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There has been mention of people being interviewed again and again about incapacity benefit. I met a charming gentleman—along with his wife and daughters, who were his carers—who was permanently bedridden. There was no chance of his being able to get out of bed, yet he has been asked for the second time to undergo an
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interview to establish whether he is entitled to incapacity benefit. That cannot be right, and it is a waste of everyone’s time and money. However, there are clearly people receiving incapacity benefit who should cease to receive it because they should not be receiving it in the first place.

I am not sure whether there is a one-stop solution that fits all those cases, and I find this a difficult issue. However, I believe that we are now living in a different age—an age in which unemployment will go up and up. Whatever the Government do at this stage and regardless of whether they succeed, unemployment will increase significantly over the next few months. We are slightly ahead of the game in Wellingborough, because our unemployment has been much higher for a considerable time. We now have 56.3 per cent. more people unemployed than in 1997, and unemployment has increased by more than 80 per cent. in the last year. I am not making a party political point; I am merely saying that I think the position in my constituency is different from the position in many others.

We are faced with the fact that, whatever welfare reform we bring about and however well we prepare people who are currently not in work and are receiving incapacity benefit, the jobs for which we prepare those people will simply not be there. If I advertised a job at the moment, there might be a couple of hundred applicants. Would I take on someone who had been unemployed for a number of years, had been on incapacity benefit and had been retrained, or someone who was experienced and had only just left the workplace? Any employer—and I would not blame him—would take on the person who had just left work and had the experience. That is a serious problem about which the right hon. Member for Birkenhead made some interesting points. I hope that they can be discussed in Committee, because the issue concerns me.

One of the aspects of welfare reform that we should be considering is the need to maintain people in jobs if that is at all possible. There is an unusual, although not unique, situation in my constituency, which contains a well-established boot and shoe company that has been in the family for more than a hundred years. It is highly respected, and its employees have worked for it for many years. In the current recession, it has run into serious problems and has had to cut its work force by a third, which has meant laying off 40 people. Some of those employees might have been employed for up to 30 years and are entitled to significant redundancy money, but the company cannot pay it because of the reasons why it had to lay the staff off in the first place. If it were to try to pay the redundancy money, the company would put itself into administration; it could not carry on trading and the other 80 jobs would be lost.

I have brought this case up in the House and Ministers have been helpful, but this case goes back to mid-December. These 40 people still do not have their redundancy money. The company is still trading and we hope it will trade out of its present situation. I understand that the Insolvency Service could provide the money to the employees and then get the money back from the company over a period of time as it traded out of its difficulties. The problem is that the company, as can be imagined, is under enormous pressure. The directors are working exceptionally hard to keep it going. The Insolvency
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Service would like to help but, unfortunately and unbelievably, the rules say that it cannot approach the company and must wait for an approach from the company. That sort of red tape needs to be looked at.

That sort of help in terms of welfare reform would allow the employees to get the money to which they are entitled and allow the company to continue to trade. After all, the Government would not be losing any money by doing that. If the company went into liquidation, the Government would have to pay anyway. I know that that case is slightly removed from the terms of the Bill, but I wanted to raise it.

Mr. Russell Brown: I had a similar situation about five or six years ago, but the difficulty then was that the company was continuing to trade under a different name and there was something untoward. It took three years to get the matter resolved. Is there a problem as to why the company is not approaching the Insolvency Service?

Madam Deputy Speaker: Order. I think that we are really now going wide of the mark. I have allowed the hon. Gentleman an opportunity to relate his remarks to the welfare reforms.

Mr. Bone: Thank you, Madam Speaker. What the hon. Member for Dumfries and Galloway (Mr. Brown) states is not the case at all.

The right hon. Member for Birkenhead argued that we should reject the Bill tonight because it is in the wrong form.

Sammy Wilson (East Antrim) (DUP): I understand the point about the economic context in which the Bill is now placed—it is different from when the Bill was originally thought out—but does the hon. Gentleman accept that the principles behind it—to try to get those who are unemployed, regardless of the economic circumstances, into a mind frame where they can prepare themselves for job opportunities that may become available, and can look at their needs and their skills and then move forward, however tentatively, towards employment—are the right way forward?

