Benefits Agency: Contingency Funds (Hansard, 31 October 2001)

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis; of Heigham)
My Lords, I am glad that I am not answering the previous Question!
1415 The contingency reserve currently stands at £1 million. It is available on application to provide Benefits Agency districts with additional funding should they be faced with unforeseen expenditure resulting from local crisis or emergency. There have been no applications so far this year but, of course, the level of the contingency reserve is kept under review.

§ Earl Russell
My Lords, I thank the Minister for that reply and especially for the assurance that the level is kept under review. Does she agree that attempting to assess need for any particular area in the light of the previous year's information is, in Harold Macmillan's phrase, "like planning a railway journey with last year's Bradshaw"? Does the Minister further agree that the downturn in the world economy has affected areas in very different proportion? The effects of 11th September, the effects of unemployment and the effects of flood damage are unevenly distributed. Would the Minister be in an even better position to respond to that kind of situation if she had a bigger contingency reserve at her disposal?

§ Baroness Hollis of Heigham
My Lords, I entirely take the point that one cannot predict the drawdown on the contingency reserve. However, I hope that I can give the noble Earl the assurances he seeks. The figures of three years ago, for 1998–99, show that of a contingency reserve of half a million pounds, £53,000 was drawn down for Montserrat evacuees and flooding. In the following year, of a contingency reserve of half a million pounds, £363,000 was drawn down for Kosovar evacuees and flooding. We increased the figure, as we thought that the Kosovo problems might increase, to £2 million the following year, but the drawdown was £262,000. Consequently, the figure for this year is £1 million. Never in my history with the department has the drawdown of the contingency fund exceeded about a third of the total moneys. The problem is that if you lock money away in the contingency reserve, it is sterile money and is not available to give out in the form of budgetary grants. However, should unexpected emergencies occur, we can turn to it.
The noble Earl mentioned unemployment. He will know that the main bulk of the Social Fund—some three-quarters of that money—is allocated to budgeting loans which are available only to someone who has been on benefit for at least six months and allows him or her to buy items such as carpets. Therefore, unemployed people will not normally be in that situation.

§ Lord Higgins
My Lords, I too welcome the fact that the level is kept under review, particularly as the prospects of flooding this winter appear to be every bit as bad as last year. However, is not the noble Earl's Question rather too narrow with regard to the Social Fund? The third report of the Social Security Committee of another place states that, the scheme in its present format needs urgent overhaul and an injection of funds". 1416 However, the Government's response in July was pure "Yes, Minister". Will the Minister go further than that response to the Select Committee's report?

§ Baroness Hollis of Heigham
My Lords, I suppose I should say, "yes, shadow Minister". The main pressure on the Social Fund—I can understand this—is from quarters suggesting that what are essentially loans should become grants. I believe that the noble Earl, Lord Russell, has espoused that view in the past. As the noble Lord will understand, our hesitation on that point is due to the fact that the cost estimate for that provision is well over £1 billion. That takes away the main function of the Social Fund which is to produce budgeting loans for people who have been on long-term benefit and who do not have the capital to replace an item such as a cooker or a carpet. Recent research by the University of Bristol contradicts the findings of the Social Security Committee. It says that these amounts are well targeted and well repaid, with 93 per cent of the money coming back, and that the system is very acceptable to people because it gives them free credit which claimants on the Social Fund would otherwise not be able to enjoy.