All change ahead

In our briefing on Universal Credit and Alternative Payment Arrangements we outline what they are and how they could work in practice to support claimants who struggle with a monthly payment.

One of the government’s objectives for Universal Credit is for recipients to take more responsibility for their finances. This includes softening the divide between working and non-working claimants, so those supported by benefits receive their income in the same way as someone in work.

Claimants will be ‘paid’ Universal Credit monthly in arrears and as a lump sum, in a way designed to mimic a salary. This means households will have to take responsibility for paying their rent and budget to ensure sufficient funds are available. This will require a significant behavioral shift for social tenants who currently have their housing costs paid straight to their landlord.

DWP wants the majority of the projected eight million claimants to receive their Universal Credit like this but happily have acknowledged some flexibility is needed, to avoid a minority of tenants building up arrears and risking eviction. In February DWP promised Alternative Payment Arrangements (APAs) for those who need to receive their payment in a more tailored way.

This will include the option for ‘managed payments,’ meaning the housing component of Universal Credit will go direct to landlords. This will mitigate the risk of arrears and eviction.

APAs are welcome recognition that some people will always need extra support. This could include those with a history of debt or already in substantial rent arrears. But our concern is how the welcome principle of flexibility translates into practice. Will decision makers correctly identify those who require APAs before they have built up arrears? Experience from the introduction of Local Housing Allowance and more recently the Universal Credit trials indicate that it can be difficult and unpredictable to identify who will struggle. For example, someone may have no history of debt or rent arrears, but only because their housing benefit has always been paid direct to their landlord.

DWP also need to acknowledge the challenges created by insufficient income, with a basic lack of money trumping even the most carefully planned budgets. This will be compounded by cuts to housing benefit for private and social tenants, which mean households will have to both pay their rent direct and budget to make-up a shortfall.

To ensure APAs work in practice Shelter is calling for better publicity of the exemption, including information on how people can make the case that they would benefit from an opt-out. The system should not prohibit people who recognise they are struggling from seeking support. Asking for help and advice is empowering and shows responsibility – precisely the qualities DWP wishes to develop.

DWP also need to ensure decision makers work with those who know households to identify those who would benefit from APAs at the start of their claim, or react swiftly when circumstances change. Cooperation is needed between landlords, DWP, local authorities and others. This will not happen overnight or without effort, and will be made more challenging by cuts to local services’ own budgets.

Shelter remains supportive of Universal Credit in principle, but it is becoming increasingly clear that successful delivery of the new system presents enormous challenges. It is vital that DWP puts sufficient resources and attention into APAs to ensure the transition to the new payment doesn’t create more problems than it solves for those already balancing the challenges of a low income.