Mr. Bone: As usual, I agree entirely with the hon. Gentleman. That is the advantage of what the Government are doing and the hon. Member for Aberdeen, South (Miss Begg) made that point very well.

I appreciate that there are others who want to speak, but I shall finish with this point. I know that the devil is in the detail and I may be getting this totally wrong, but it would be fundamentally wrong if lone parents with a child as young as one were forced back into the workplace. [ Interruption. ] I see heads shaking behind the Minister, but I am concerned that that is a possibility under the Bill. I know that this will be dealt with in Committee, but no Member on either side of the House should try to make lone parents into a sort of easy headline. That may not be what the Government intend, but that needs to be clarified.

I appreciate that the Secretary of State has been bold in what he is trying to do. I am not entirely sure that everything in the Bill is right, but I am leaning towards supporting the Government, despite what the right hon. Member for Birkenhead said. However, we must reserve the right to look at the details before reaching a final decision.

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7.45 pm

Mr. James Plaskitt (Warwick and Leamington) (Lab): I certainly welcome and support the Bill, which is timely and contains a wide variety of important measures to improve the welfare system. I am quite familiar with many of them, for reasons that my right hon. Friend the Minister will know.

I want to confine my remarks to the sections of the Bill that deal with reforms of the social fund. I welcome the proposal in the Bill, so far as it goes, of forging something of an alliance between the budgeting loan part of the social fund and credit unions. But I want to suggest that the social fund needs a much more radical reform than that. Over the last few years, we have made some useful, but I think rather minor, improvements to the social fund. If that sounds like a criticism from an ex-Minister, let me say that the criticism is aimed at myself. I feel that I did not make as much progress in reforming the social fund as I wanted while it was my responsibility. I take on that criticism personally. But I hope that now it has been included in the Bill—I am pleased that it has—the Government will consider going further.

We know the problems with the social fund. They are now widely known. Citizens advice bureaux constantly remind us that the social fund suffers from underfunding and that there is an element of a postcode lottery, and even a calendar lottery. I would certainly confirm all those criticisms. As a Minister, I often found that part of the way through the financial year, details of the allocations of the social fund in different regions would come back on to my desk for me to alter to make sure that the target was met by the end of the year because some areas were spending above trajectory and some below. We had to keep shuffling the figures around, which was crazy. It meant that there was no predictability in certain areas as to how the social fund was going.

The social fund is also not used properly by some of the claimants. It is an unfortunate fact that some tend to use the opportunity to access budget loans as a kind of revolving door and keep coming back for more loans, whereas others desperately need a budgeting loan and simply cannot get it. The Treasury Committee and the Work and Pensions Committees have urged us to do more and we should take this opportunity to heed what they are saying. The problem with the social fund is that it is wholly passive; it does not give us any of the additional engagement with clients that we need if this is to be part of an active welfare state, as we would want it to be.

I welcome the tie-up with the credit unions. The credit union movement is growing thanks to investment from the Government through the growth fund and to rule changes in the common bond, but let us bear in mind that the credit union movement in this country is geographically incomplete. There are great swathes of the country that simply do not have credit unions, and many of those that do exist are quite fragile and are run by volunteers who keep them operating—just. At the moment, credit unions serve just 1.5 per cent. of the population. We cannot look to credit unions as a vehicle by which to deliver radical reform of the social fund.

The social fund needs to be recapitalised. We have heard this in respect of the banks but it is actually the problem with the budgeting loan part of the social
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fund, which is undercapitalised. It has about £500 million revolving around it, paid out and coming back in as repayments from those who have got a loan. It supports about 1 million loans a year. But that level of funding simply is not enough. I urge the Government to blow the dust off KPMG’s feasibility study from last year which examines—I think interestingly—the possibility of a public-private partnership to expand the social fund by bringing in some private capital. The report concluded that at that time there was little appetite among the private sector banks for lending to what they referred to as the deep sub-prime sector. There is an irony in that, as the banks did that on a gigantic scale for many years and said it was exactly the right thing to do. They gambled working people’s money on that, and they are now being bailed out with more money from working people, and in a way that I think will pitch even more people into financial exclusion. In these circumstances, the least they can do is reconsider the possibility of giving some capital support to a joint private-public budgeting loans scheme.

