Concerns arise over direct welfare payments

The biggest shake-up of the welfare system in decades is looming. In just over a year, people on jobseeker’s allowance and employment and support allowance, income support, child tax credits, working tax credits and housing benefit will receive a new single payment instead – the universal credit.

One of the biggest changes for families in receipt of housing benefit will be the way in which they are paid, with housing support included in the single monthly payment paid directly into claimants’ bank accounts.

Welfare minister Lord Freud believes paying tenants rather than landlords underpins the ambition of “allowing claimants to prepare for the financial responsibilities they will face when in work”.

But in a recent speech to the Local Government Association, he conceded the changes will mean local authorities and the community and voluntary sector will have to take on a “breadth of new powers and responsibilities”.

In June, the government launched pilots in six areas, which are trialling direct payments to housing benefit claimants.

Levels of support
Vivian Davies is head of collections and credit control at housing association Family Mosaic, which is working with Southwark Council on one of the pilots.

“We are trying to assess the type and levels of support families need to maintain direct payments,” he says. “We decided we couldn’t rely on our preconceived ideas of who can and cannot maintain their finances. So we wrote to tenants asking them what sort of support they think they will need.” The responses the association received ranged from assistance in opening a bank account to help controlling substance abuse, and support for tenants with learning difficulties.

Out of a potential pool of 535 tenants chosen for the pilots, 212 began to receive direct payments last month.

“As we support people throughout the project, we expect to identify some people that will probably never be able to manage direct payments. Those groups of people would be the ones that we recommended are regarded as exemptions under universal credit. Others may need support to manage their finances at the outset until they get used to it.”

But Geoff Fimister, a senior policy officer at the charity Citizens Advice and member of the advisory group on the direct payment pilots, has major concerns about the new system.

He argues that many families with children are already struggling to balance their finances and may prioritise buying items such as food or clothes for their children over making rent payments.

“Clearly the danger is that we have families on very low incomes and if the money for the rent is paid directly to them, they may go and spend it on some other essentials because they are under financial pressure,” he says.

“People on very low incomes are often brilliant managers of their finances because they have to be, but for many it will be a case of them simply not having enough money.”

Citizens Advice believes claimants should have the choice over whether or not they or their landlord receives the money. “Most claimants would prefer to have the money for the rent paid direct to the landlord so that is taken care of,” Fimister says.

Changing relationships
Davies acknowledges that the system of direct payments fundamentally changes the relationship between a housing association or local authority and families living in their homes. “If tenants have multiple debts, we will have to arrange for that person to meet with a debt adviser,” he says.

“Somebody with a bank account may have an overdraft facility on it. We may suggest that they open up another account so their payment doesn’t get swallowed up by their overdraft.”

This kind of tailored case-by-case support will require significant investment, something Davies wants to ensure is properly acknowledged by local authorities and housing associations.

For Citizens Advice, the extra resources needed to ensure no family is left floundering is something that must be of primary concern for the government.

“We are very much in favour of providing high quality, financial management and money advice to families,” says Fimister. “The question is, can you develop a high quality set of services across the country when the mainstream universal credit system comes about, not just in the few areas testing these payments?

“If you are going to do it properly, it is going to be very expensive. I don’t know if ministers really understand the extent to which they are going to need to put their money where their mouths are.”

Universal credit