Work and Pensions Secretary Iain Duncan Smith has asked officials to look into the feasibility of such an approach “in some detail”, as part of attempts to prevent people from spending benefits on alcohol or drugs.
If introduced, the smart cards would be restricted so that claimants could only spend their benefits on essentials, such as food, clothing and housing – similar to a system used in Australia.
But Rhian Beynon, head of policy at Family Action, warned that the proposals risk stigmatising families and “fly in the face” of efforts to empower people on benefits to take financial responsibility for themselves.
She added that introducing smart-payment cards for so-called “problem families” would deter parents from engaging in support to turn their lives around, such as the government’s troubled families programme.
Beynon called on Louise Casey, director general of the troubled families programme at the Department for Communities and Local Government, to use her influence to discourage the Department for Work and Pensions (DWP) from pursuing the payment card plans.
“Louise Casey needs to knock this idea on the head quickly if she wants the troubled families programme to succeed,” Beynon said.
“This will be experienced as deeply stigmatising by many families who need the help of the troubled families programme but are not alcoholics or drug addicts.
“The punitive tone of the DWP also threatens the success of the programme. Families are unlikely to voluntarily engage with a programme if money is removed from them. And supporting families to learn financial responsibility is a skill that cannot be taught through Oyster cash alone.”
A spokeswoman for the DWP said government is “determined to reform the welfare system so that it supports employment and tackles welfare dependency”.
“This includes looking at how to help the vulnerable people in society manage their money,” she said. “We will keep approaches under review, including looking at how pre-paid cards are used in other countries.”