Managing money: the importance of autonomy

Managing money: the importance of autonomy

From time to time, we all get into difficulty managing our money. A boiler breaking, a car needing repair, a bigger heating bill than expected. These things can hit us hard and always seem to be poorly timed, particularly if money is already tight. We all have different methods of coping, and different ways of ensuring we keep on top of all the other bills and rent. Some people try to manage by taking the hit in one go; whereas others do the exact opposite, choosing to cut back less but over a longer period. Some will use savings and replenish these over time; others will try to cut back on their living expenses.

This will sound familiar to many. Managing our incomings and outgoings can be an intensely personal choice. But, for certain payments if you receive benefits, you do not get a choice. And given how meagre many benefit payments now are, that choice can be absolutely vital.

As part of the Secure Futures project, CPAG chief executive Alison Garnham published her paper, The Problem with Means-Testing. This takes a detailed look at the principles that underpin our means-tested system and the evidence that suggests it doesn’t work as well as intended. Our welfare system is rooted in means-testing and, as a result Alison argues, this means policy makers feel they can intervene in people’s lives. It encourages the ‘sense that you must prove yourself to be deserving’ enough to receive benefits. These ideas are very much at play with how autonomy is granted to those receiving benefits over how they manage incomings and outgoings. They are no more evident than in the rules for how housing benefit is paid.

As shown in Shelter’s recent report From the Frontline, even before universal credit was introduced, there was already a set way for tenants to receive housing benefit. Social tenants receiving housing benefit would have their rent paid directly to their landlord. When local housing allowance (LHA), the housing benefit that is supposed to cover private rents, was introduced, tenants would receive it themselves – rather than the landlord. Private renters could only have their LHA paid directly to their landlord if there was a particular reason why they were unable to manage their payments. Since universal credit has been introduced, social tenants are also now automatically paid their housing benefit, rather than it going to the landlord as before.

There is a way to have the payment changed from the default through an alternative payment arrangement (APA). However, the idea that people really have a choice over this is a bit of a myth. There is an uphill battle to prove need and that you are ‘deserving’ of that choice, and the process itself is often riddled with admin errors. We at Shelter have seen people applying for APAs that are never processed, or that do not kick in until months after they were processed. And even housing benefit being taken from the claimant but never ending up with the landlord. Not only that, but in order to get a change in how your housing benefit is paid, DWP guidance states a claimant should be ‘in arrears…for an amount equal to, or more than, two months of their rent’. A landlord can legally start eviction proceedings if you are in two months of rent arrears meaning those who can apply for an APA are already at crisis point and at risk of homelessness. At Shelter we’ve seen first-hand the impact it has when people are served eviction notices despite trying to actively make sensible decisions about how they manage their finances.

People have a whole range of reasons – from personal preference to much more serious medical reasons – why they would like to have their rent paid in a particular way. Rent should be no different from managing your money for unexpected payments. With housing benefit, this choice of how to manage your budget is crucial, because often there is simply not enough money even to pay for essentials. We know that LHA falls a long way short of covering rents across the country and on average those on the lowest incomes have to find an additional £113 per month, on top of their LHA, just to keep the roof over their heads. Those difficult budgeting decisions we all have to make from time to time are the everyday norm for a lot of people receiving housing benefit simply because they do not have enough money – and sometimes these decisions are impossible, particularly when you add on the impact of government policies such as the benefit cap and the ‘bedroom tax’. This all becomes more difficult still when you are prevented from making your own decisions about your budget.

We’re campaigning hard against the LHA freeze, and calling for rates to be increased so that they cover rents. Taking away people’s choice compounds these issues. People claiming benefits should be able to choose how best they manage their money – and this is more important, not less important, because they do not receive enough to cover costs. When thinking about what a future social security system should look like, ensuring people have enough money coming in, and giving people autonomy to budget and make choices so that they can actually cover the essentials, is fundamental. People who use the social security system, and that could be any of us, at any time, should be supported to make the decisions that are right for them so that they can get on with their lives.

This article originally appeared as commentary on the Child Poverty Action Group website.