Local Government and Communities Committee, 12 Nov 2008

Meeting date: Wednesday, November 12, 2008

Official Report 212KB pdf

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Child Poverty Inquiry

The next item is oral evidence for the committee's inquiry into child poverty in Scotland. I welcome to the meeting Lindsay Isaacs, social policy officer for Citizens Advice Scotland; Jo Kirby, advice services manager for the Action Group; and Mark Lyonette, chief executive officer of the Association of British Credit Unions. I hope that the witnesses have agreed among themselves that only one of them will make some introductory remarks. If not, I ask that they keep any remarks very brief.

I thank the committee for the chance to give oral evidence. Citizens Advice Scotland welcomes not only the Scottish Government's commitment to the 2010 and 2020 targets for eradicating child poverty but this inquiry which, given the recent news that efforts to eradicate child poverty seem to have stalled, comes at a very appropriate time.

Although many of the levers for addressing child poverty are reserved to Westminster, the Scottish Government is certainly able to do a number of things. In our submission, we focus on two areas on which we have the most evidence and expertise, given the issues that clients bring to bureaux. First, on benefits and tax credits, we looked at the value of advice on income maximisation and at benefit take-up campaigns; and secondly, with regard to employment, we examined the role that child care could play in alleviating child poverty.

I am happy to take questions on those and other issues. If I cannot answer any questions today, I will come back to the committee on them.

I endorse many of Lindsay Isaacs's comments. Our response focuses on the need for proper funding of welfare rights advice; more support to help vulnerable people with the day-to-day management of their finances, paperwork and other issues that impact on their ability to manage their limited resources; and adequate funding for supported employment projects in order to help parents with disabilities to move into work.

I will keep it short and sweet; I have no introductory comments.

I was interested in Lindsay Isaacs's comments on the effects of child care on reducing child poverty. What impact has the devolved status of child care had on the issue? I believe that in your submission you say that policies have developed

"in a different way and at a different pace."

What improvements should be made in co-ordinating child care policy between the United Kingdom and Scottish Governments?

That comment was about what is happening with welfare reform and the various green papers that have been published over the past three years. For example, significant changes are being made to the benefits that lone parents can claim; indeed, a change that is being introduced this very month means that, when their youngest child turns 12, lone parents will be moved off income support and on to jobseekers allowance, which means that they will have to actively seek work. Moreover, the age limit will, in time, drop to 10 and then to seven. That reform will be effective only if flexible, affordable and appropriate child care is available. Without that kind of support system in place, the people affected will find it almost impossible to find or sustain employment if, for example, their shift patterns change or their child falls sick.

As a result, although the Department for Work and Pensions at Westminster is responsible for developing policy on welfare reform, the success and effectiveness of those reforms are dependent on devolved policy areas such as child care and on appropriate child care being in place. On a number of occasions, we have asked for evidence that such child care is in place in Scotland before any reforms are introduced.

Quite apart from the cost of child care, which is obviously a major issue for many claimants, the focus in the Government's new legislation on forcing single parents to actively seek employment at a time when such child care is not available might, in fact, make their task very difficult. Will the new regulations and their associated burdens make it harder for single parents to gain employment?

As I have said, we have already asked for evidence that child care provision has been put in place before the introduction of the reforms. If changes at a UK level are made without local support services to ensure that the measures can be implemented and that lone parents are able to fulfil the obligations that are being placed on them, we will simply be putting the cart before the horse.

That is helpful.

Single parents in particular are very concerned about these welfare reforms and, as Jim Tolson has rightly pointed out, an obligation has been placed on the Scottish Government and Scottish local authorities as a result of UK policy. I want to unpick the issue a little bit. Following these reforms, has any cash from the UK Government trickled down to the Scottish Government or Scottish local authorities for more child care provision?

I do not know anything about finances that have been targeted in support of the reforms; I am certainly not aware of any. I know that, although child care is a UK priority, the various systems that have been introduced are developing slightly differently. As a result, although the situation is not equivalent throughout the UK, the same responsibility to seek work is being placed on lone parents.

I appreciate that. Obviously, it is the committee's job to scrutinise what the Scottish Government and local authorities are doing, so I would be keen to find out whether the UK Government has made cash available for these reforms. If it turns out that it has not, I will be very disappointed; after all, you cannot expect the Scottish Government or local authorities to respond without resources. If cash has been made available, the committee might wish to consider how the Scottish Government and local authorities are using it. Should there be a cash consequential to support child care as a result of the reforms?

Child care support needs to be in place and it is quite clear from client evidence that that is not the case at the moment. Child care provision throughout the UK is very expensive and often is not flexible enough; there are also problems not only with quality but with availability, particularly for parents with children who have illnesses or disabilities. The current provision is fairly patchy and accessing child care can be a struggle for clients in rural areas. Improving the situation will require financial investment.

Thank you for that response. Perhaps, convener, we can find out whether there have been any discussions between the Scottish Government and the UK Government on taking forward these reforms together.

That would be helpful. Of course, child care is not the only element that is affected by the situation; there is also a cross-over between reserved and devolved responsibilities in the area of skills. We have been assured that the two Administrations are having conversations about the issue, but we are not sure about their content or at what level they are taking place.

It is important that policies develop coherently. After all, our clients think about their problems not in terms of reserved or devolved matters but in terms of how they impact on the totality of their lives.

