numbers involved
is not necessarily a very clever option. Obviously the opportunity
to do interviews by phone is an important part of this. Again,
that helps people to have contact without having to go somewhere.
We also look at refunding travel costs if a customer attends the
office for any face to face interview. Again, I think that is
about theology. If someone has no money or is short of money,
we can make an arrangement with local bus companies where a Job
centre Plus office can issue a bus warrant and then cover those
bills for someone because obviously, even in the brave new world
of online and phone, people sometimes do need that face to face
interview. We also put some of our facilities in community points,
so the job contact points can be put in a library. It could be
in a local authority office and so on, again thinking about how
we could do that. We also have for the Pension Service a service
that operates throughout Scotland which offers a home visiting
service for customers as well as having these information points,
as I mentioned before, on anything to do with pensions for pensioners
in local libraries and community centres. We are trying to be
as flexible as possible. Again, going back to what I said earlier,
the partnerships with local authorities and community organisations
is really important to this as well because actually it sometimes
serves some of those other organisations who have to deal with
exactly the same challenge. If we can share premises or share
information so we can all help each other with each other's job,
that is obviously helpful in this. That is how we are trying to
look in terms of the service delivery side of it. The other side
of it of course is how do we look at the challenge of employment
creation in some of our more rural communities. That is where
I think the partnership and a more local look is really important.
It is interesting, just for information. I was at an event with
an organisation we have done some work with and we were talking
about a project. I think BT is involved, where they were talking
about down the road, where a lot of jobs that involve being on
the phone and having a computer in front of you, whether it is
in rural or whether it is in urban, companies potentially putting
the actual IT in someone's home and in the 21st century that person
being able to work from home could be one of the ways that we
can address not only rural challenges but child care challenges
as well for people. The other plus point of that was that actually,
once the equipment is there, that family could use the IT for
their own needs in terms of education and access to online services
which we know for some people in low income families, as we have
more and more websites, can be an exclusive issue for those families
without that sort of equipment. Again, thinking through some of
those issues about the jobs for the future and where they might
be and how IT could help us with that is possibly one of the issues
that rural communities could look at as well as urban communities.
Q909 Mr Devine:
In England you have the Commission for Rural Communities. We do
not in Scotland. Does it work and would it be something you would
see being rolled out in Scotland, Northern Ireland and Wales?
Jane Kennedy: The Commission for
Rural England do you mean?
Caroline Flint: No, it is not,
is it? The Commission for the Protection of Rural England?
Q910 Mr Devine:
The Commission for Rural Communities.
Caroline Flint: In terms of my
experience within the Department of Health, if I remember correctly,
part of the work of the Commission was to ask government departments
to look at where their policies were impacting in terms of rural
proofing. I think that has been helpful. In terms of our own Department,
we obviously look all the time at this sort of issue around the
impact of our policies and what effect they might have disproportionately
on a more rural area. I would have to write to you on that. I
cannot speak for the whole of other government departments on
that particular issue. I think part of whether you have a commission
or not is just recognising that the people we serve come in all
sorts of shapes and sizes in terms of their families. They live
in all sorts of different communities and I think sensitivity
to that is very important.
Q911 Chairman:
Some of the witnesses believe that if we have a Commission for
Rural Communities then at least we will have a powerful voice
for the rural communities in Scotland, like in England. They suggest
that we should have a Commission for Rural Communities in Scotland.
We are just asking for your view. Would you support this proposal?
Jane Kennedy: Frankly, sitting
here today, I do not have a view but it is something that obviously
the government will want to consider if that is one of the findings
of the Committee. I hate the phrase and I always try to find a
different phrase. We do work hard in government to overcome departmental
barriers. We work hard to achieve shared objectives. There is
a very genuine recognition that rural communities have greater
barriers to overcome. We have about 23% of all rural children
in the whole of the UK in low income households. We acknowledge
that there is a problem. From my limited knowledge of Scotland,
I know that simply having the transport strategy does not necessarily
mean that people in the most outlying neighbourhoods can access
the services more easily. There is a very deep, genuine commitment
to working together to overcome that. Some of that will have to
be done with the Scottish Executive. At the same time, tax credit
for example is largely delivered by mail and telephone services
throughout the whole of the country and we will continue with
that.
