Up to 2.5 million claimants are estimated to need some support when the new welfare and Tax Credit system is introduced next year, which will make benefit payments monthly for the first time. Claimants will also no longer have the option to have rent payments sent direct to landlords.
The DWP has invited banks, mobile phone companies, smart card companies (ominously) and any other private sector shark who’d like a slice of the benefit bill,to bid for a whopping £145 million worth of contracts to design budgeting support. Despite this huge sum claimants are expected to be charged for any continuing support once they have been on the new benefit over 12 months. The contract specifications say:
“DWP intends to enable claimants to access financial products that offer budgeting support by subsidising the cost of these products for an interim period of one year per claimant as they transition onto Universal Credit. At the end of the initial subsidised period DWP will withdraw the subsidy. The claimant will then choose whether they wish to continue using the account, with either themselves or a third party meeting the ongoing monthly cost:”
The new products will give private companies unprecedented control over claimant’s money, with suggestions that some cash could be ring-fenced to pay bills or debts. The exact details of any scheme are not yet known as Lord Freud has thrown caution to the wind and decided that the ‘final design will be open to the market to devise’.
Of most concern however is the potential for abuse of those claimants who are genuinely vulnerable and worried about managing money under the new regime. The poverty pimps brought into manage the scheme will have just 12 months to ensnare claimants into depending on their new financial products.
With banks invited to bid for the contract, no doubt High Street loan sharks have also got their greedy eyes on the latest DWP money pit. One way to trap claimants into using the service is to trap them in debt. For the first time, credit histories of potential borrowers will be irrelevant. Companies involved in this scheme will have access to claimant’s money at the source, meaning there is no choice but to pay back any loans that may be offered.
Lord Freud has stated that products must help claimants ‘build up their credit rating’. One way to build up a credit rating is to borrow money. Is the ex-banker dropping a hint to his old chums in the financial sector that here is a way to entrap the very poorest in an inescapable lifetime of debt?
We should find out later this month when the contracts are announced.
The tender details are available at:
Already plans have been announced to make Hardship Payments into loans. These are the meagre payments which can sometimes be claimed when benefits have been sanctioned and are currently worth about £40 a week. Under new measures claimants can now face benefit sanctions of up to three years, with Housing Benefits also now to be stopped. This means those in extreme poverty will have to borrow Hardship Payments to pay rent and possibly Council Tax leading to sanctioned benefit claimants being forced to borrow money from the government to pay tax!
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