Child care is a very important issue but, from the responses that I have heard, I am not so sure that the witnesses can help us with funding and other wider policy issues.

I want to work through some issues about advocacy services. I recently visited my local money advice project. The people there feel that their work and the waiting list for appointments are increasing and that, as a consequence, the need for advice is unmet. What is the impact on the services that you provide? I do not disagree with the fairer Scotland fund's objectives of seeking to put people back into work and to overcome the barriers that prevent them from working, such as the need for child care. We all recognise that having a job is the best way out of poverty. However, those who provide the advocacy services in my area feel a bit aggrieved that they are not given the recognition that they deserve in that process. They feel as if they are losing out, and have to seek alternative funding and so on. Could you give me a flavour of the current impact on your organisations and the expected demands on your services, and indicate whether you will be able to meet those demands and whether you are being properly supported?

The need for advice far outstrips our ability to provide it. I do not have a view on the working for families strategy, other than that I do not think that it has affected us adversely. Getting consistent funding is an on-going problem for our service. We receive no core funding from the council, so we must go to different charities and bodies for funding. That funding is for specific aims and priorities that those groups determine. For example, the priority for Scottish Power is children, but where does that leave vulnerable adults? The funding is short term and seeking it is time consuming. Such funding does not allow us to build and develop a service that adequately meets all the needs of the people who come for assistance.

Long-term investment in income maximisation and welfare rights advice would be welcome because it is crucial to eradicating child poverty. Before parents can even begin to think about work, they need to have enough money to get by on. They also need assistance when they start work. For example, a disabled parent may have to inform up to five different benefits agencies when they begin work. If someone has a literacy or mental health problem, that in itself is quite overwhelming. It is vital for such people to have support from someone who can help them. Further, as someone's employment status changes as they move into and out of work, it is vital that they know where to go for help to reclaim what they need and to inform agencies as required.

Is the DWP filling that gap?

No.

What is the gap then?

It is advice on everything that someone is entitled to. As you will know, there is a complex maze of benefits to which people may be entitled. Consequently, they need practical assistance in applying for benefits. With benefits such as disability living allowance, administrative decision making can sometimes be poor and people need specialised assistance to challenge decisions.

It could be about simple things. For example, I recently worked with parents who are in receipt of disability living allowance for their child. However, income support did not have a note of that, so the family was missing out on about £60 a week. Income support had not put the disability premium on to their account. The family was struggling—for example, they had disconnected the telephone, and they had to make trips back and forth to visit their child in hospital. People face that sort of situation daily, and they need somebody to give them a hand with it.

I echo a lot of what Jo Kirby said. On whether the DWP fulfils the need for advice, if an unemployed person is considering moving into work, Jobcentre Plus will often give them a benefits check to find out how their income would change, what benefits they could expect and how well off they could expect to be. The problem is that Jobcentre Plus often takes a narrow approach: it considers only benefits versus income from employment and not costs that might increase through moving into employment, such as transport costs and the cost of eating outside the home, or the fact that debt repayments, which might have been set at a low level, increase when the person takes up employment. Jobcentre Plus also sometimes takes quite a short-term view. Tax credits might be higher in the first year that somebody goes back into work because they are based on their real income in the previous year. After a year in employment, the person finds that their income suddenly drops when they do not expect it. Advice organisations such as the citizens advice bureaux tend not only to consider what benefits or income someone might expect to get but to take a more holistic view of how the individual's income and outgoings will change.

What is the expected increase in workload for unemployment and benefits advisers? When I visited my local money advisers recently, they told me that the main issue was that banks and building societies were taking a harder line and pursuing repossession relentlessly. The advisers were unable to change that relentless legal process, which involved intensive casework and support. That was before the credit crunch. What do you expect the result of the current acknowledged economic difficulties to be? Are more people coming through the door now? What do you expect to come through the door? Will you be properly funded to play your part? What representations have you made to get the unmet need recognised and secure the resources that you need?

As Jo Kirby said, need certainly outstrips supply at the moment, but that has been the case for quite a while. We do not expect a huge increase in the number of clients or issues that are brought to bureaux because most of them tend to be working at capacity anyway. We do not yet have the formal figures to show whether there is a change in the types of issue that clients are bringing to bureaux in the current economic climate, but there are informal, anecdotal reports from bureaux, certainly on debt issues and money advice. Some bureaux are booking appointments and the waiting times are getting longer. That is largely because the sorts of issue that clients are bringing are more complicated, so it is taking longer to deal with a client's inquiries and to do the necessary follow-up work to resolve them.

Funding for bureaux is not a new issue; it has not just reared its head. Bureaux have struggled to get adequate funding for a number of years. Trying to sustain themselves and keep going often takes them away from the work that they should be doing—providing advice. Some of the funding that they get for specific projects can be quite short term, so it is hard for them to plan ahead and provide any continuity of service.

Citizens Advice Scotland has recently received funding from the Scottish Government for work with specific groups that will help to address child poverty. Kinship carers are one such group, but there are many client groups and there is significant unmet need. Last year, we were unable to represent clients at, I think, 330 social security tribunals because we simply did not have the staff or volunteers to do it. That is probably an underrepresentation, but it gives you an indication of the level of unmet need that we currently face.

You just missed an opportunity to put a demand on the table, but that was up to you.