Q912 Ms Clark:
You are probably aware that there is a call for a fuel poverty
action plan to be drawn up. Has the government drawn up a fuel
poverty action plan? If so, could this be joined up with other
energy efficiency policies which have recently been announced
as part of the government's climate change initiative?
Jane Kennedy: Fuel poverty is
a priority. We have been working with the devolved administrations,
with the Scottish Executive, who have set challenging targets.
We remain committed to achieving those targets. Across the UK
we have seen substantial reductions in fuel poverty since 1996,
about 3.6 million households removed from fuel poverty. There
has been a huge amount of work but we recognise that there is
more to do. We have increased benefits to support those on low
income, who are at the greatest risk of fuel poverty, including
the introduction of pension credit and tax credits, which clearly
help families in those groups. We have improved benefit take-up.
The poorest third of households would be on average £2,200
a year or £42 a week better off this year, 2007-08, than
they would have been if the 1997 tax and benefits system was unchanged.
We are conscious of it. We are working to it. I cannot say that
we have a particular plan that I can point to but there is a huge
amount of work going on across government to counter the effects
of fuel poverty.
Q913 Ms Clark:
It is quite likely we are going to see increases in electricity
and gas prices over the next year. Is that something that you
are beginning to think about in government in terms of what assistance
can be provided to people in poverty to cope with those price
increases?
Jane Kennedy: Obviously all of
those issues are matters of concern that we keep under review.
We have the winter fuel grants that I think have gone out this
month which are a very big factor, particularly for the elderly.
As I approach 50, I think 60 is not that old. Those policies are
in place. They will continue and we review the level at which
we make those payments all the time.
Caroline Flint: It is a bit like
the rural issue. Fuel poverty is a devolved issue. Clearly and
quite rightly, these are issues that apart from obviously the
winter fuel payments that we do, the added value is at the more
local level. Insulating homes and what have you is really key
to that because just paying for in the long term money to disappear
outside of people's homes because they are not well insulated
is not the sustainable policy, is it, that we are all working
for? Measures on that front—insulation is really key to
this—I would imagine in Scotland just as it is in England.
Q914 Mr Devine:
One of the things the Scottish Executive is doing is, for pensioners,
they are condemning heating systems and replacing them. Has any
thought been given to that?
Jane Kennedy: There is the Warm
Front Scheme that has helped a lot of my constituents in precisely
those circumstances. That will continue into the future. As far
as the winter fuel payment and concerns around increasing fuel
prices, bear in mind that it is now £200 for households for
somebody aged 60 to 79 and £300 for households with someone
aged 80 or over. That has increased significantly from 1979 when
it was £20. Although fuel prices do fluctuate from year to
year, a market in energy prices—not everybody might agree
with this—does help to keep prices lower. Since 1997, average
pension incomes, we have to bear in mind, have steadily increased,
29% in real terms compared to increases in fuel bills of about
15% between 1996-97 and 2006. We do not simply set the figure
and walk away. We keep it under close review.
Q915 Chairman:
Irresponsible and illegal money lending is a major contributory
factor towards poverty. The Citizens' Advice Bureau told us that
one in five cases they are dealing with are directly related to
debt. Over the last ten years, they say this figure has increased
considerably. How would you tackle that?
