News archive - 2006

3 November 2006

Minister launches innovative credit initiative in Leamington Spa

James Plaskitt, a DWP Minister and MP for Leamington Spa, is a longstanding member of Leamington Spa Credit Union. On 27/10/06 he visited the credit union to celebrate the fact that the organisation would be working in partnership with seven other credit unions and Coventry and Warwickshire Reinvestment Trust (CWRT) in the Warwickshire area to deliver affordable credit services to financially excluded people.

James met several personnel from the credit union and CWRT and he presented David Bradley with a certificate acknowledging the completion of his training as a Growth Fund loans officer.

This is an innovative initiative as it has enabled small community based credit unions to work in partnership with larger city based credit unions and a community development finance institution in circumstances that may not have existed without the willingness to work together.

The enthusiasm on the day was clear, with members of the different organisations (including volunteers) talking together about the financial help they could bring to the financially excluded in the Warwickshire area.

Below are a couple of photographs taken on the day.

20 September 2006

James Plaskitt gives speech at ABCUL conference

On 19 September 2006, James Plaskitt, Parliamentary Under Secretary at the Department for Work and Pensions, gave a speech entitled “Including the Excluded: Quality Credit Unions at Work” at a conference organised by the Association of British Credit Unions Ltd and Barclays Bank.

Read the speech

20 September 2006

Loan turnaround

Appendix B of the Growth Fund contract states that “in normal circumstances, from the date of application, loans should not take more than 7 days to issue”. Several organisations have queried this as occasionally applicants are asked to provide additional documentation or information and can take several days to provide this, thus increasing the time taken to turn loans around.

The Growth Fund Project have considered this and have agreed that counting of the 7 days will ignore any days when the onus has been passed to the applicant to provide additional documentation or information. However to allow this to happen organisations are asked to keep a brief action log for each loan application setting out what action has been taken and the date of that action, for example:

Application received: 24/8/06
Applicant asked to supply additional documentation/information (bank statements, proof of income etc): 25/8/06
Additional documentation received: 10/9/06
Loan decision made: 11/9/06
Loan paid: 12/9/06

Under the original rules this loan would have failed the 7-day turnaround test, as there are 20 days between the receipt of the application form and payment of the loan. However, as all necessary documentation was not received until 10/9/06 the loan has passed the test. Your Service Delivery Manager will take into account the number of days between receipt of the application and the request for further information, and will recommence the 7-day count once all relevant documentation enabling a loan decision has been received.

5 September 2006

Definition of Low Income

The Request For Proposal (RFP) and the Supplier Briefing pack gave guidelines on what could be considered as low income. Those details were as follows:

• £123 or less per week for single person
• up to £215 per week for a lone parent with 2 children
• up to £400 per week for a household with 4 children

We have received a number of requests for a more comprehensive list of what constitutes “low income” in the context of making Growth Fund supported loans to financially excluded people. The following list provides a more detailed indication of what we consider low income to be for Growth Fund purposes (all figures are per week):

• Single person £123
• Single person + 1 child £169
• Single person with 2 children £215
• Single person with 3 children £261
• Single person with 4 (or more) children £307

• Couple £216
• Couple with 1 child £262
• Couple with 2 children £308
• Couple with 3 children £354
• Couple with 4 (or more) children £400

Income levels shown in this list are made up of all net income received into a household, including all earned income, benefit income and tax credits, but excluding:

• Child Benefit
• Disability Living Allowance
• Attendance Allowance (regardless of whether it is paid in respect of an adult or a child)
• Mobility Allowance (regardless of whether it is paid as cash or a Motability car)
• Housing Benefit
• Council Tax Benefit
• DWP funded mortgage interest payment

The figures shown are indicative. We recognise that there may be some applicants with household incomes that vary from the amounts detailed above who are still readily identifiable as financially excluded, and for whom it may be appropriate to approve a loan from your Growth Fund capital.

Whilst the list should be used as a prime indicator of whether or not an applicant may qualify for a loan from your Growth Fund capital, their income is not the sole factor that you should take into account.

Loans made to cases where income is in excess of these rates are expected to be the exception rather than the norm.

