Housing associations have given a cautious welcome to Government plans to subsidise for a year bank accounts that would help claimants manage monthly payments under Universal Credit.
The Department for Work and Pensions (DWP) is set to appoint one or more payment suppliers to offer jam jar-style accounts – which allow people to split their benefit into separate pots for spending, saving and bill payments – that would be offered when claimants sign on to Universal Credit.
The theory being that from October next year, new Universal Credit claimants will have their circumstances assessed by the DWP and, if necessary, will be offered special “budgeting” accounts. Those offered the accounts will be those for example exposed to debt and who feel unable to manage monthly payments.
Those without bank accounts but who feel confident to manage monthly payments could be sign-posted to a basic bank account.
Those claimants assessed as qualifying for a budgeting account – which normally incurs a cost – will receive it free for the first 12 months.
The DWP estimates that around 3 million people will need some form of additional help to budget on a monthly basis come Universal Credit – with up to 1.3 million of these claimants currently not using a transactional bank account to manage their benefit payments.
Mark Causer, welfare reform specialist at Walsall-based housing association whg, gave the plans a cautious welcome.
whg is signing tenants up to new budgeting accounts – offered through its local credit union – ahead of Universal Credit next year and is covering the cost of them for the first year.
He said: “I’m pleased they’re [the Government] taking the needs of people on board but I do have concerns about it.”
He said whg would still see a “massive role” for its credit union partner Walsave because it is proactive in managing direct payments to the landlord ensuring tenants don’t just simply opt out of paying housing costs to the landlord and the accounts incur “very small transaction costs”.
It is still unclear whether the rent payments to housing associations would be guaranteed under the DWP scheme or whether it would be moved as an option which the customer then approves or can amend/ stop.
Mr Causer is also calling on the DWP to clarify its definition of “vulnerability” and warns that the accounts mustn’t simply be used as an alternative to direct payment to the landlord where the claimant is identified as “vulnerable”.
He said: “It comes back to who the Government classifies as vulnerable. We need to know what vulnerable is. Looking at this, it’s another thing people will need to be assessed for.”
The Government is keen to utilise credit unions in the delivery of the “budgeting” product, but it also wants nationwide coverage.
There are around four “accessible brands” offering budgeting accounts in the market as of last year: Royal Bank of Scotland, the Secure Trust Bank, Spectrum Payment Services and Think Banking Ltd.
Nick Atkin, chief executive of Halton Housing Trust, said that to prevent overlap/duplication and also to minimise the costs to the Government, the state-backed solution should only be offered in those areas where similar accounts are not offered by local credit unions.
He said: “This will also encourage credit unions to embrace the DWP’s modernisation agenda and take full advantage of the opportunities they have available to them from the introduction of Universal Credit.”
He also suspected that after 12 months, the costs of running the accounts for social tenants would be borne by housing associations.
He said: “Currently we are looking at a £2 per transaction charge with local credit unions. When you think it through this is still much cheaper once every four weeks than doubling existing income recovery teams to collect 63% of our current income which is no longer guaranteed.”