I will return to the issues around child care later but, first, I will continue on the points that the convener has just been making. People's understanding of the system is an issue, as is take-up. What work is being done on financial literacy and how can it be improved? Perhaps that is a question for Mr Lyonette.

Yes, I can speak a little to that. As committee members know, credit unions have a statutory requirement to educate their members in the wise use of their money. One of the big changes in Scotland recently has been the many more requests from schools for credit unions to work with them, which obviously reflects changes in the curriculum. We have found that teachers are very willing to have somebody go into their school. Such work tends to be much more about having properly regulated children's savings clubs running as part of the credit union in schools as opposed to formal education.

When we talk about financial education, we talk about financial capability. Any credit union will say that it is not entirely sure that people can be taught to save. People will not save simply because I say that saving is a good thing. We think that people learn to save only by doing so—it is a learning-by-doing thing—so the trick is to get people to start saving. A Scottish bank recently did research on that, which shows that there is a clear link between a person being encouraged to save when they are young and that being followed through into adult life. The credit unions are struggling a bit, because there are no resources for them to go into schools—volunteers must do such work, although staff may do so if the credit union is lucky to have grown enough to have staff. There are no extra external resources, but they are keen to help, because they see such work as a vital part of the future.

I am aware of financial literacy packs that have been made available to primary schools and more recently to secondary schools. Are those packs being rolled out across Scotland?

There is no coherent credit union strategy in that regard. We would love that to happen, but a piecemeal approach is being taken.

The previous Scottish Executive and now the Scottish Government launched those packs. Are you aware of them in your work?

When you refer to packages—

They show teachers how to provide information to children about managing their money, saving and so on.

Yes.

I have another question for Mr Lyonette about credit unions. There are issues to do with banks and savings at the moment, and people experienced problems with Farepak. They thought that their savings were safe. It is clear that credit unions offer people opportunities, but your members are required to go out and let people know about the credit unions in their area. How does the Government support that? Can more be done?

It is clear that the tide has changed and that there is an unprecedented banking crisis. There is anecdotal evidence that credit unions are attracting new savings, although we do not have figures on that, as they tend to come out annually. The most visible and strongest Scottish credit unions are certainly getting a range of new savings. Indeed, there is massive demand for loans from the credit unions because of the current economic climate, but they are having to turn down some requests, as it would be irresponsible to make loans to some people, which is, of course, sad.

I would love the Scottish Government to do more in general to encourage savings. Now is the time to do that. We all saw the impact of unregulated savings with Farepak and the damage that it did. If the Government could find some way of encouraging saving throughout Scotland, that would be fantastic and in tune with what we think.

In my area of West Lothian, the Blackburn, Seafield and District Credit Union, which works with Capital Credit Union, has an outreach worker who goes out and tells community groups and schools about its work. Does that happen throughout Scotland? Should we consider that approach?

Such work is patchy. It must be funded predominantly from the credit union's loan interest.

We are in the process of getting new credit union legislation down at Westminster that will give credit unions the same quality of legislation that any other sector in the world has. Some members will no doubt know from their travels that credit unions around the world are much bigger than credit unions in Scotland and the rest of the UK. The legislation will make it much easier for employers to get involved in the credit union sector. At the moment, employers really only have the opportunity to start their own credit union or, if they are a national Scottish employer, perhaps to work with 10 or 12 credit unions, which is not attractive.

It is relevant to mention employers in relation to savings and how to get people to put money aside—either for an emergency or just to get into the habit of budgeting and using money better—because we have found time and again that the way in which employers can interact with credit unions, by deducting from payroll, is incredibly powerful. It seems much easier for people to save by having money taken from their wages, rather than by setting up a standing order or direct debit—it is that old thing of what you haven't seen, you don't miss. If we want credit unions and safe savings to take off throughout Scotland, we should be aware that one thing that credit unions can do that banks cannot do is to work with employers on payroll deduction. That also works with benefit deduction, but that is a slightly different story.

In the coming years, we would love to work more closely with national and local employers throughout Scotland, because ensuring convenience is one of the keys ways in which to encourage saving. The issue is not just the rate of return. Indeed, particularly for people on low incomes, the rate of return is probably not the key factor that will drive saving; convenience is. For example, in the transport industry in Scotland, which is a fairly low-income industry, about 11,000 people, who are no better at saving than you, me or anybody else, have significant savings, because money has been deducted from their wages. That is a powerful tool.

I want to deal with some issues to do with financial exclusion, which is very expensive. Perhaps we should become more aware of the current legislation. I have seen on websites how expensive it is to get a loan. I am talking about companies that operate legally in my constituency, such as Payday UK. I have seen loans with a typical annual percentage rate of 1,355 per cent. I know that there is a regulatory mechanism and that Mary Mulligan's colleague, Jim Devine, and others are considering capping the rate. These companies are on our high streets. Log Book Loans has loans with an APR of 244 per cent. We all criticise credit cards, but they have an APR of only about 15 per cent. That shows how expensive it is for poor people, who have the same needs as everyone else has to get to the end of the month. Given the nature of credit unions and how they have grown up in our communities, do they have the capability to expand and compete with those companies and is suitable legislation in place to allow them to do so?

On that theme, would a suitable ambition in Scotland be for every child to have a bank account? People go to cash cheques with such companies and pay high commission. Millions of pounds are paid out in clothing grants but the very nature of those grants is such that a large number of the people who receive them will not have a bank account and so might need to go to those companies. Therefore, for every million quid that we give in allowance, about £100,000 could be going to the money lenders.

