Ministers will forge ahead with proposals to outsource emergency loans to vulnerable people, despite dumping plans to charge 27% annual interest to reward contractors. A government response to consultations on reforming the Social Fund, which provides emergency loans to benefit claimants, reveals Whitehall's intention to proceed with privatisation options, despite town hall opposition. The fund pays loans to people facing one-off costs, such as boiler repairs or housing deposits. Work and pensions minister, Kitty Ussher, said: ‘We will take [forward] the power to work through outside organisations which are better placed to offer financial advice than we are.' But Ms Ussher reiterated ministers had dropped plans to introduce 27% annual interest charges to remunerate contractors, an unpopular proposal revealed exclusively by The MJ last year. ‘Should we in the future decide to offer loans through external stakeholders such as credit unions… we will not charge interest,' she said. One alternative would be to pay a lump sum to contractors. A spokesman for the Public and Commercial Services trade union, which represents staff administering the loans, told The MJ: ‘The proposal is ludicrous. The Government has, rightly, removed plans for interest charges – so how are contractors going to make money? They will cut costs, and possibly staff, putting the scheme's quality at risk. This vital service should remain state-run.' In its consultation submission, South Lanarkshire Council claimed credit unions ‘do not… have the capacity or experience to provide an alternative service.' Councils are concerned that privatisation would increase costs, leading to higher demand on town hall services. A Department for Work and Pensions spokeswoman said the Treasury would only approve outsourcing ‘if it is financially viable'.
