Link to this page: http://www.socialistparty.org.uk/issue/561/6742
Labour ministers' unsocial fund
NOT SATISFIED with attacking the benefits entitlements of the unemployed in the recent Welfare Reform Bill, the government proposed charging up to 27% interest on emergency state loans to claimants.
Many elderly, disabled and unemployed people apply for emergency loans to replace a broken fridge or cooker, etc. These loans are then repaid from benefit payments. Prior to 1988 claimants could qualify for one-off, non-repayable grants.
Even an interest-free loan is a big financial undertaking from people struggling to survive on a pittance.
However, the government's consultation paper proposed outsourcing the social fund to credit unions: "Interest would be charged in return for these services but this would be at affordable rates compared to those charged by commercial lenders in the same market. We propose to set it at the maximum charged by credit unions of 2% per month (26.8% apr)."
Yet Gordon Brown has the hypocritical cheek to berate the banks for not passing on to customers the most recent reduction in lending rates!
This latest Labour bludgeon to strike the poorest and most vulnerable in society was the brainchild of work and pensions secretary James Purnell. Readers will recall that Purnell, in an earlier, crassly insensitive comment, lectured the unemployed 'not to use the economic recession as an excuse for not finding work'. Advice no doubt appreciated by the 75,000 people who lost their jobs in November!
The government, faced with a barrage of criticism over this outrageous proposal, has subsequently denied wanting to charge interest on social fund loans.
However, Kitty Ussher, a work and pensions minister, hasn't withdrawn the proposal of privatising the social fund and allowing credit unions to administer loans from the fund. But why would a credit union be prepared to offer interest free loans?
Like many of Labour's 'kite flying' proposals, the suspicion is that we haven't seen the last of this proposal.
In The Socialist 7 January 2009:
Socialist Party Marxist analysis
Socialist Party youth and students
Socialist Party campaigns
Celebrity Big Brother
International socialist news and analysis
Socialist Party workplace news
Environment and socialism