Archive for December, 2008

Rene cuts through the crap: Royal Mail and the social fund

Monday 22 December 2008

I’m pissed off. Not because I haven’t done enough Christmas shopping, but because there is a bizarre amount of confusion over current public policy issues hanging in the air at the moment – and because (coincidentally) I haven’t blogged in a while.

I refer to the future of Royal Mail and today’s kerfuffle over loans to poor households. Media discussion has shown ignorance, misdirection and complete surrender – as evidenced when Deborah Summers of guardian.co.uk said nothing at all about Jim McGovern’s resignation and invited comments instead. I don’t know Ms Summers, I’m sure she is a capable journo and have no wish to be rude, but professional political journalists ought to offer a way through the murky world of Westminster, not invite members of the public to grope their way through. At the risk of sounding monumentally arrogant, perhaps I can help shed some light on the matter.

1) Royal Mail

The resignation of Jim McGovern, PPS to postal minister Pat McFadden, was hailed as the first sign of a Labour revolt over the unambiguous plan to partly privatise Royal Mail. And maybe it is. But as Nick Robinson absolutely rightly pointed out, McGovern had no right at all to pretend to be surprised at the plans.

Pat McFadden is on the right of Gordon Brown’s ministerial team. He’s no friend of the unions (just ask the unions), who oppose part-privatisation*, and was not minded to award the Post Office Card Account contract to the Post Office. If anyone supports more private sector involvement in Royal Mail Group plc (which owns the Post Office), it’s him. McGovern of all people should know that. For pointing this out, Robinson has been worsted by lots of ignorant motormouths. Ignore them.

Anyway – and much more importantly – Labour MPs may feel rebellious (even ex-cabinet minister Peter Hain made a rare intervention over it) but will they get the chance to actually vote against the government? Media reports since the Hooper report was published last Tuesday suggested that it would require an Act of Parliament. I don’t think it would. Full-blown privatisation, yes. But I am reliably informed (as my Tribune story says) that distributing shares to create a minority stake could be done through a legislative tool such as an Order in Council or a Statutory Instrument, which does not necessarily need a vote in either House.

But Parliament would never stand for it, I hear you cry. They’d demand a vote. Not necessarily. Some controversial issues, such as raising of tuition fees and welfare amendments, are left to statutory instruments. And even if there were a vote, the support of the Conservatives and perhaps some Lib Dems would safeguard the bill’s passage. If the Government wants part-privatisation, it will get it. Mandelson is driving it; Brown and McFadden support it.

2) Social fund

 Apparent shock and horror today as journalists woke up to the idea that people could be charged interest on loans as part of a package of measures from James Purnell’s Department for Work and Pensions to reduce the effect of low incomes on social mobility.

The storm has broken out over a DWP consultation paper which suggests that such loans, provided by third-party credit unions, could attract annual interest rates of up to 26.8 per cent. The government, in the shape of anonymous briefings and an appearance from Kitty Ussher, has said they don’t intend to do that.

Is it a bungled response to helping people through the recession, as some people are saying? Er, no. If it’s a bungled anything, then it’s a bungled response to helping people out of social deprivation – i.e. nothing to do with the current economic climate at all. And the effect of raising interest on loans would not be quite as harsh as you might think.

It may well be that today’s headlines have been propelled along by a last-minute volte-face in Whitehall, but these plans are nothing new. In May this year, I was one of two or three journalists who could be bothered to turn up to James Purnell’s speech to the Fabian Society on child poverty, which I covered for Tribune. One of the angles I couldn’t quite fit into my story concerned the extension of credit to poor people, a policy which led directly to that consultation document. Purnell said (my bold type):

We need to reduce the poverty penalty.  As Save the Children showed recently, it costs you more to be poor.  And part of our response to the local elections has to be helping those on lower incomes with the cost of living.  To make sure that every extra pound goes further.

There are many causes of the poverty penalty.  But I want to start with the cost of credit.   Last year, there were 160,000 people relying on loan sharks.  I would like nothing more than to put the loan shark out of business.  They walk the streets of estates in my constituency, often with the latest toy in hand, to dangle in front of children to get their parents to take out a loan. But without dangling the interest rates which can be literally extortionate. One lone shark prosecuted last year was found to be charging rates of between 1500 and 117,000 APR.

We already do a lot to help.  The social fund will this year provide half a billion of interest free finance to people on benefits when they are in need. But the budgeting loans are not currently available to those who have moved into work, and we do not have sufficient resources to offer them to everyone they could help.
I have, therefore, commissioned KPMG to undertake a feasibility study to assess the options available for reform.  They will report by July.  This can be the start of transforming our approach so that we extend affordable lending to everyone.
I want to explore how private and third sector partners can work together with the Government in the delivery of a reformed scheme. I want to see how the money that we have invested in the programme can be made to go further, to offer low cost loans to those who work as well as those who don’t.

Did you see that? He said ‘low cost loans’, not ‘free loans’. Duh. And even a loan at 26.8 per cent APR would be well under what commercial lenders charge. Kitty Ussher said that some loan sharks charge up to 1000 per cent. But see above: some go a helluva lot higher than that.

While on the subject of 26.8 per cent APR, how much would that cost? The DWP’s consultation document helpfully explains: an average-sized loan of £433.30 would incur total interest of £47.80, and take 46 weeks instad of 42 to pay off. Whether that is fair is up for debate; whether it’s ‘loan shark’ behaviour, as Purnell’s Tory shadow Chris Grayling says, is not.

Have I just mounted a staunch defence of James Purnell? Maybe I’ll be sacked from Tribune…

*Unite do not oppose part-privatisation as expressed in the Hooper review. They appear to be in a minority, and needless to say they’re not endearing themselves to the Communication Workers’ Union over this. The TUC opposes Hooper, although their press release nicely pretends that Unite do too.

Clumsy briefing over Royal Mail

Sunday 14 December 2008

BBC political correspondent Iain Watson is puzzlingly reporting today that Lord Mandelson has “received” the Hooper review’s final report into the future of Royal Mail. Puzzlingly because Mandelson’s officials actually received it weeks, if not months ago.

What’s going on? I can only assume from the headline, “Report on Royal Mail future due”, that the BBC have been given a steer that Mandelson is finally going to release the report, which some uncharitable contributors have suggested he has been sitting on.

It’s not unusual for a report to remain on a minister’s desk awhile. Some, like the recent Gregg report for the DWP, only get released after a minister has decided to do pretty much what they say.

But unless Mr Watson has made a mistake, it’s plain clumsy for an official to let out a confused story like this. BERR have not sent out even a not-for-publication operational note about the report’s release. If they’re going to release it, they should release it properly – messy briefings always annoy somebody.