Integration Loans for Refugees and Others Regulations 2007

Lord Bassam of Brighton
rose to move, That the draft regulations laid before the House on 21 February be approved.

The noble Lord said: My Lords, these regulations will introduce a system of integration loans for those recognised as refugees or those given humanitarian protection and their dependants. For ease of reference I shall discuss the benefits to the potential recipients as refugees. By that I mean not only refugees but those with humanitarian protection and their dependants.

Section 13 of the Asylum and Immigration (Treatment of Claimants, etc.) Act 2004 enables the Government to set out in regulations a loan scheme aimed at helping refugees integrate into United Kingdom society. Section 13 was subsequently amended by Section 45 of the Immigration, Asylum and Nationality Act 2006 to extend eligibility for the scheme to be made to other categories of migrants, as prescribed.

When a refugee is first granted status, he or she will normally enter a critical period of transition during which they may need to find accommodation, to train or re-qualify, and, critically, seek employment. As part of the integration process, an interest-free loan will, we believe, make a considerable impact on their ability to become established in the United Kingdom. It is intended that the loan should be spent on things such as deposits for accommodation, the purchase of tools of a trade or some vocational training.

These regulations establish who is eligible to apply for an integration loan and the criteria against which applications for a loan will be considered. The opportunity to apply for an integration loan will be made available to any person aged 18 and over and granted refugee status after the date on which the scheme is introduced. Applicants will be eligible to receive only one loan. Loans, if made, may be subject to conditions. The regulations set out the type of conditions which may be applied. They also make provision for borrowers to enter into a loan agreement which details the conditions on which it is made, the repayment terms, and how terms may be amended if there is a change in the borrower’s circumstances.

The introduction of a system of integration loans is much fairer and more cost-effective than the arrangements currently in operation. At present, the legislation provides for those who are recorded as refugees—and I refer to refugees only—to claim a back payment of the income-related benefits he or she would have received, calculated from the day on which he or she first claimed asylum. Deductions are made from that sum, equal to the value of any asylum support received in the mean time. No provision is made for those with other subsidiary status or dependants.

Back payments are, in our view, inherently unfair. The amount of money due to a refugee in backdated benefit is based solely on the time spent awaiting a decision and bears no relation to the needs of the individual. We believe that the integration loan scheme will ensure better value for money by targeting resources to those refugees most in need and for specific purposes that will help their integration. The payment of a loan is not automatic and the applicants must say what use they intend to make of it.

It is intended that the loan scheme will be funded by the savings made from the abolition of back payments. The maximum loan payable will be capped at £1,000, while the minimum available will be £100. Loan repayments will be recycled to ensure a continued fund for future refugees. The scheme will be closely monitored to assess its take-up rate and cost-effectiveness.

The loans scheme will be jointly administrated by the Home Office Border and Immigration Agency and the Department for Work and Pensions. This partnership will ensure that the administration of the scheme is as cost-effective as possible. The Home Office is committed to the successful integration of refugees and recognises the potential vulnerability of this client group, many of whom may have little or no experience of a culture of formal borrowing and repayment. Loans will be interest-free, with gentle repayment rates based on pre-existing arrangements that operate in the Department for Work and Pensions.

The current expertise and safeguards built into the DWP processes and legislation should deliver the policy intention to ensure that the repayment terms of the integration loan are tailored to the individual recipient’s circumstances. In particular, it is planned to recover the loans for those on income-related benefits by way of an amendment to the Social Security (Claims and Payments) Regulations 1987 and their equivalent in Northern Ireland. The amount to be deducted from those on benefit will be consistent with deductions already in operation within the current framework—presently £3 per week.

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The regulations have already been considered and approved by the other place. If and when they are approved by this House, amendments to the relevant DWP regulations will be laid.

For borrowers in employment or not claiming any income-related benefits, rates of repayment will be set in accordance with established guidelines used by the DWP for other debts and overpayments. Provision is made in the regulations for repayment terms to be revised if a borrower’s circumstances change.

Section 12 of the 2004 Act repeals the various pieces of primary and secondary legislation that enable the payment of backdated income-related benefits. That section will be commenced once the regulations have been approved. That is in line with the commitments made during the passage of the 2004 Act that back payments would not be abolished until a loan scheme was introduced.

The introduction of integration loans will be an important step in helping refugees to find their feet in society and to start contributing to our economy as soon as possible. I commend the regulations to the House.

Moved, That the draft regulations laid before the House on 21 February be approved. 10th report from the Statutory Instruments Committee and 12th report from the Merits Committee.—(Lord Bassam of Brighton.)

