Social Security (Payments on Account of Benefit) Regulations 2013

Baroness Hollis of Heigham Excerpts

Wednesday 13th February 2013 Lords Chamber

I have dealt with the point raised by the noble Baroness, Lady Lister, about the single budgeting advance versus multiple loans, but let me do so again. The system is designed to prevent claimants taking out multiple loans and remaining in debt for many years. It is designed to reduce the risk of the claimant getting into long-term debt and will encourage improved budgeting and personal financial responsibility. Where there is a second crisis, we will look at referral to the local authority provision as a way of dealing with that.

[Baroness Hollis of Heigham]

I am now completely baffled by the approach that the department is taking. On the one hand, the money-lending teams, which are obviously doing well, are seeking to exterminate illegal loan sharks and so on, but they exist because there is a demand for cheap credit, otherwise they would not be in business at all. We obviously respect what the Minister is trying to do with credit unions, which are an appropriate alternative—if, of course, you have first saved—but given that he has now agreed that the maximum figure for single people is £348, £464 for couples and £812 for families with children, why not use those figures as the maximum cap that people can borrow against for their payments on account, rather than be confined to one loan? Thereby, if you have taken out £70 or £120, you cannot take any more until you have paid that back. If you are going to have those caps, regard them as the caps against which money can be borrowed on several occasions and you will therefore teach people how to manage credit as well as income. I suggest that that would be much more appropriate, given the Minister’s other objectives, which we entirely share.

[Lord Freud]

This is a fascinating area because, following the growth of the micro-loan industry particularly in Bangladesh, where it started—it has spread all around the world—the lessons on helping people to learn how to budget are very much along the lines of giving someone a loan which they pay back before they get the next loan. There is therefore a real learning process. In our approach, we are picking up this global phenomenon, whereby we will provide credit—in practice, free credit behind which there is a discipline—which has to be repaid before the next loan is available. It is very much the same thinking as that which we see globally.

[Baroness Lister of Burtersett]

If people know they can get only that amount, they will borrow more than they need at that point, knowing that that is it, whereas, as both of my noble friends are suggesting, you could have £100 here and £100 there, as you need it. I suggest that it would be good to look at this again.

[Baroness Hollis of Heigham]

I would artificially inflate my bid, knowing what you are doing to me. That would be a very foolish way to encourage me to learn how to manage credit.

[Lord Freud]

I can see that I am in the presence of experts—in an observatory context—on how people manipulate any system at all. I shall take away your thoughts, as always, about the fact that some gamesmanship may be going on.

It is getting very late so I shall wrap up. When you look at local authority provision, there are clearly opportunities. It is for each local authority to consider its own local circumstances. We are in the process of getting information about the details of those schemes, which will perhaps provide goods or services and some will provide cash. Then we shall be able to report back at the appropriate time when we have some more information.

I hope I have dealt with the questions. Clearly there will be teething problems, as there is with anything new, but we will monitor this very closely as part of our evaluation programme, and that will cover the introduction of universal credit. In addition, the intention is to review specifically universal credit advances and budgeting advances in 2017. Short-term advances for those on legacy benefits will also be monitored and evaluated. I commend the regulations to the House.