sfha meeting the challenge of financial capability for uc claimants
TRANSCRIPT
Meeting the challenge of financial capability and inclusion for Universal Credit claimants
“our reforms are about changing the culture of welfare,
so that it acts as a springboard rather than a trap”
Rt Hon Iain Duncan-Smith Secretary of State for Work & Pensions
June 2012
SFHA, Glasgow, 26th NOV. 2012
Never let the truth get in the way of a good story
THE POPULAR NARRATIVE
Address key identified deficiencies in the existing benefits system:
•complexity •weak work incentives & •costly administration
The central proposal is the introduction of a Universal Credit, replacing various means-tested working-age benefits, to be implemented in 2013 and completed by 2017
THE COALITION’S REASONING
“welfare dependency is now a way of life. This destruction of aspiration has never been morally acceptable. Moreover, it’s now financially unaffordable”Dr Steven Brien Then, Centre for Social Justice. Now, Expert Advisor DWP. The Spectator, March 2010
FEW DISAGREE
“The idea behind Universal Credit is that work becomes a sensible choice and is financially rewarding”
Christian Guy MD. Centre for Social Justice quoted on “You & Yours” Radio 4, October 2012
“Spending on working-age benefits and tax credits increased by
almost 50% in real terms in the ten years to
2011/12. The state can no longer afford to pay people disproportionate amounts in benefit each
week, sometimes in excess of what someone in work may take home
in wages”
DWP Impact Assessment for the benefit cap 16/7/2012
£1 IN £8 SPENT ON WORKING AGE BENEFITS
59
32
9
74
15
11
94
3 3
76
17
8
0
10
20
30
40
50
60
70
80
90
100
Yes No Dont know
Should welfare levels overall be reduced? (Source You Gov/Prospect Magazine March 2012)
Labour Lib Dem Conservative all
“there are reasons to
predict that opinion has not
followed the pattern of
previous recessions,
because the public has
embraced a more tough-
minded view of welfare”
BSA29 October 2012
CROSS PARTY VOTER SUPPORT
“We see the public is becoming less supportive of the government taking a leading role in providing welfare to the unemployed, and even to the elderly in retirement. There is less enthusiasm about public spending on all types of benefits and an increasing belief that the welfare system encourages dependence” All quotes from BSA29, October 2012
“In 1991, 26% agreed if benefits were less generous people would stand on their own two feet, now 54%”
“In 1991, 27% agreed unemployment benefits were too high and discouraged work, now 62%”
ATTITUDES TO WELFARE HARDENING
“Where is the fairness for the shift worker, leaving home in the dark hours of the early morning, who looks up at the closed blinds of their next door neighbour sleeping off a life on benefits?”Rt Hon George Osborne MP (Oct 2012)
• Bedroom Tax: housing element cut if deemed to be in home too big for needs. A 14% cut for 1 extra bedroom, 25% for 2
• Non dependent deduction: 18+, living in tenants home, working = contribution
• Universal Credit: monthly in arrears, to replicate wages
• Benefit cap: £350/wk (single) £500/wk (couple)
• LHA: based on 30th percentile of rents in area, paid to tenants as part of UC, not landlords, linked to CPI
• Many other changes including: DLA, crisis loans, child benefit, winter fuel allowances, changes in backdating claims
WELFARE REFORM : THE MAIN CHANGES
Do landlords know their tenants circumstances and needs?
THE BEDROOM TAX : DO YOU KYC?
• All UC recipients must have a transactional account...
...and internet access!
• Paid monthly, in arrears, with real time updates online
• Around 1 in 5 social housing tenants, are unbanked
• How many will need internet access? (digital by default)
THE PREREQUISITES
WILL THE WHEELS COME OFF?
“Challenges are fundamentally around the
I.T., implementing something on this
scale...two others, changing system and behavioural change: changing the
culture”Deven Ghelani founder of Policy in Practice and key architect of UC speaking to Credit Today, 28th Aug 2012
• 484,790 HB claimants in Scotland• 387,060 (80%) are social housing
tenants• receiving £81 average per/week
• £1.6bn in HB (social housing), of which
• £1.2bn (approx.) to working-age recipients
• Tenant has to make arrangements to pay a landlord haunted by the L&Q experience
Sources: DWP HB/CTB caseload data May 2012
THE IMPACT IN SCOTLAND
• L&Q “direct payment” pilot in 2002 saw arrears rise 133% from 3% to 7%
• 2002 economy was not as harsh• Arrears would probably increase
anyway with economic climate, without additional UC challenge
• For a landlord with 4.25% arrears, a 133% increase = circa 10% arrears
• But, it’s not just an arrears issue – loss of rental income affects investment, jobs and wider role
THE CHALLENGE FOR ALL STAFF
• Three most commonly cited reasons for budgeting pressure:– food prices– fuel prices– bringing up children
• Cost pressures & squeezed incomes lead to sacrificing one need for another
• 3/4 in lowest income quintile have no savings
• Govt. say 75% paid monthly in arrears but 42% of those in bottom 40% are paid weekly
• Frequent payments ration income & encourage restraints
• Hypothecated spending decisions will suffer
• Using cash is illogically logical: more easily juggled or withheld
• More month than money
FINANCIAL RESILIENCE IS LOW
“Low levels of debt & high levels of savings; alongside the capability to sustain this position”
October 2013 – could there be a worse month to start?