6 June 2006

Evaluation complete – next steps

Evaluation of bids to deliver Growth Fund services is now complete. Letters were issued, by 1st class mail, on 2 June 2006 advising all bidding organisations whether they had been successful in reaching the post tender negotiation stage. Those organisations that were not successful have been offered feedback on why their bids were unsuccessful.

Organisations with an estimated start date for delivery of Growth Fund services of June, July or August, will be sent a letter on 7 June 2006 inviting them to post tender negotiations. Organisations with an estimated start date of September 2006 or later will be sent a holding letter on 9 June 2006 advising that they will be contacted during July with a specific invitation to post tender negotiations in early August.

30 March 2006

We have received a number of requests for an extension to the deadline for submission of proposals to deliver Growth Fund services. Bidding organisations should note that there will be no extension to the deadline. As stipulated in the Request for Proposal document (Para 5.1.3), all proposals should arrive no later than 3:00pm on Monday 3rd April 2006.

1 March 2006

Question and answer update

Three new questions have been added to the end of the ‘Bidding/evaluation’ topic in the Questions and Answers section of the website. These questions clarify requirements C1.3, 1.4 and C3.1 and what is meant by ‘net income’ in the definition of low income on page 4 of the Request for Proposal document.

Need for further ‘clarification’ briefing sessions

The Growth Fund Project has given some thought to the need for further briefing events and, based on the relatively small number of queries we have been receiving and the topics covered in those queries, we do not feel that there is a need for further events.

Given the tight timescales organisations are working to in preparing their bids, and the additional cost involved in attending briefing events, we feel that time would be better spent answering specific queries received via the Growth Fund website.

If your organisation requires clarification on any specific point, please contact us and we will endeavour to provide a comprehensive and helpful reply.

EU State Aid Provisions

A number of enquiries have been received concerning the EU state aid provisions under which the Growth Fund will be paid.

A particular theme has centred on whether there will be cash link between payments of state aid made under the provisions for operating a ‘de Minimis’ scheme, and payment from the Growth Fund. The following response confirms that payments of compensation received under the Growth Fund scheme will not be subject to the financial cap which applies to schemes operated the under the ‘de Minimis’ provisions.

Particular Articles of the (EU) Treaty of Rome (1957 and subsequent amendments) provide for a limited number of different schemes under which state aid may be paid. Organisations may have some prior knowledge or experience of the rules under which ‘de Minimis’ state aid may be paid: i.e. the total of all aid paid under the ‘de Minimis’ rule must not exceed a total value of EURO100,000 in any consecutive three year period.

Compensation paid to organisations that successfully bid to deliver the Growth Fund service will not be paid under the ‘de Minimis’ rules for the payment of state aid.

The Growth Fund is to be paid as compensation for delivery of a Service of General Economic Interest (SGEI) under the rules for operating a Block Exemption on the notification of a SGEI (Article 86(2) of the Treaty of Rome, 1957 as clarified by the EU Court in May 2005 [Altmark]).

The provisions for operating state aid schemes under:

• the ‘de Minimis’ rules, and
• the ‘Block Exemption’ rules

are distinct and separate. It is therefore possible that an organisation may legitimately receive state aid up to the EURO100,000 limit of the ‘de Minimis’ provisions AND subsequently (or simultaneously) receive compensation for delivery of a SGEI under the provisions for operating a Block Exemption.

Payment of compensation to successful bidders to the Growth Fund will not, therefore, be reckonable against the total that applies to any funding that may be received under the ‘de Minimis’ provisions.

Loan Plan Template

Quarters - when completing the Loan Plan Template, bidders should base Year 1, Quarter 1 on the estimated date they could begin a contract with the Growth Fund if their bid were successful. E.g. if the bid predicts a start date of 20 June 2006, Year 1 – Quarter 1 in the template would be 20 June 2006 to 19 September 2006.

End date - when completing the Loan Plan Template, bidders should be aware that the latest date on which planned payments to contractors will be made from the Growth Fund is 31 January 2008.

This means that with contracts starting no sooner than June 2006, there will be a maximum of 7 quarters in which payments will be made.

