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Sunday, December 21, 2008

Another Labour revolt

As the credit crunch continues to bite and becomes a deep recession the impact on the welfare state will be immense. The cost of paying more benefits, emergency loans and mortgage support will grow exponentially and place a strain on the Treasury and the Government's ability to repay the extra loans they have taken out to reduce the impact of the recession.

The first signs that Ministers are thinking about this and how to tackle it are evident from the plans announced in the Queen's Speech to put more pressure on claimants to find work. There is also the article in today's Mail on Sunday, which suggests that plans to charge interest on emergency loans from the DSS has generated huge opposition across the parties.

The paper tells us that Work and Pensions Secretary Mr Purnell wants to start charging 26.8 per cent on new loans – the sort of punitive rate found on High Street store cards and way above normal credit-card rates. This would add nearly £50 to the cost of an average £433 loan and saddle the borrowers, who are almost all on State benefits, with an extra four weeks of repayments.

Some MPs have accused Gordon Brown and Mr.Purnell of behaving ‘like loan sharks', whilst rebel Labour MPs have joined forces with David Cameron’s Tories and the Liberal Democrats to accuse the Government of penalising hundreds of thousands of families on benefits who rely on these interest-free cash advances to cover the cost of unforeseen crises.

More than one million individual loans worth over £600million were paid out from the Government’s social fund last year to hard-up people – many of them disabled – who struggled to afford to repair a broken boiler or cope with some other domestic emergency.

The Government have now back-peddled on this proposal and suggest that the leaked paper was just a suggestion that they have no intention of implementing. This raises the question as to who leaked it?

I am sure that it is often the case that controversial plans are often placed in the public domain in this way so as to test the water. That way they can easily be disowned if reaction is adverse. With a bit of luck this will be the last we see of this particular idea.
Just had a quick squint at MoneyExpert dot com at the recommended Credit Card rates, somewhat surprisingly the Credit card rates are less than the 26.8% you quote in your blog.

Virgin Money 16.6%
AmEx Platinum 18.9%
Post Office Ltd 16.9%
AA Online 15.9%

...but then again, if you've got to have an emergency loan, you are unlikely to be given credit via a credit card....

What it does show that this government doesn't want to help those worse off in our society.
This is such an obviously daft idea that I can't help wondering if the Government haven't been a victim of this technique described in the Guardian a few weeks ago:

"There are many ways to undermine a minister. One way is to slip into a policy consultation paper a number of damaging phrases or proposals that will get that minister into political trouble. This can be done by adding a few paragraphs to a consultation paper, putting it into his red box with a lot of other papers , and letting him pass it. Suddenly the information is released, possibly from another Whitehall department, and the minister is caught on the hop and his reputation is damaged."

See http://www.guardian.co.uk/politics/2008/dec/06/damian-green-whitehall-mole
Today's Independent is even more apocalyptic.

The sneak disposal of the final stake in the Aldermaston Atomic Weapons Establishment looks like the beginning of a government fire-sale including Ordnance Survey among many others.
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