Social Security (Claims and Payments) Amendment (No. 2) Regulations 2006

My Lords, I, too, am grateful to the Merits Committee and the Social Security Advisory Committee, and to the noble Lord, Lord Skelmersdale, for bringing these regulations before us today. We are talking about a very serious problem. Perhaps the Minister will ask his department what the full extent of low-income-family indebtedness is. Government figures which I have seen give me no comfort or assurance that the Government know how bad the problem is. The best thing that I have seen to date is the Joseph Rowntree Foundation study which was done by Collard and Kempson in 2005. It came to the conclusion that 6.2 million low-income people aged between 16 and 64, in the course of the year that it studied, needed to borrow. Some 1.8 million of them had borrowed commercially, and 750,000 had been forced to use a high-income lender. That is more than likely to be a substantial underestimate, because we all know that people in distress in low-income families often turn to family, friends and informal arrangements to get them through difficult circumstances. So this is a big problem. The Treasury should stop interfering with the Department for Work and Pensions. The noble Lord, Lord Skelmersdale, is absolutely right that the Chancellor of the Exchequer magicked £20 million into this equation, without any let, hindrance or, it seems, thought from the Department for Work and Pensions policy experts who have been working on access to credit for low-income families for far longer than Treasury people. This £3 million is a result of that interference and a complete waste of money. How will the scheme work? The unit that will oversee it will presumably be centrally based. How on earth will it relate to front-line staff to work out whether the lenders are competent to enter minutes of agreement of the kind that are envisaged in the regulations, or whether the claimants and customers of the department—the people who are taking out the loans—will get proper service from them? Any suggestion that that can be done for £150,000 a year is laughable. The Minister may not have time to explain in his winding-up speech the mechanics of how the£3 million will be spent and the running costs thereafter, but I would be very interested to receive details in a letter and happy to share it with others. I do not believe that it can be done in the way which the Government suggest. I object to the drift towards debt recovery through the benefits system. The benefits system is not a debt recovery tool. Over the years, we have seen increasing numbers of people having their benefits clawed back in circumstances that were admirably described by the noble Lord, Lord Skelmersdale. These families are not in a position to cope with substantial reductions to what are subsistence-level benefits in the first place. As far as I can calculate, 11 types of deductions—there may be more—can already be made from subsistence-level benefits. It is wrong for this House to allow others to be added willy-nilly without very careful thought. It is wrong for this House to allow others to be added willy-nilly without very careful thought. We are being quite casual and wrong in assuming that the situation is acceptable just because benefits are uprated by price protection annually, which seems a perfectly reasonable thing to do from year to year. As an example, unemployment benefit in the early 1970s, when I first took an interest in this matter, was the equivalent to some 20 per cent of average earnings. The equivalent GSA is now worth about11 per cent of average earnings. It is easy for us all to slip into the ways of thinking that from year to year price protection will give customers and claimants some degree of protection but, over the period, those who are relegated to non-statutory price protection on an uprating basis suffer grievously. Citizens Advice tells me that 40 per cent of their debt clients on income support have no money left at the end each week, so we are dealing with families who are right up against a degree of adversity that some of us would find it difficult to deal with. I think that these regulations for the first time extend the third-party debt access to contributory benefits. I may be wrong about that, but I would like it confirmed one way or another, because it has always been otherwise in the past. I was around when the system was put together during debates on the Social Security Bill in 1986. It is actually an inheritance from the supplementary benefit system. The noble Lord, Lord Fowler, the Secretary of State at the time, rightly recognised that priority debts—and I emphasise the phrase ““priority debts””—should be given some priority in terms of deductions that could be permitted from benefit levels. We have now moved away from priority to levels of debt that are difficult to describe—certainly as they were originally envisaged, at the time when the scheme was set up in 1987. It is wrong to do this now without looking across the whole spectrum of the history that attaches to this system, how it is operating and the context in which it is operating, before we implement piecemeal small amendments of this kind. The third-party debt scheme would have to be reviewed in its totality before I could be confident that what we are being asked to do in these regulations is right. The full review of access to low-cost credit is also overdue. I commend the work done by Collard and Kempson, and I hope that the Minister adds it to his weekend reading, as it is extremely well argued. As my noble friend Lord Oakeshott and the noble Lord, Lord Skelmersdale, said, it points clearly in the direction, for anyone with any knowledge of these things, to a more intelligent use of and increase in the social fund provision in terms of community care grants—grants, not loans—as well as budgeting loans. I am sure that the Minister will resort to saying that the Government have put £90 million in the three years up to 2005-06, and that is very welcome; but the Collard and Kempson study found that twice that will be necessary to meet the identified need. Finally, if we are looking at ways in which to support credit unions and region-based community loan schemes, as we should be, that means investing in them directly to give them more capability of servicing the needs that they generally meet well. The best credit unions are the biggest ones; the community-based credit associations are the ones that are best able to meet the needs that they face. If it was my money to choose how to spend, I would certainly have invested some £3 million, or gone down that kind of route, rather than pursuing this scheme, which, I am absolutely certain over the coming five to 10 years, will prove to be next to no use at all, hard to administer and dangerous, because it is beingdone without proper accounting of the background and history of the schemes that it seeks to try to influence.