16 February 2006

Increase in credit union interest rate cap

As announced at the Pre-Budget Report 2005, to give better flexibility to serve low-income groups and following consultation, the maximum rate of interest that credit unions can charge on loans will be increased from 1 per cent a month to 2 per cent a month. The intention is that the necessary regulatory amendments will be made in the near future, with the new maximum rate available to all credit unions before commencement of Growth Fund contracts in July.

In preparing bids to deliver the Growth Fund service, credit unions should therefore submit one business plan, one set of financial forecasts, and one loan template. It is for individual credit unions to decide what interest rate, or range of rates, they propose to include in their business plan, financial forecasts and loan template.

7 February 2006

Commercial Briefing Sessions Q&A

The Questions and Answers section has now been updated with the questions asked at the Commercial Briefing Sessions held during January.

FSA Rules

At the recent commercial briefing events, a number of attendees raised questions as to whether delivery of the Growth Fund service should adhere to the rules laid down by the Financial Services Authority (FSA) concerning credit union loan operations.

DWP have now received confirmation from FSA that loans made from the Growth Fund should be treated and managed in the same way as loans made from any other source for all statutory, regulatory and reporting purposes, including financial reports to the FSA.

30 January 2006

Salford University and The Growth Fund

DWP has asked Salford University to look at the processes and costs involved in making personal loans in the third financial sector. The purpose of the work is to further help the Growth Fund Project take a realistic view of business proposals during the evaluation of bids.

No information provided by lending institutions to the University will be shared with DWP, and the work will have no impact on the outcome of any particular bid. However, the work is important because it will help us to better understand good application and lending processes and costs and we hope that institutions contacted by the University will feel able to contribute.

DWP does not know which institutions have been contacted and will not be given this information. Involvement in the work is entirely voluntary.

26 January 2006

At the recent Commercial Briefing events, the Growth Fund Team have been asked whether it is now too late for organisations to express an interest in bidding to provide Growth Fund services.

The answer is No. However it is imperative that any organisations wishing to express an interest do so very quickly. Late expressions of interest must be made in time for a pre-qualification questionnaire (PQQ) to be issued, completed and returned to:

Barbara Elliott
1st Floor, Saxon House
50 – 52 Heaton Road
Newcastle upon Tyne
NE6 1SL

Email: newcastle.thegrowthfund@dwp.gsi.gov.uk

To arrive no later than close of business 6th February 2006.

PQQs received after that date will not be considered.

Organisations which pass the PQQ stage will then be asked to complete a form asking for a Request for Proposal pack (sometimes referred to as an Invitation to Tender). This form must be completed, signed and returned through the post to arrive no later than close of business 20th February 2006. Electronic copies of the completed form will not be accepted.

Completed forms received after that date will be out of time and will not be considered. Bidders are advised to obtain proof of the date of postage in the event of any delay in the mail.

17 January 2006

The pre-qualification questionnaires (PQQs) received have been assessed and those organisations deemed eligible to bid have been invited to attend a briefing event. The remaining organisations have been notified giving reasons why they have been deemed ineligible to bid.

Any PQQs received after the requested date will be assessed and organisations notified of the result as soon as possible. Although every effort will be made to notify successful organisations in time for them to attend a briefing event, this cannot be guaranteed.

The PQQ exercise has thrown up two areas that require clarification:

Data Protection Act registration

Some organisations indicated that they were not registered under the Data Protection Act, their registration had expired, or they were exempt from registration.

The Department for Work and Pensions will not contract with any organisation that is not registered under the Data Protection Act. Organisations bidding to provide Growth Fund services must, therefore, ensure that they are registered when making their bid.

Provision of statutory accounts

The PQQ asked for 2 year’s statutory accounts. In general, the organisations completing PQQs fell into 5 categories in this respect:

1. Newly forming organisations with no accounts.
2. Newly formed organisations trading for less than 2 years, which submitted one set of accounts.
3. Organisations formed more than 2 years ago, which submitted 2 sets of accounts.
4. Organisations formed more than 2 years ago, which provided only one set of accounts. Some of these organisations explained the omission.
5. Organisations formed more than 2 years ago, which failed to submit any accounts and did not explain the omission.

The Request for Proposal, to be issued as part of the Invitation to Tender, will specify exactly what is needed in respect of accounting information. It is imperative that all eligible organisations adhere to these requirements to ensure their bid is considered.