The banks might say to us—I had conversations with them on these matters when I was exploring the idea—that the loans are pretty risky. I point out to them that the level of default on budget loan repayment is very low and that this is nothing like as risky as the activity the banks themselves have been engaging in for a number of years. The banks might also say—they said this to me—that it is too costly, and ask, “Exactly how much do you want to put into this recapitalised amount?” I think the level of recapitalisation needed is such that it would increase the pool of money in the budgeting loan fund about fivefold. Therefore, we would be looking at about £2.5 billion of private capital to be put into the pot in order to meet the demand. Is £2.5 billion too much to ask the banks to put into such a joint venture? Well, we should set that question against the fact that last year alone—which was not a good year for the banks—they managed to find £3.6 billion in bonus payments. The amount of capital I would look for from the private sector is, therefore, less than it is prepared to pay out in bonuses. If a £3.6 billion reward for incompetence can be afforded, resources for financial inclusion of £2.5 billion can also be afforded. I also think that the vast majority of people who take out a budgeting loan have a better sense of fiscal responsibility than many of the bankers who have driven massive financial institutions into the ground.

Just before Christmas, the Government had a spot of difficulty with this proposal because the idea got out that it would mean the introduction of interest payments on loans offered under the revised budgeting loans fund. May I suggest to the Government the scheme we should be thinking about, which completely avoids that problem? An applicant would come forward in exactly the same way as now, through Jobcentre Plus, and they would be referred to the fund for a loan, but they would then open an account with the fund, so that they would register with it and a relationship would be built between the applicant and the social fund. They would then have access to a certain amount of money from the social fund interest free. That sum might be capped at a certain amount per year; it might be enough to facilitate three, or possibly four, budgeting loans during the year—sums of £1,500 or £2,000, perhaps, although this issue would need a little more exploration. Beyond that, they would also have access to money advice, which is not
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part of the budgeting loans scheme at all at present, and beyond that, under the joint scheme I am proposing, they would have access to affordable credit above and beyond the amount that is interest free, and that would be drawn from the capital put in by the private sector, and should probably be charged at interest rates of about 1 to 2 per cent. per month. This proposal, therefore, retains the interest-free loan facility, but also allows access to affordable credit.

Why is it important to do that? Because we have to close the debt trap that many of the customers of the budgeting loan fall into. If they cannot get a budgeting loan, for the earlier reasons I mentioned, where do they go? They go to doorstep lenders—and they might go to legal doorstep lenders who are charging 170 per cent. interest, or others charging about 300 per cent., or to those at the margins of legality charging 1,000 per cent. or more. It is to avoid people having to go to such lengths and falling into a perpetual debt trap as a result that I would like to see this facility built in under a private-public partnership, to allow a universal access to low-cost credit in a way that the credit unions cannot provide because they are not yet universal in provision. If we had this sort of scheme, we could link it in to other things that are happening, such as the advice from a personal job adviser. It could also be part of the work readiness preparation, or be linked to the savings gateway.

This is a more radical approach to resolving the problems with the budgeting loans. I urge the Government to take the opportunity presented by the Bill and agree to amendments, which I hope they will consider, to take the powers to do this. That would at least provide an opportunity to pursue it at some point in the future. I ask the Government to consider that.

7.55 pm

Mr. Dai Davies (Blaenau Gwent) (Ind): I support the principle and aims of this Bill. I hope it will be a Bill to enable employment, and not be a barrier to those who need benefit and help. That is most important.

I wish to begin by echoing some of the sentiments of the right hon. Member for Birkenhead (Mr. Field) on the timing. I suppose that there is no right or wrong time, but as I represent a constituency with one of the highest incapacity rates in the country, I am concerned that all this will happen at a time when it is very difficult to get people into employment. The statistics for December for Blaenau Gwent were that 2,638 people were out of work claiming jobseeker’s allowance and 6,560 were on incapacity benefit, while there were only 218 listed job vacancies. Therefore, although taking people off incapacity benefit and getting them into work is the right principle, it is not an easy task.

One of the measures we must look at is flexible working. We have talked today about the employment bracket as a whole, but there is opportunity through shared work and shared hours to open it up for those on benefit and the disabled. It must not be employment at any cost, however, or training for training’s sake. We have a scheme in my borough called job match, which looks at the requirements of the borough and those of the individual. We need to match their skills with real employment.