Caroline Flint: The DTI, as you
may be aware, funded pilots in Glasgow and Birmingham to crack
down on illegal money lenders. My understanding is that it was
a great success. In fact, it is so successful it is going to be
rolled out nation wide. What they did was identify, in the first
pilot, 250 loan sharks. As a result, they assisted nearly 2,000
victims to save an estimated £3.3 million in payments. They
recovered also two million of assets. The icing on the cake is
court cases resulted in prison sentences totalling more than 15
years as well as 230 hours of community service. Those pilots
and the fact that they are going nationwide indicates that one
part of this is how we tackle those people who basically are criminals
in one form or another, who prey on vulnerable people in communities
and, by doing so, ratchet up the repayment rates. The other side
of it is through things like the growth fund, how we support the
credit unions to be part of that responsible and safe service
for people for whom savings or bank accounts might not be part
of the way they live their lives. Part of it again is what we
have been looking at, the financial inclusion agenda, how we can
also within the culture of benefits encourage people to actually
take more responsibility for their finances. One of the areas
we are looking at is actually being tested in Edinburgh, Argyle
and Bute as well as other parts of the UK. For example, local
housing allowances, where we are looking at actually giving to
people in the private rented sector the actual allowance for their
housing, which is about getting them to engage that this is a
sum of money and they then have a relationship with the landlord.
Again, it is trying to think of ways about how we develop the
financial responsibilities of families who often maybe never see
much money because a lot of things are paid off elsewhere on their
behalf or by agencies, provide the sort of support in the form
of credit unions, but I have to say—I hope we are in agreement
on this—in the private, commercial financial sector, how
they could play a role as well with people on low incomes to encourage
them to have bank accounts and what have you. It is very interesting.
One of the first questions I asked when I came into this job and
was quite surprised at was the numbers of people who we pay into
bank accounts. I do not have the exact figure in my head but I
will provide it for you. It is actually very high, much higher
than I thought, to be honest. That shows, on the one hand, many
of the people who are either on pensions, low income or benefits
have a bank account. That does not mean that if they have a bank
account they are not still prey to loan sharks and others who
will then provide them with maybe some up front money but for
whom the consequences are pretty dire when they come back to try
and get their repayments.
Chairman: I am glad that you are aware
of this subject. You have answered my next two questions. We are
talking about illegal money lending. That is a huge problem. People
pay up to 200, 300 or 500% and end up losing their homes, all
their belongings, everything they have made in their lives, to
these unscrupulous money lenders. Jane, we are not talking here
about only illegal money lenders. I think the legal money lenders
are making people's lives a misery as well. Nobody can believe
that other constituents and people in the United Kingdom will
be paying 20, 25, 30, up to 40 or 50% interest rates to the banks
and building societies, who are defaulting or who do not have
secure loans. There must be some regulation over these banks when
they have a base rate of less than 6%. How can these banks be
allowed to charge up to 40 or 50%? There must be some way out.
Mr Devine: One of the big concerns about
the Farepak campaign was that Provident was targeting people who
had done Farepak in various parts of the country and they were
charging 177%. That is just a licence to print money.
Chairman: And make misery for people.
Q916 Mr Devine:
Absolutely. Should we not be looking at some way of introducing
a limit on interest rates, whether it is banks, companies or whatever?
Jane Kennedy: It is interesting
you mention Farepak because I came here from a meeting with representatives
of the Save the Children fund who mentioned Farepak as an example
of families who are in receipt of very low income and yet all
year round were extremely careful and managed that income and
trusted a company like Farepak to enable them to enjoy a better
Christmas than they would otherwise have done if they had not
budgeted all year round and paid a small amount of their small
income every week in order to build up that deposit with Farepak.
We are aware of the concerns that you are raising. The Financial
Services Authority is looking at the experiences of customers
in precisely the circumstances that you are outlining. They are
conducting a review of the effectiveness of the mortgage regime,
particularly in this sub-prime market which is the one which has
caused concerns in the United States and has had an impact here
through the Northern Rock Building Society. They are going to
be reporting on their findings next year and obviously we want
to wait to hear what they have to say, but we are aware of the
issue. There is a review into it and obviously you will be as
interested as I am to hear what that review says.
Q917 Chairman:
These are vulnerable people who are in desperate need for £400
or £500. I can quote you many examples from my constituents
in Glasgow where they borrowed £500 and in two years they
paid more than double and still their debt is increasing. There
must be some way we can deal with this. A lot of people lose their
homes just because they borrowed £500 or £700 and then
it has gone up to 4,000, 5,000 and 10,000.
