Welfare Reform Bill

I gather from the remarks of the noble Baroness, Lady Thomas, that we are likely to have a broader discussion around the Social Fund on the next amendment, so I shall keep my remarks fairly focused at this stage. It is obviously difficult to comment on individual cases, but in the example that she cited a crisis loan would not necessarily be ruled out, because crisis loans are not linked to or precluded from people who are not on income-related benefits. I do not say that it would have been approved in that case, but it might have been. As we have already discussed, Clause 15 is about external provider social loans and subsection (2) of this new section describes who would be eligible for a social loan from an external provider. It appears that the aim of this amendment is to ensure that eligibility goes beyond those in receipt of income-related benefits. It alters the eligibility criteria for Social Fund loans. The amendment would allow only those whose income was comprised solely of benefit payments to be eligible for external provider social loans. In particular, it would include people whose main source of income was a contributory benefit—as the noble Baroness described—such as contributory-based JSA or retirement pension. I can understand why the noble Baroness would want to ensure that those on contributory benefits would be eligible to receive these loans but there are some effects of the amendment that I would like to explain, and which I feel were unintended. It is our intention to provide that those on certain income-related benefits would be eligible. By accepting the amendment, we would increase the potential number of individuals eligible for loans by around 1.7 million. The money available for loans is likely to be cash-limited. Increasing the number of eligible individuals would place a significant burden on the scheme. This would lead to some difficult choices. Should we put modest maximum amounts on loans which may be awarded, or run the risk of having providers run out of money completely before the end of the year, meaning turning people away who could be in real need? Another effect of accepting the amendment would be that an individual whose sole income was from, say, contributory-based jobseeker’s allowance could apply for and be awarded a loan. However, although the applicant may have no other income, he or she could have a partner in full-time work, with a healthy salary and perhaps even savings. The loan provider would still need to consider awarding an interest-free loan to someone in these circumstances, since the amendment makes no provision to take account of partners’ income. There would be a further effect of this amendment, which I am certain would be unintended. This amendment would not only extend the groups eligible to apply for loans—as the noble Lord, Lord Taylor, quite correctly identified—but exclude some people who currently have access to Social Fund loans. Current benefit recipients, such as lone parents on income support who have additional income—say, from child maintenance payments or a part-time job—would be excluded by this amendment from applying for a loan. The same would be true of a pensioner who is currently in receipt of pension credit and who has additionally a small occupational pension. I am sure that the examples that I have just outlined, and which I think were hinted at by the noble Lord, Lord Taylor, are not what the noble Baroness had in mind when tabling her amendment and I hope, therefore, that she will withdraw it. In relation to the question posed directly by the noble Lord, Lord Taylor, the benefits to be subscribed have not been decided but it is likely that they will be income-related benefits, as they currently are in terms of eligibility. The noble Lord, Lord Taylor, also raised the point about how social loans will be funded. External provider social loans will be in place of Social Fund provision, but funded from the same source, which is to say from the Exchequer. There is no intention to change funding, only the way that it is delivered. I hope, in particular, that the noble Baroness will realise why, certainly at one level, her amendment is too restrictive. It would really make life difficult for people who have some income-related benefits but have some small income in addition. The broader approach that the noble Lord suggested could increase the number of people eligible very significantly, and in circumstances where they could be in quite a wealthy household. Again, I do not believe that that was intended.