Credit unions serve about a quarter of a million people in Scotland, day in, day out. Throughout Scotland and Britain, credit unions are starting to grow really well. We have had credit unions in Scotland for many years, but only in the past 10 years has the sector as a whole embraced ways of working that are helping us to grow. I will not go into those but, basically, they are about modernising what we offer.

Further to the points that have been made about savings and credit charges, many people, including those on benefits, who currently pay a couple of hundred per cent for lending could save £300 or £400 a year on just one loan by using a credit union. For people on low incomes, that is quite a significant saving, never mind the potential help that they might receive to change the balance in their lives between credit and savings.

Members may not be aware that the credit union sector has grown over the past couple of years to the point that we have invested millions of our own money—not Government money—in developing a current account for the sector in partnership with the Co-operative Bank. That has taken off well, with take-up from five credit unions in Scotland. One reason for taking that step is that it makes credit unions a lot more convenient, because people no longer need to visit the credit union to get their cash as they can take it out of a hole in the wall like anybody else.

Another reason why we introduced a current account is that, for people on low incomes, the UK banking system is punitive. The banks' model of revenue generation is that banking is free unless customers default, in which case they get hit with heavy charges. Such charges cover the cost of banking for those of us who do not default. We think that that is unfair. Regardless of whether they are feckless or careful with their money, people on low incomes are much more likely to default because their margins for error are slim. The direct debits system can far too easily catch people out if their money or benefit has not arrived. Therefore, we are not surprised that many people on benefits have only a basic bank account that they do not use or only a Post Office card account.

The current account that we have introduced has a very different charging structure, in which people are not charged £35 or £39 if they happen to go overdrawn by a few quid for a day or two. The reality is that there are charges in the system. Every withdrawal from an automated teller machine and every debit card payment in a shop incurs costs that need to be covered. If we cannot pay for those costs from the funds that people have in their account—obviously, that is quite difficult for people on low incomes, who might make many small transactions withdrawing £10 or £20 from a cash machine—we need to charge people. When we asked whether people would prefer a small fixed charge each week or month rather than the uncertainty of a high default charge, all our research showed that people would rather pay £1 a month or even £1 a week than £35 here and £35 there. Even at £1 a week, the cost of banking is easily exceeded if people incur a couple of default charges at £35.

Although it is unfashionable to say that the UK's banking platform and charging structure are part of the problem of financial exclusion, it is ironic that people on low incomes feel more comfortable with being charged a small, certain amount. In some ways, the high-cost lenders are so effective because they charge only £3 or £5 a week and people know where they are. The loans might be expensive, but people know where they are with them. Certainty is very important. Managing risk is something that people on low incomes have to do daily.

I have Alasdair Allan, Bob Doris and Jim Tolson all wanting to ask questions, but I will let Lindsay Isaacs respond first.

If I may, I will first just answer the question about growth.

The sector is growing well and legislation is key to that. One thing that we need to do more in Scotland is to engage with the local government sector—with COSLA and with individual authorities—to help them to change the credit union sector. Wherever there are strong credit unions, there are strong enabling local authorities. They do not necessarily need to provide grant or lots of investment. Sometimes, they can just bring to the table other partners in the burgh or council area who can play a role in the credit union. We recognise that there is much more that we need to do across Scotland.

Our evidence certainly bears out the fact that being poor costs a lot more. As well as the examples that have been given, I could mention utility companies' pre-payment meters, which help people on low incomes to budget but cost more. The cheapest way to pay is by direct debit, but those who are financially excluded may not have a bank account so that option will not be open to them.

We have a wealth of evidence from across the CAB service that people on low incomes are given credit that is unaffordable either due to very high APRs or because of the inclusion of additional things such as payment protection insurance, which really bumps up the cost. They may also be offered consolidation loans and rolling loans, which will hugely increase the amount that people need to repay over time. Credit is unaffordable and lending is often irresponsible. For example, people whose only income is from benefit are given huge loans that they simply cannot repay. Such loans are also offered to people who have either retired or are approaching retirement age.

We have argued for a long time that people on low incomes still need access to credit. Often, they use it not to buy plasma-screen televisions or go on holiday but as part of budgeting for day-to-day expenses such as buying food and paying bills or to cover one-off expenses such as the cooker breaking down. Therefore, they need access to responsible and affordable credit.

We support the work that credit unions do, but work also needs to be done on products or services that are targeted specifically at the needs of people on very low incomes. For example, somebody might have £5 left in their bank account but be unable to get it out because they can only withdraw £10. They might want to withdraw only £1 or £2 at a time because that is their daily budget.

I support what both other witnesses have said. There is an idea that a bank account is in itself a route out of financial exclusion, but for many people whom I have come across in my service, it has been the beginning of debt problems because of bank charges. People come in who have more than £1,000-worth of charges; their income support is being swallowed up and the problem spirals because they do not have the assistance that they need to look over and understand bank statements, which is quite a skilled task. The most vulnerable people do not always have the support that they need to manage a bank account. If people have learning disabilities or other additional support needs that impact on their ability to manage their finances, we need to provide not only one-off education but continuing support to help them to manage them.

