Universal credit: budgeting support
David Simmons examines DWP guidance on the provision of budgeting support for universal credit claimants.
One of the most controversial features of universal credit (UC) is the provision for monthly payments to be made direct to households (see Bulletin 230, p4). Claimants will normally receive a single monthly payment covering all elements of UC to which they are entitled, including payments for children and housing costs. The government argues that this will encourage them to take greater responsibility for their finances and will smooth the transition into paid work. Critics are concerned that the new arrangements will result in budgeting difficulties for many of the poorest and most vulnerable claimants. The government accepts that a minority of claimants will require additional budgeting support and has produced initial guidance on how this will be provided. At this stage, the guidance only applies to the pathfinder phase of UC from April 2013 (see Bulletin 233, p4) but similar guidance is expected to apply to the national roll-out of UC from October.
The default provision is for payment of UC monthly in arrears by direct credit transfer into a nominated account held in the name of a claimant (or appointee). In the case of couples, this could be one partner’s account or a joint account. Payment is made in respect of each ‘assessment period’ of a calendar month, with the normal payday being seven days after the end of each assessment period.1
The rules provide for three exceptions to the default arrangement.
- UC can be paid otherwise than monthly ‘in any case or class of case’ determined by the Secretary of State.2
- In the case of couples, payment can be made to one partner only, or split between partners if it is in the interests of the claimants, a child for whom they are responsible, or a severely disabled person where a carer’s element is being paid for looking after him or her.3
- Payment can be made to a third party (eg, a landlord) on the claimant’s behalf, if it is necessary to protect the interests of the claimants, or a child or severely disabled person as above.4 In the case of housing costs for secured loans taken out by owner occupiers, payment is normally made directly to the lender.5 There is also provision for deductions to be made from UC and paid directly to third parties to discharge debts (including rent arrears) subject to detailed conditions and rules.6
Justification and concerns
The government’s justification for making monthly payments direct to claimants is that this will encourage personal budgeting responsibility and reflect the world of work, with 75 per cent of employees receiving monthly wages, making monthly payments the most sensible arrangement for working claimants and ‘smoothing the transition into work’ for unemployed claimants.
Critics point out that only 51 per cent of people earning under £10,000 a year receive monthly earnings, and that many of the poorest and most vulnerable claimants who have high levels of unsecured debt could struggle to budget on a monthly basis (see Bulletin 230, p 4). Lump sum monthly payments for all elements of UC, including children and housing costs, will make it difficult for some claimants to prioritise between different areas of expenditure and debt, and increase the risk of claimants being left without money if it is all used before their next payday or if something goes wrong with their payments.
The government accepts that the move to monthly payments to households will cause difficulty for some claimants and has put into place three main safeguards.
- Payments on account in the form of short-term advances and budgeting advances (see Bulletin 233 p6). Short-term advances go some way to replacing crisis loans but are much more restricted in scope and do not apply in most situations where a claimant has run out of money. Budgeting advances go some way to replacing social fund budgeting loans.
- Local welfare provision (see Bulletin 233, p7). In most cases, these will be restricted to emergency provision (often in kind) and will not address ongoing budgeting difficulties.
- UC budgeting support. This is covered by the DWP guidance which is examined in detail below.7
Elements of budgeting support
The guidance covers two elements of budgeting support:
- money advice to help claimants manage their finances on a monthly basis;
- alternative payment arrangements, in the form of:
– direct payment of housing costs to landlords;
– bi-monthly payments of UC;
– split payments of UC to partners in couples.
The guidance states that ‘money advice will be offered to all UC claimants’ and ‘given to those with a clear need’. The level and type of advice will be based on need and will range from sign-posting to online services, through to telephone advice and more intensive face-to-face advice. The advice will be delivered by external organisations with relevant expertise. This could include local and national organisations – eg, Money Advice Service and Citizens Advice. A need for money advice could also trigger consideration of alternative payment arrangements (see below).
Alternative payment arrangements
Any or a combination of the above alternative payment arrangements can be considered at any time during a UC claim. Consideration of an alternative arrangement could be triggered by the DWP on its own initiative or on application by the claimant, the claimant’s representative or caseworker, or the claimant’s landlord in the case of rent arrears. There is no set format for making an application, which could be done by telephone or in writing.
Decisions on whether to implement an alternative arrangement are made by UC advisers on behalf of the Secretary of State. There is no right to such an arrangement and no right of appeal against a refusal, but discretion must be properly exercised in each case, taking into account the individual circumstances. Decisions can be challenged by making written representations and, in exceptional cases where the need is acute or urgent and the application has not been properly considered, threatening and pursuing judicial review proceedings. Other possible remedies include making an official complaint to the DWP, the Independent Case Examiner and the Parliamentary Ombudsman (see Chapter 61 of CPAG’s Welfare Benefits and Tax Credits Handbook 2013/14 for details).