Jane Kennedy: Both the FSA and
the Office of Fair Trading are responsible for making sure that
the companies that are trading legally—you have raised the
point that it does not mean they are not charging high rates of
interest—are regulated. We seek in government to create
a market in which the availability of credit is good and on a
sound basis, but also that people are encouraged to borrow sensibly,
within limits that they can afford. We have to strike a balance
between ensuring that credit is available, because now it is an
essential part of our economy, but at the same time helping people
to borrow in a way that is sensible for them. It is a review of
the practices that you have raised here today and you will be
as interested as I am in what the outcome of that review will
say.
Q918 Chairman:
Does the government accept the criticisms that are made of the
social fund? What plans does it have to improve it?
Caroline Flint: The numbers of
applications to the social fund are going up so obviously people
are using it. It is not an under-used service. As you will be
aware, it does provide grants and interest free loans to assist
people with one-off items of expenditure. In 2006-07 over 2.6
million discretionary grants and loans were awarded with a total
value of £827 million. Of these, over 0.4 million awards
worth nearly £104 million were made to applicants in Scotland.
That is quite significant in that it is a well used service. Today,
you can do it by phone, ringing up for a social fund, so again
we are trying to expedite for people as quickly as possible. I
am not saying it always works perfectly all of the time, but generally
I think it is pretty good. We did put some changes in actually
because we do listen to people and what they say about the access
and what have you. They were introduced in April 2006. they were
an attempt to simplify the budgeting loan scheme, to make it more
accessible, but also it took on board some issues around repayment
as well. Again, these are interest free loans. We have also invested
an additional £300 million for between 2003 and 2008 to hopefully
help more people. I am always interested to hear from people what
specifics they are. Are they logistic issues, that people are
not getting it on time? What happens? I was talking to someone
the other day and in years gone past I am told that staff used
to literally sit with an Argos catalogue in front of them and,
when someone came and put in a claim, they would look up the Argos
catalogue—I do not want to give them a commercial advert
here—and basically it would be that sort of discussion going
on. Could you imagine it? Now it is trying to be more accessible,
to get to people what they need as and when. We have expanded
it but I think the other aspect of this is, alongside what we
provide for people in terms of the social fund, the other things
I mentioned earlier about financial independence, encouraging
people to be more aware of budgeting, saving, and helping them
to do that, going back to what we said earlier for people to get
on and progress in work. Obviously the social fund is there. It
is not just for people who are totally on benefit. It is for some
of the most vulnerable people who are in low income jobs as well.
Q919 Chairman:
I am sure my colleagues will agree that it was a very good evidence
session and it will be very helpful for us when we compile our
report on poverty in Scotland. Thank you very much for coming
along to give evidence. This Committee has no remit about the
promotion of ministerial posts but if we had we would definitely
recommend you both for the Cabinet. Before I declare the meeting
closed, would you like to say anything in conclusion perhaps on
any areas that we have not covered during questions?
Caroline Flint: As well as what
the UK government can do, the Scottish Executive and local authorities,
I think the role of Members of Parliament in challenging at local
level what is happening in their communities is so important.
We are signing up across Scotland, as with elsewhere, these local
employment partnerships with employers who want to engage with
us in a much bigger way than just providing vacancies—I
welcome that as well—to help people make that transition
from benefits into work. I know Members of Parliament have a lot
of contact with different employers in their constituencies and
anything you could do to help us with that agenda as Scottish
MPs would be warmly welcomed.
Jane Kennedy: If there are any
technical questions or questions of detail around figures that
we can provide that occur to you afterwards or figures that you
are presented with you are not sure about and you wonder whether
they are the figures that government draws upon, I am sure the
Treasury would wish to help.
Q920 Mr Devine:
It might be helpful if you could give us tax credit uptake in
Scotland for each constituency, various other pension credits
and things like that and just give us a UK average to see how
Scotland compares.
Jane Kennedy: Okay.
Chairman: Thank you very much again.
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