Lord James of Blackheath
My Lords, this development has caused great anxiety since it was first considered by the Merits Committee, and causes me to hear the jangling of alarm bells as an example of very good intentions from the Government that may lead to unforeseen consequences involving serious distress to the intended beneficiaries. The Minister has given us an accurate understanding of the intention of the measure, but he has not touched on certain aspects of it which cause grave concern. First, what will happen in the event of a default on the repayment arrangements? Secondly, to what extent may there be prioritisation on the expectation of recovery compared to other debts incurred by the immigrant?

I shall deal first with the repayment arrangements in the event of default. The Merits Committee asked for an explanation of the position of the DWP. The Minister will correct me if I am wrong, but I understand that the answer was that as long as new benefits are still being paid to the recipient of the loan, the responsibility for collecting the loan will remain in the control of the department. That is fair enough, because it is clearly making continued payments—so, as he said, it could reschedule the loan or make offsets against the continued benefits it is paying. That is logical.

The chilling part comes when we heard in another part of the answer that we received in the Merits Committee that the intention was that the DWP would cease to have responsibility for collecting the loan if it was no longer making benefit payments to the individual. What would happen then? Does the department intend to bring in a professional debt collector? The initial answer was no, it would not, but when we pressed the question a little further, we reached the answer that it might sell the loans. Who is it going to sell them to? Debt collectors.

We are talking about migrant people dealing in a loan culture with which, as the Minister said, they are unfamiliar. I wonder whether their knowledge of the English language will be up to understanding the famous words, “I am your friendly neighbourhood debt collector and I am going to break a couple of your fingers to make sure that you remember to pay next month”. That is the nasty world that we are talking about here. It is quite wrong that there should be any latitude for the DWP to let control of those loans go to potentially very alien influences, who may be the last sort of influence that we want when trying to integrate new migrants into our community.

I suggest that the Government rethink the provision urgently with a view to ensuring that the DWP will never let control of those loans go out of its hands and will see them through to completion, even if that means that it introduces the continuity of further benefit payments to help the rescheduling process. After all, that is all that a bank does: it lends more money to help someone pay it back until it can reschedule for recovery of the full debt. Why cannot the DWP do the same thing? That is a very unsatisfactory part of the arrangement.

Secondly, there is an unsatisfactory feature in what appears to be an attempt to introduce the recovery of the loan in priority over the loan clubs and credit societies, which also come into the equation, which could in turn lead to the loans forcing a default in some other form of loan if priority is given to those payments. I am concerned that if people who receive those loans are frightened by the circumstances of what the Minister called the culture of debt, they will resort to a life of petty crime to get the money to pay the next instalment. We will be making petty criminals where we are trying to make good citizens. This is a seriously ill thought-out move, which the Government should rethink. The obvious and easy answer is to put the matter wholly and permanently in the hands of the DWP from start to finish.

Baroness Harris of Richmond
My Lords, the noble Lord, Lord James of Blackheath, has raised some very important and interesting matters. I must admit that I had not thought about the recovery of the loans, and I share his very great concern about this. I was quite disturbed to read the regulations, which at best smack of extraordinary heavy-handedness. At worst, they appear miserly and deeply offensive to people who look to us for safety and some measure of security. We are talking about refugees—people who have had to flee their own countries and whose refugee status we have agreed—not about illegal or failed immigrants. The refugees will have little knowledge of our banking systems, our form-filling requirements, and probably our money. Yet we are offering paltry sums of £100 to £1,000 as a loan, which they will be expected to repay once they are settled. It is almost insulting, to us and to them. Nor am I confident that either the Home Office or the Department for Work and Pensions will deal with either the refugees or their loans efficiently or sensitively; given past experiences, they are highly unlikely to do so.

Is the Minister saying that these loans can be applied for on top of any benefit payments the refugees may be receiving, or is it an either/or option? Can we be told how much is being spent on back payments and, allied with that, the estimated cost of administering this new scheme? The regulations lack detail, and I would have preferred to see much more detail before giving them unequivocal support from these Benches.

Viscount Bridgeman
My Lords, I welcome the intentions behind the regulations, in particular the implementation of Section 45 of the Immigration, Asylum and Nationality Act 2006, which, as the Minister has said, extend these provisions to humanitarian cases in addition to refugee cases. We on these Benches are also pleased to note that the current scheme should be self-funding, although the noble Baroness, Lady Harris, has asked about the cost of this scheme. I take on board her objections to the ill thought-out nature of this scheme, which is slightly condescending and of no real value. I also thank my noble friend Lord James for the very real concerns that he has voiced about what one might colloquially call the loan sharks industry and the vulnerability of this class of immigrant, to which both my noble friend and the noble Baroness, Lady Harris, have drawn attention. I look forward to receiving the Minister’s replies on these matters.