I recently joined the credit union in my constituency. The people there told me some interesting things about the difficulties with setting up new credit unions, not least the fact that it is much easier to get people to borrow from them than to offer to save with them. Is that the general experience of new credit unions?

Yes. If you think about it, that is not surprising. If you came to our credit union asking for a loan, you would be taking somebody else's money and would not really care if we were still there tomorrow—in fact, you would probably be quite pleased if we had fallen apart. However, if we came to you and asked you to save £5 or £10 a week or a month, you would want and need to know many other things about us because we would be taking your money.

Through the 1980s and 1990s, credit unions had to learn that if they wanted to attract people's savings, they had to give the impression of safety and, indeed, be safe. It is no coincidence that banks built marble banking halls all those years ago; it was not only somebody's fancy but was about giving the impression of safety. Credit unions are not going to build marble banking halls, but even a new credit union such as yours needs to think about its image and how it can come across to people in the community as being a safe and sound place to save. Credit unions have the compensation scheme that the banks and building societies have so, in practice, everybody's money is as safe in a credit union as it is in the banking system. In fact, it is arguably safer than in the banking system at the moment—Which? said that the other day, actually, which was interesting. We have to pay attention to the impression of safety. How can a new institution—a small, community credit union—project solidity on day one? That is difficult when there has not been significant capital to start it off.

You also mentioned getting people to sign up to arrangements under which money is taken at source from their pay. I get the impression that that has been much more successfully promoted to date in the public sector than in the private sector. Is there anything that can be done to encourage the private sector in that regard?

You are absolutely right that, in Scotland, the public sector has payroll deduction through a variety of credit unions well covered. We hope that the new Westminster legislation will attract the private sector much more easily. It would be quite difficult for Scottish Power's employees, for example, to join one credit union. The company would have to start the Scottish Power credit union or work with credit unions in each area in which it had an office or other facility, neither of which is particularly attractive to the human resources department of a company in 2008.

One thing that the new legislation will allow a credit union to do—Capital Credit Union in Edinburgh or Glasgow Credit Union, for example—is to go to Scottish Power and say that everybody who lives or works in Glasgow, Dundee or wherever plus all Scottish Power's employees can be covered. We are keen on that approach because if one looks around the world—more than 180 million people now use credit unions—one will find that employers have often played a big role in the growth of credit union sectors because of the ease of making payroll deductions and the credibility that working with employers brings. We think that it is great to reach people where they are employed, and it would be fantastic if the new legislation opened up the ability to work with big and small employers throughout Scotland.

I would like to share a constituency case. I was involved in a single-parent constituent's long, drawn-out benefits claim. At the end of the process, quite a substantial amount of cash was payable to the constituent, at which point the local authority and the Benefits Agency got together and the money was levered towards the constituent. However, there was no financial advice available and no suggestions were made about how my constituent might want to use that money. We can return later to how far back benefits payments should go—that is another story—but when a vulnerable individual with a chaotic credit history gets a substantial backdated lump sum of cash, is there a role for credit unions, other financial institutions or whoever is paying that money to offer financial advice or point them to a CAB, for example, which can say how they can use that money and budget with it? Money is often paid out and that is the end of the story—until the person is in the same situation again.

Obviously the boundary between regulated and non-regulated financial advice presents challenges. Credit unions are keen to play a part in the Financial Services Authority's new money guidance initiative, and are likely to do so. That involves giving preventive advice, rather than giving debt advice when people have gone too far.

Things are difficult when a person gets a large lump sum. People have to be quite skilled and I do not think that many of our credit unions would want to step into such work at the moment, because that area of advice is regulated. However, generally encouraging people to save small amounts from their benefits or wages is a different matter. In the case in question, we would probably have referred the person to an independent financial adviser—they are the only people who are regulated to do such work—to discuss what to do with the lump sum.

The lump sum may not have been significant to many of us, but it was significant to the individual who received it, who was perhaps not used to financial management. If credit unions are engaged with people when they stop being out-of-work benefits claimants and go into work and other things kick in, other budgetary solutions can be put in place. There is a role for credit unions and others in that respect.

I do not know much about the subject, so forgive me for reading my notes.

Citizens Advice Scotland has done work on the matter. We developed two projects that piloted the use of independent financial advisers to assist clients—they gave more in-depth explanations of financial products. The participating IFAs, who had to have attained a uniform level of qualifications to participate, were from the Personal Finance Society. The bureau would refer clients on, but no product recommendations were made. The system was designed to give clients a better understanding of the choices that were available to them. Perhaps that is the sort of process that you are talking about.

More generally, there tends to be a focus on helping people to a transition point—to get a benefits payment, for example—after which support services stop. People are helped into employment and then left to their own devices, which is often why they leave that employment. More continuity of care is needed across the board. People need to be helped not only to a point of change or transition: the work that has been done should be followed through.

I would like to pop back to child care. One of our potential contributions to tackling child poverty is our work with Daycare Trust, an agency that is based in London. It has identified that if the legislation means that people will seek work much earlier and child care is available, a lot of child care providers will seek deposits—a bit like rent deposits that are paid by people moving into a new property. Where will that money come from if people have not yet begun to receive their wages?

Daycare Trust is carrying out research—with a grant from a charitable trust, I believe—into whether the credit union sector, or perhaps a single credit union working throughout Britain, could create some kind of child care bond for such people. They could be encouraged to save a little at a time, although in reality most people will not get there, so they might need a small loan. The credit union sector might be able to do something with regard to the deposit that is necessary for the first month's child care, because otherwise people might borrow for that first month at a huge interest rate, and then have to work much harder so that their wages can catch up.

