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| Version 4 | Version 5 |
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| Poor 'may face state loan charge' | Poor 'may face state loan charge' |
| (about 1 hour later) | |
| Emergency state loans given to the poorest people in the UK could cease to be interest free, under changes being considered by ministers. | Emergency state loans given to the poorest people in the UK could cease to be interest free, under changes being considered by ministers. |
| The social fund currently extends £500m a year in interest-free loans to some 1.2 million benefit claimants. | The social fund currently extends £500m a year in interest-free loans to some 1.2 million benefit claimants. |
| But the government says in future some loans could be run by credit unions, who it says typically charge annual rates ranging from 12.68% to 26.8%. | But the government says in future some loans could be run by credit unions, who it says typically charge annual rates ranging from 12.68% to 26.8%. |
| The Tories accused ministers of acting like "loan sharks". | The Tories accused ministers of acting like "loan sharks". |
| The BBC's political correspondent Jo Coburn said the reforms were designed to ensure that interest-free loans were not offered to people who did not really need them. | The BBC's political correspondent Jo Coburn said the reforms were designed to ensure that interest-free loans were not offered to people who did not really need them. |
| The social fund was set up to help needy people, many of them elderly or disabled, meet the costs of items such as cookers, cots and funerals. | The social fund was set up to help needy people, many of them elderly or disabled, meet the costs of items such as cookers, cots and funerals. |
| Credit unions | Credit unions |
| Details of the proposed changes were released in a Department for Work and Pensions consultation document. | Details of the proposed changes were released in a Department for Work and Pensions consultation document. |
| It states that the government is considering offering contracts to credit unions to provide "affordable loans", as well as other services such as savings accounts and financial advice, to people at a local level. [It] seems to me that it would make a bad situation even worse John McFallTreasury Select Committee | It states that the government is considering offering contracts to credit unions to provide "affordable loans", as well as other services such as savings accounts and financial advice, to people at a local level. [It] seems to me that it would make a bad situation even worse John McFallTreasury Select Committee |
| "To fund the cost of these extra services, we are proposing that the credit offered under these arrangements could attract an interest charge of 1-2% per month," it says. | "To fund the cost of these extra services, we are proposing that the credit offered under these arrangements could attract an interest charge of 1-2% per month," it says. |
| The paper states that credit unions of the sort they are considering "typically charge interest at rates varying from 12.68% to 26.8% APR". | The paper states that credit unions of the sort they are considering "typically charge interest at rates varying from 12.68% to 26.8% APR". |
| The DWP said that in 2007/8 the average "budgeting loan" given by the social fund was £433.30, and the average repayment was £10.54 a week. | The DWP said that in 2007/8 the average "budgeting loan" given by the social fund was £433.30, and the average repayment was £10.54 a week. |
| In future, if interest were charged at 2% a month, it would take 46 weeks to repay that amount instead of 42, with total interest of £47.80. | In future, if interest were charged at 2% a month, it would take 46 weeks to repay that amount instead of 42, with total interest of £47.80. |
| HAVE YOUR SAY The people who need it the most will suffer while those who milk the system will not notice a thing Steve Godrich, Reading Send us your comments | |
| A Department for Work and Pensions spokeswoman said: "The social fund provides affordable credit for people who need it. | A Department for Work and Pensions spokeswoman said: "The social fund provides affordable credit for people who need it. |
| "We are now exploring how we can make it more widely available to people in work as well as on benefits. | "We are now exploring how we can make it more widely available to people in work as well as on benefits. |
| "We want to make sure people in need do not turn to illegal loan sharks who can charge interest of 1,000%." | "We want to make sure people in need do not turn to illegal loan sharks who can charge interest of 1,000%." |
| No decisions had been made and the government would do nothing to create difficulties for low-income families, she added. | No decisions had been made and the government would do nothing to create difficulties for low-income families, she added. |
| 'Totally unacceptable' | 'Totally unacceptable' |
| Labour MP and chairman of the Treasury Select Committee John McFall told the BBC that the social fund "does not work". | Labour MP and chairman of the Treasury Select Committee John McFall told the BBC that the social fund "does not work". |
| "The government needs to... ensure that people get the genuine loans and genuine needs met," he said. | "The government needs to... ensure that people get the genuine loans and genuine needs met," he said. |
| "To put a 26.9% interest rate on that seems to me that it would make a bad situation even worse, so I think that's a bit of a joke." It's harsh, it's insensitive and it doesn't reflect the needs of the day Vince CableLiberal Democrats | "To put a 26.9% interest rate on that seems to me that it would make a bad situation even worse, so I think that's a bit of a joke." It's harsh, it's insensitive and it doesn't reflect the needs of the day Vince CableLiberal Democrats |
| Shadow work and pensions secretary Chris Grayling said: "These proposals are simply outrageous. | Shadow work and pensions secretary Chris Grayling said: "These proposals are simply outrageous. |
| "Thousands of people are losing their jobs every week, and it is nothing short of extraordinary that the government's answer is to propose abandoning interest-free emergency loans, and start charging 27% a year instead. | "Thousands of people are losing their jobs every week, and it is nothing short of extraordinary that the government's answer is to propose abandoning interest-free emergency loans, and start charging 27% a year instead. |
| "Gordon Brown and [Work and Pensions Secretary] James Purnell are behaving like loan sharks." | "Gordon Brown and [Work and Pensions Secretary] James Purnell are behaving like loan sharks." |
| The Liberal Democrats said the proposal was "totally unacceptable" and "seemed to be destroying the purpose" of the social fund. | The Liberal Democrats said the proposal was "totally unacceptable" and "seemed to be destroying the purpose" of the social fund. |
| Treasury spokesman Vince Cable told the BBC: "It's completely self defeating. It's just driving people who are already in difficulty into even further difficulty. | Treasury spokesman Vince Cable told the BBC: "It's completely self defeating. It's just driving people who are already in difficulty into even further difficulty. |
| "It's harsh, it's insensitive and it doesn't reflect the needs of the day." | "It's harsh, it's insensitive and it doesn't reflect the needs of the day." |