The guidance stresses that alternative payment arrangements should only be considered for the minority of claimants ‘who genuinely cannot manage the single monthly payment and as a result there is a risk of financial harm to the claimant or their family’, and are ‘not available through choice’. They are subject to review after an appropriate time, to decide whether the claimant has become capable of managing the standard monthly direct payment.
Alternative arrangements should be decided in the following priority order.
- Rent direct to the landlord is the first priority to safeguard the claimant’s home.
- More frequent payments come next, where monthly payments are causing difficulties. It appears the normal alternative option will be bi-monthly payments in arrears, with 50 per cent of the monthly payment being made on the normal payday and the other 50 per cent two weeks later.8
- Split payments between partners should only be considered in specific situations – eg, where one partner is mismanaging the UC award, or where there is domestic violence.
The guidance stresses that all cases must be assessed non-judgmentally on an individual basis, taking into account all relevant details provided by claimants, their representatives and landlords. The guidance then lists ‘Tier 1 and Tier 2 factors’ which should be used to help decide whether alternative arrangements are appropriate in an individual case.
The guidance could be useful to advisers who are trying to secure alternative payment arrangements for claimants who fall within the listed categories and could be referred to when making representations. Falling into more than one category may also strengthen a claimant’s case. Claimants should not be excluded from consideration for an alternative payment arrangement merely because they do not fall within a listed category, as this would amount to an unlawful fettering of discretion by the Secretary of State.
Tier 1 factors are described as ‘highly likely’/‘probable’ needs for alternative payment arrangements. They are:
- Drug, alcohol and other addiction problems
- Learning difficulties, including problems with literacy or numeracy. This may be linked to a medical condition (eg, autism or Down syndrome) and evidenced by low educational achievement.
- Severe/multiple debt problems. This could apply to claimants unable to meet credit commitments after necessary expenditure. Severe problems could be evidenced by multiple debts, at least two months’ arrears and heavy use of local welfare assistance schemes. The ‘key factor’ is described as ‘the claimant has not made a repayment plan or is not sticking to the terms...and is a very disorganised and chaotic money manager’.
- In temporary or supported accommodation. This could include B&Bs, refuges, homeless hostels and accommodation with housing-related support, where this impedes the ability to manage financially with monthly payments – eg, because the accommodation is short stay.
- Homeless. This applies to those without safe or reasonable accommodation, or threatened with loss of such accommodation within 28 days. This will include rough sleepers and those in hostels, squats or about to be evicted. Claimants should have been homeless for more than two weeks or not at the same address for more than a month.
- Domestic violence and abuse. This could include current or past financial, psychological, physical, sexual or emotional abuse, and threatening or coercive behaviour, between partners, family members and in ‘forced marriages’.
- Mental health condition. This could include any condition which impairs the ability to manage affairs effectively – eg, phobias, bipolar disorder, severe depression).
- Rent arrears/threat of eviction or repossession. The guidance refers to those with two or more months’ rent arrears, those evicted for rent arrears in the previous 12 months and those threatened with repossession or eviction. A recent DWP circular indicated that claimants in the pathfinder areas with more than two months’ rent arrears will automatically be switched to direct payments to landlords.9
- 16/17-year-olds and care leavers. Many will have limited or no financial capability and be in hardship.
- Families with multiple and complex needs. They could be part of the government’s Troubled Families Programme, or have a history of persistent offending, antisocial behaviour, mental health issues, domestic violence or drug and alcohol issues.
Tier 2 factors are described as ‘less likely/possible’ needs for alternative payment arrangements. They will only be relevant where they impair a claimant’s ability to effectively manage her/his financial affairs. They are:
- no bank or usable account;
- third-party deductions in place (eg, to repay utility arrears), or eligible for rent arrears because of more than two months’ arrears;
- refugees or asylum seekers eligible for UC;
- history of rent arrears (in past 12 months) but not currently in arrears;
- previously homeless or in supported accommodation (in past 12 months);
- disability other than mental illness;
- recently left prison or hospital or bereaved (in last three months);
- English not first language;
- ex-service personnel (discharged in last 18 months);
- aged under 24 and not in education, employment or training.
Please be aware that welfare rights law and guidance change frequently. Therefore older Bulletin articles may be out of date. Use keywords or the search function to find more recent material on this topic.
- 1. Regs 46 and 47 Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013 SI 2013 No. 380
- 2. Reg 47(1)
- 3. Reg 47(6)
- 4. Reg 58(1)
- 5. Reg 59 and Sch 5
- 6. Reg 60 and Sch 6 and 7
- 7. UC personal budgeting support, 11 February 2013, available at: www.gov.uk/government/publications/universal-credit-local-support-servic...
- 8. DWP presentation on UC personal budgeting support, 22 May 2013
- 9. para 10, Annex F, HB Circular A13/2013, 29 April 2013