I would like to comment on that—I realise that I am indulging your patience, convener.

You are indeed—you are here to ask questions rather than to make comments.

I will return to my initial point about cases in which lump sums of cash are given out from the Benefits Agency or as housing benefit. Would it be appropriate to send out a small leaflet along with that money suggesting possible solutions for how to manage it? It would perhaps not signpost people directly to a credit union, but it could give the address of, and suggest that they go to, their local CAB, where someone will talk them through it. Would that provide a bit of joined-up thinking within the sector?

Yes—certainly. One of the things that Lindsay Isaacs and I will talk about on the way out is whether we can develop in Scotland a project similar to that which we developed with Citizens Advice in England and Wales, to build closer relationships between bureaux throughout Scotland and credit unions.

People often have different perspectives on similar problems. The relationships between individual bureaux and credit unions are sometimes not as good as might be imagined, but there is much to be gained if they work together. We are considering opportunities throughout Scotland for individual bureaux and credit unions to work together more closely in a range of ways. Information on the things that we have discussed, such as referrals from credit unions to bureaux, would be part of that.

I am going to stretch Jim Tolson's patience, as he is waiting to ask a question.

The points that you have raised during this discussion are very important. We have discussed in a local context topics such as welfare rights and the role of the Department for Work and Pensions. I know that my local housing association offers advice on housing benefits; that Macmillan Cancer Support nurses, local hospices and home helps offer cancer victims similar help; and that Citizens Advice—on a wider scale—and independent advocacy groups offer advice. I have also mentioned the money advice that is available in my constituency.

Is there a lack of co-ordination—or, indeed, is there competition—between those groups, which are serving a client group? In relation to the committee's inquiry on child poverty, what do we need to do to ensure that all the agencies that seek to help people who are excluded by poverty in one way or another are better served? How can all the groups work more effectively together to serve that client group?

There is no competition between advice providers: I imagine that there is, because so many people are in need of advice, very little overlap. However, I agree that it would be good to take a co-ordinated approach within a local authority area, in order to map the available services and to identify gaps, and to implement a co-ordinated and robust funding system to fill those gaps. Everyone would be aware of what was being done, and people would work together more. That is currently left to informal networking—as far as I am aware, no one in Edinburgh is taking the lead on that. I imagine that it is the same in other local authority areas, although there are perhaps different practices in different areas.

Perhaps "competition" is too strong a word, but there is certainly a lack of co-ordination. It would be interesting to hear good examples of areas in which all the groups come together to ensure better take-up of services and greater efficiency in the system. We need to ensure that we are not paying people just to manage projects, and that there are more front-line people who can deal with the client and the case—for example, we need to have one manager and five case workers rather than six managers. Is any such work under way?

I support what Jo Kirby said. The convener said that "competition" is not the right word. The different organisations that offer advice are not necessarily aiming for the same client group. We know that different people seek advice and support in different ways, and they take different routes to get to the same end point. It might be appropriate for some client groups to access advice in a health care setting, such as their general practitioner's surgery or a hospital, while others might get it in a community centre or a library. Some people might want to access advice over the telephone, whereas others need face-to-face advice. Many different agencies and services offer advice but, as Jo Kirby said, there is still a lot of unmet need. There might be areas of overlap, but the different organisations are fulfilling different requirements for different client groups.

The strength in partnership working lies in co-ordination of resources and services. Citizens Advice Scotland works in partnership with Age Concern, Money Advice Scotland and Shelter to provide various services, which combines resources and strength. I agree that there is room for improved co-ordination, and for some sort of audit of what is currently available and what gaps exist. All that will require funding—if I missed the chance to call for more money earlier, I will not miss it a second time. There must resources to deliver front-line services.

Maybe we are asking the wrong people; maybe we should be asking the customers of the various services whether they believe that there should be a one-door entry into the system. There could be a better mix than six projects, six project managers and 12 case workers, although I recognise that that could be challenging for the various organisations.

I am not from the advice sector so I would not comment on that. However, it strikes me that a challenge is faced by the advice sector and the credit union sector. As you say, it is not just about the balance of managers and front-line staff; it is also about access and hours of opening. The credit union sector throughout Britain is considering whether we can find a way to open outwith the hours of 9 to 4 or 9 to 5. People often want services when it suits them, which might mean evening opening, or opening on Saturday mornings or afternoons. We are starting work to consider whether we can provide a back office for all the credit unions in Scotland, or some kind of entity that sits behind the scenes and answers the phone up to 10 o'clock at night, so that people can phone up about their accounts. People may not be able to do everything they could do by walking through the door, but we would be providing some service. It would also create economies of scale.

Credit unions around the world have always used that kind of co-operative working to find ways to offer more from the same. It is unlikely just to be a Scottish initiative. To get the volume and the scale, it will probably take place throughout England, Scotland and Wales. It should transform the sector, not just with respect to ease of access and opening, but to its scale. It should help us to grow much quicker.