Lord Bassam of Brighton
My Lords, I am grateful to noble Lords who have contributed to the debate. I am particularly grateful to the noble Baroness, Lady Harris of Richmond, for her questions and concerns, which I fully appreciate. They were fair points to make. However, I take issue with the suggestion that this is an ill thought-out scheme. We have given it very careful consideration, and we said that we would not introduce it until we were in a position to do so. These loans are considerable, not miserly. They will help with housing by enabling deposits to be paid for rented accommodation and will help initially with rent payments, if that is what is wanted, or with essential items or moving expenses. They could be used to meet travelling expenses, clothing and footwear for a new job. They could assist those who are here as refugees and who have been offered humanitarian support to find an education or training programme that will enable them to retrain and qualify for a new job. It is for those very positive reasons that we set up this loan fund so that we can assist in an important area of integration.

The noble Baroness asked how much we were paying out in back payments. I do not have those figures. I know that the question has been asked before, but we cannot be precise about it. Based on the number of individuals granted refugee status and humanitarian protection in previous years, we expect that there will be in the region of 5,000 beneficiaries annually. Of course, each loan application will have to be considered on its merits, but we think that the scheme will make a valuable contribution to assisting those who have a quite proper right, because of their immigration and asylum status, to be here.

We think that it is fairer to provide a level playing field in support than to provide support by way of individuals applying for money that they would otherwise have received as benefits, as that money would have been determined entirely by the length of time that the person had awaited an outcome or decision; it would bear no relation to their current circumstances and it would not necessarily assist them with integrating into the world of work, the housing system and the world of education. For those positive reasons, we are happy to bring this scheme forward.

The noble Lord, Lord James of Blackheath, asked how the scheme will operate and talked about the potential for abuse if there are questions over repayment. I do not think that there will be problems here, because the Department for Work and Pensions is, if it is anything, extremely experienced in dealing with benefits and in collecting overpayments and so on. The loans will be recovered using the existing mechanisms through which the DWP acts to recover overpayments and debts owed to utility companies, for example. I do not think that this should be a problem.

The administration costs for the scheme have been estimated as being in the region of £300,000 in the first year. We calculate the average administrative cost of a loan payment scheme and recovery as being approximately £40, based on the assumption that some 4,000 loan applications will be processed.

I was asked what will happen if there is a problem with default. If the individual is in receipt of income-related benefit, to which they will be entitled, deductions will be made from those benefits. That will be at a fairly low level—in the region of £3 per week—so a gentle repayment programme is in place. If an individual fails to repay the loan, we will enforce repayment. The usual DWP civil enforcement rules will apply where we are satisfied that there is no compelling reason why loan repayments cannot be made. Normally, civil action is taken only where a customer avoids repayment, not in cases where they are unable to pay. I do not think that the spectre of loan sharks will stalk this system, which should operate fairly. We have put in place a robust payment and recovery programme and we are satisfied that it should work well. Obviously, we will continue to review the scheme as it rolls out. As I have said, I think that this scheme is fairer than the current one.

The noble Baroness, Lady Harris of Richmond, asked whether loans can be applied for on top of existing benefit payments. The answer is yes. The scheme is designed to ensure that there is adequate financial support for those who have been granted humanitarian status here as a refugee and to whom we owe a duty to assist with integration. I think the scheme will work well; we are confident of that. Although there has been some criticism of its modest nature, those who receive our country’s generosity, consideration and support through this scheme will find it extremely helpful in the future.

Viscount Bridgeman
My Lords, before the Minister sits down, if I understand my noble friend Lord James correctly, his objection was not to the scheme itself but to the unnecessary complication and loss of control through two departments being involved. Why cannot the whole of the control of this scheme, both the making of the loan and the recovery of the debt, be handled by the Department for Work and Pensions?

Lord Bassam of Brighton
The answer to that is simple. The Department for Work and Pensions will have the primary responsibility for payment and collection through the usual processes of claim and assessment. The department responsible for making decisions about asylum status and the humanitarian position of those who have made such applications has to be the Home Office. We would not want that responsibility to migrate to the DWP; that would be quite wrong. One department deals with decisions about the status of the individual, while the other, quite properly because of its experience, will deal with matters relating to applications to the loan scheme.

On Question, Motion agreed to.