Provident (PFG) share price hit 10 year high in Oct. 2012
POVERTY PREMIUM IS HIGH
• Mistrust banks, prefer Post Office Card A/C (POCA) & cash
• >850,000 basic bank A/C’s (2009)
• with 840,000 returned item charges
• Avg bank charge is £14 per item
• £11.7m in bank charges• For remaining few an account
is only opened after a trigger event (clothing grant, loan offer, or UC)
• Expect a late rush! • Social landlords need options
FOR MANY: A PREFERENCE FOR CASH
Questionnaire Scotcash Debt & Money advice
Tenancy support
Community regeneration
Debt managementCU prepaid
Card accounts
Bank accounts
“To either cut down on beer or the kids new gear, it’s a big decision in a town called malice” The Jam (1982)
WHAT ARE SOCIAL LANDLORDS DOING?
OPTIONS: BASIC ACCOUNT
0
10
20
30
40
50
60
UK Scot
% of population with gross income <£15,000
% of population with gross income <£15,000 who have BB A/C + trnd item charges
% of population with gross income <£15,000 who have BB A/C
DD’s are date driven – not credit driven!
Bank AC management is tricky, requires financial capability,
budgeting & planning. Will be present in many tenants but not all
It’s either in or it’s not it – it’s not nearly
in!
20% of low income basic bank account holders incur charges
DWP pays Universal Credit monthly
Step 1
Claimant (for household) nominates transactional account
PCU meets with tenant (60mins) to establish bill
payment mandates (inc. rent) Step 2
Step 3 Step 3 rent
PCU pays tenants bills (inc. rent) on receipt of UC.
Residual balance swept same day onto PCU prepaid card for everyday use.
Some charges apply for card use.
One-off fee to landlords set up scheme.
Landlord charged monthly fee when tenant pays rent
PCU employ client manager to liaise with landlords.
No rent = no fee.
PCU: JAMJAR + PREPAID CARD
£39 set up cost includes f2f
PCU/tenant meeting
UC paid into PCU AC triggers mandates to
jamjars
Residual balance swept onto prepaid
card for everyday use
Rent paid confirmation incurs
£5 pcm charge
Since 2007 Scotcash has opened >1,500 basic bank ACs for tenants. In ¾ of cases there has
been a “trigger” event
• account opening•evaluation of tenants
financial capability / wider support needs
Initial meeting
•experience of process assessed by tel/f2f• check DD set up• address concerns
Post opening meeting • tel/f2f
• check DD successful• address concerns
One month meeting
•Tel call• check bank account functioning properly• address concerns
• assess wider progress
three month follow up •Tel call
• check bank account functioning properly• address concerns
• assess wider progress
six month follow up
• Estimate 1,900 accounts could be opened in Y1, and
• follow-up phone calls to the same number • Estimate 25% (475) of clients will accept financial
guidance and account management advice and • a separate 20% (380) client will require and be
provided with debt and money advice support
SCOTCASH A/C OPEN + MONTHLY SUPPORT
• 2,600 account held in their two branches • Vast majority of customers are social housing
tenants• Male (71%) <40yo (60%) state benefits (70%)
• HomeGuard Account • Can receive UC• Credit-triggered• Intensive f2f support
by GCS tellers ensures 14 day cooling off period adhered to
• Could be local service
GRAND CENTRAL : HOMEGUARD
• KYC / research• Workshop with staff/tenants• Segment tenants by level of support required• Expect a late rush • As it stands third sector orgs will be
overwhelmed• Some third sector orgs planning for UC – but it
costs!• Needs to be a win/win• “open book” discussions landlords/third sector• Landlords will pay – but how do they know
results & estimates will be delivered?• Who might back “proof of concept” or
underwrite?
365 DAYS AND COUNTING
• Welfare reform already taking effect
• Widespread popular support• Hardening public opinion• Some tinkering; but it will
happen• Banking & Digital by default• Pilots underway: one in Scotland• Prep. important, but expect a
late rush• KYC, research & workshop• Customer segmentation required• No “low or no cost” answer• Welfare reform; a ‘wedge issue’
at next election between political parties
SUMMARY