I echo Mark Lyonette. One of the initiatives that we have been working on over the past few years is the citizens advice direct service, based in Glasgow, which is a phone-based advice service for people who, for various reasons, are unable to access a bureau or who choose the phone as their preferred way of accessing the services. Of the calls that come in to citizens advice direct, 86 per cent of the single-issue calls have been resolved, which has freed up bureau time for people who really want face-to-face advice. We have received some funding from the Scottish Government with a view to expanding the service across Scotland. However, we are also trying to increase awareness of the service throughout Government departments, in order that, instead of reinventing the wheel, other services might be able to use our existing infrastructure—infrastructure that has proved to be effective.

Mary Mulligan made an important point about education. How can we educate people to prevent problems from arising in future? When, as a young man, I moved from education to employment, I was given no advice. I opened an account with a bank that sent someone to my place of work, but it quickly became clear that that was not the best direction to take. Getting things thrown at you is not always helpful.

I was contacted a few months ago by an independent financial adviser who is based in my constituency but works throughout Scotland. He is keen that the Scottish curriculum should include money advice and that young people should learn not just about banking but about how to deal with bills, insurance and savings. Information on such matters is patchy, as someone put it, but it is important to make it available to young people. It is unfortunate that my attempts to encourage the Government to include money advice in the curriculum were unsuccessful.

Do the advice groups think that it is important to invest in our children's future by including in the curriculum not only the three Rs but information about how to handle money, bills and debts? In your experience, who would be best placed to provide such information? Should it be the independent financial sector, advice groups or the Scottish Government?

For people who have additional support needs—the group with whom I work—training or advice is best given in context, when it is needed. That is not to say that information should not be available in schools. However, help with money management should be available as soon as a person moves into employment or starts to receive benefits directly. That is preferable to a conceptual approach in which someone is told, "One day this will happen."

A number of agencies might be well placed to provide advice and there is probably a role for the advice sector, which could perhaps do joint work with the independent financial sector.

There is certainly a role for financial education. The range and complexity of the financial products on offer is baffling, so people need a helping hand to show them what factors they should be considering, explain APR and assist them in making appropriate decisions. There is probably a role for schools. Some bureaux go into schools to talk to children about debt and budgeting, but that happens in an informal and ad hoc way. It might be useful to formalise the process.

It would probably be most useful if advice were delivered in partnership. A range of organisations could bring different strengths to the process. Most important, the advice must be independent, and must be perceived to be so by the people who receive it.

Financial education is incredibly important and could help to address child poverty, but regardless how well educated a person is, if they do not have enough money in their pocket they simply cannot budget. There is a role for financial education, but income maximisation through better pay and increased benefits levels and take-up must also be addressed.

I appreciate those points. The organisations that are represented here are considering the current problems, and child poverty is a key issue. I strongly suggest that we all take a wider view and try to prevent problems from continuing down the line. Education in schools is crucial. Children should learn about the options and hurdles that they might face before they have wages or benefits in their pockets and get into problems.

I absolutely agree. In our response to the Scottish Government's poverty inquiry we said that we need to move towards a strategy in which the emphasis is on prevention rather than cure or symptom relief, so we support that call for education.

I hope that the witnesses will bear with me if I return to our discussions about child care. It has been brought to my attention that much child care is provided by the voluntary sector and that there are concerns about how sustainable it is. CAS's report suggests that that child care can be expensive and inflexible. Do sustainability issues also arise? In addition to the points that you have already raised, what can we do to improve provision of child care?

Child care needs to be more user focused. For example, out-of-hours child care has to be available for people who work shifts. There also has to be flexibility if the shift pattern changes; the child care has to be able to move from one slot to another.

As I have said, affordability is the key. I cannot remember the statistics off the top of my head, but I think that people in the United Kingdom pay about 75 per cent of their child care, whereas across Organisation for Economic Co-operation and Development countries the average is between 20 and 30 per cent. People here have to pay a huge amount towards their child care.

Mark Lyonette mentioned the problem of people having to pay up front. Problems also arise if people have to pay for child care while out looking for work and attending interviews, before they are actually in employment.

We feel that child care has to be more user centred, flexible and affordable, and more has to be available. In pockets of rural areas, child care really is not available. Child care has to meet the needs of children and of parents who are in work.

That will require resources. Where should they come from?

As I have said, our main concern is that child care provision has to be put in place. It is not in place at the moment. I presume that there would have to be negotiations between Holyrood and Westminster on where the money should come from. It is certainly not available at the moment for our client group.

If we are to be as responsive as possible, local authorities may also have a role.

Absolutely. That should be the case in order to be able to respond to local need. Local employment patterns vary, which has a huge impact on the type of child care that has to be made available.

I want to pick up on an issue that the convener has raised, and to record my arguments on how we can co-ordinate take-up of benefits. It may be that the Department for Work and Pensions has to reconsider its role in ensuring that people get the benefits to which they are entitled. At the moment, a range of agencies chase the DWP to ensure that people get their benefits.

I return to credit unions. Mark Lyonette mentioned a number of large and well-established credit unions. Such credit unions include Capital Credit Union Ltd and Glasgow Credit Union Ltd. There is also the Glasgow Taxi Trade Credit Union. I have heard that small community-based credit unions find it difficult to operate. That is mainly because of Financial Services Authority regulations, particularly those that relate to money laundering legislation. However, those small credit unions also find it difficult to get volunteers to do the type of work that Mark was talking about—providing out-of-hours services and Saturday morning services. There is a great disparity between the large credit unions and the small, community-based credit unions. How can we assist the community-based credit unions to encourage people to take the opportunity to save with the credit unions?