Some years ago, we had schemes in which people shared employment, but on different rates of pay. Another worry I have is that if we put people into employment
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on benefit rates working alongside someone on a higher rate, that will cause huge problems. The gap between earnings and jobseeker’s allowance is significant, and that should be reviewed, as the TUC has requested.

Another major concern at a time when so many people are losing their jobs is mental health. When we talk about mental health, we forget about conditions such as stress, depression and anxiety—conditions we cannot see or put a plaster on, but which are extremely important. We have heard again tonight about how we will help people into employment, and support is critical. The worry I have is that the support services are not readily available. We have seen funding withdrawn from many services and social services in the borough council, and we have also recently seen the threat to Remploy, which could play a huge part in helping people into real employment—not to stay within the Remploy circuit, but to go out into the jobs market. We need support for counselling services. Those who suffer from mental health conditions need a lot of support, and that must be funded.

Another worry I have mentioned many times in the House is to do with the medical board that people are called in front of. It cannot be target driven. If the board is given targets to hit, the wrong people will be put into a very dangerous position. Things must be done correctly and each case must be dealt with on its merits. Who are the experts in the relevant field? Do those on that board offering medical opinions know everything—are they mental health experts, or physical health experts? They need to take advice before they make decisions, and perhaps even consider speaking to GPs and specialists, because we will have constituents who want to appeal against a decision, with their GP supporting them but the board saying that they are fit for work. We have real problems in this area. If there is a conflict between the two, where does the appeal go? If it stays at that board level, that is not the answer.

I asked a question in the House some weeks ago about a guarantee of payment because of the worries about what might happen as people move from one benefit to another, and whether there would be any loss of that benefit value. Other benefits, such as housing benefit and things that people can claim through borough councils, fall into that category, so we need to ensure that the value of money received by the individual is not reduced.

The drugs problem has been mentioned, and I was pleased to hear the Secretary of State say that it does not include people who are having problems with prescription drugs, tranquilizers or even alcohol. Again, support services need to be provided for those individuals. It is not good enough just to say, “Well, they can continue on benefit.” They need the same help as those who are on the harder drugs. We must remember that many individuals on harder drugs, too, are ready to come off them—they just need the support to do so—so to punish them further or to punish their families would not help in any way. Each case must be considered with compassion and on its merits.

We have heard a lot about single parents tonight, but carers fall into the same bracket; this is a huge area where a lot of employment could be created. We need to consider equal parenting and equal responsibility. We tend to blame one side or the other—the father or the mother—so there must be a move towards equal
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opportunity for both and both taking their responsibility. We must ensure that the increase in the benefits structure to move people into employment does not move people into poverty, and the value of the money must be retained.

On the privatisation of some services in the Jobcentre Plus area, I hope that such things will stay within the control of the state, but on the understanding that the relevant bodies must work with the voluntary sector and private partnerships to deliver the best for those who wish to get back into employment. I have concerns, too, about the office structure of Jobcentre Plus facilities; I recently visited one with a client of mine, and I felt that the open-plan structure is not necessarily the best for everyone. The last thing that someone who has been made redundant or someone who is suffering from ill health, especially mental ill health, wants is to be spoken to in a room full of people. We need to look sympathetically at how we deal with such individuals.

My other worry on Jobcentre Plus is that in the area I represent, at least, it has been unable to answer a number of benefit questions. Benefits are being dealt with at a central location by telephone, and people cannot ask questions in person. Again, that does not help many of our constituents. No one should be taken off benefit until their appeal is heard; stopping someone’s benefits when they have an appeal in the system cannot be right.

The welfare state was created to help individuals into employment and to support them when employment was removed; it must not involve an alienation or stigmatisation of the individual. I know that we have all received a significant amount of paperwork, either by post or through e-mail, over the past few days; this has probably been one of the biggest postbags that I have received on one issue. I urge the Committee to examine all the information coming forward and to take into account the concerns of all the organisations that want to work with the Government to deliver the best system for these individuals to get them back into employment. This Bill is probably one of the most important that we will ever deal with, and I wish the Government well in its progress.

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