Also, how can we get people to save money when they do not have money to save? We know that it is an issue for society that people do not pay for pensions or for insurance policies. How can we get people to save when children are living in poverty and when there are the levels of indebtedness that Lindsay Isaacs mentioned? I visited the Motherwell and Wishaw CAB a couple of weeks ago. Wishaw has been identified as having the second-highest level of indebtedness in the UK. It is fine to talk about credit unions and getting people to save, but people do not have the disposable income that would allow them to save. How can we deal with child poverty in such circumstances?

I will start with the second point. I agree with what John Wilson said, in that the more income people have the easier it is to save, in some ways. However, as I said earlier, the channels through which people on low incomes save are as important as the level of income.

Five years ago, we got the Department for Work and Pensions to allow benefits to be paid directly to credit unions, which was a massive step forward for us. A credit union that receives an individual's benefits is more inclined to make a loan to them because repayment will be easier. The credit risk comes down, which reduces the cost of credit and allows us to serve more people on benefits. I do not want to argue that benefits levels are too low. When we introduced that direct payment service, we discovered that some people found it possible to save from their benefits. The money was going into their credit union and they were taking out what they were living on. It might be a matter of leaving in £1—we are not necessarily talking about leaving significant sums. However, those small sums build up, which is valuable.

I do not wish to undermine what has been said about the importance of levels of income and giving people more income; that is clearly important. However, people do not save more just because they have more income. The issue is how we encourage saving and the channels that we can use. As one of the Scottish banks has found recently, it is also about what we do when we are young and what our parents, or whoever it is, have encouraged us to do. There is a clear link there. That is what I would say in response to the question how we encourage more people to save.

There is a big challenge around community credit unions. There are now three credit unions in Scotland that are bigger than three or four of the smallest building societies. One larger credit union has £50 million to £56 million in assets, and about 20,000 members. It is not serving all the possible people in Glasgow by any means, however.

The challenge for community credit unions is twofold. If we expect people just to walk through the door to save or to get loans, we are expecting quite a lot, particularly as lives get busier and so on. Community credit unions must find a way to resource a face-to-face service, whether it is through volunteers or staffing, and to be available for people in various other ways, whether by allowing them to get their cash from cash machines or by making available people to speak to over the phone.

If we want community credit unions to survive and thrive in the future, we need to find some economies of scale for them. The harsh reality is that they will not find it easy to survive serving the most disadvantaged communities, given the low interest rates that they charge. There is a need to broaden their reach, so that they serve a mixture of people. Can we, across Scotland and Britain, find a collective way to use some back-office entity or services behind the scenes? The customer will still go into Blantyre Credit Union's office, say, and will see its staff. Behind the scenes, however, something could perhaps be done so that the costs of processing, auditing, accounting and so on are cheaper. That way, we could make more credit unions sustainable more quickly, and they will be able to thrive and grow in years to come.

Are there any bids for a final cut?

On credit unions?

For the witnesses in general.

If I may, I will ask a question about benefits take-up. The Child Poverty Action Group has said that £70 million of tax credits go unclaimed each year. Do you have any views about how that money could be used more effectively? Ideally, people will claim those benefits, but if that money is sitting in the Treasury unclaimed, could a portion of it go directly to funding affordable child care, for example, which Mary Mulligan mentioned. That would help to get people who are out of work into work so that, ultimately, they would no longer be claiming tax credits. Could the money that is lying dormant and going unclaimed in the Treasury be used more cleverly, rather than letting it just sit there?

CAS does not have a formal view on that. I reiterate our main point: our main focus is to get that money out of the Treasury and into the pockets of the people to whom it belongs.

I agree with that.

Tax credits cover a wide range of income. They can be relatively small amounts of money for people on relatively large incomes, and they can be substantial amounts of money and important proportions of income for people on lower incomes. Of the £70 million that is unclaimed, what is the profile of the would-be claimants who have lost out? What research or evidence is there that the unclaimed money affects people, proportionally or otherwise, at the lower end of the eligible groups, as opposed to the higher end? Has any analysis of that been done?

I am not aware of any such analysis, although I know that if a targeted campaign was being considered, one area in the profile of tax credit claimants in which there is quite low take-up is people who do not have children. I do not know about the spread across the piece, however.

Why do people not take tax credits up? Is it simply ignorance, or not understanding the connection between benefits entitlement and credits and the links to agencies? We might think, on the face of it, that most people who are told that they are entitled to something will take it up. Most Scots I know would grab it with both hands. Is the problem ignorance?

There are a range of reasons. Sometimes people do not know about their entitlement; sometimes people might know about their entitlement but decide, for whatever reason, that there is a stigma attached to claiming benefits, and so choose not to pursue it.

On tax credits, we have evidence that people who are entitled are still coming to bureaux, but they decide not to pursue claims because of negative publicity and coverage of the introduction of tax credits and the recovery of tax credit overpayments.

There are real problems with the design and administration of benefits and tax credits. Some people in our client group choose to remain on a more secure and stable—albeit lower—benefits income, as opposed to moving into employment. Although that might offer a higher income, it could be less stable and less predictable.

Thank you all very much for spending this time with us and for giving us your evidence this morning. We appreciate it.

We now come to agenda item 5. The committee previously agreed to hold its consideration in private.

Meeting continued in private until 13:28.