Tag Archives: Direct Payments

How Universal Credit Will Incentivise Rent Debt

rent-bookA perverse incentive in the Universal Credit pilot scheme has already emerged which will mean that social housing tenants who go into rent arrears will be able to have the housing element of the new benefit sent direct to their landlord.

Universal Credit will feature Direct Payments, meaning that council or housing association tenants will receive a monthly cash payment towards their rent.  At present Housing Benefits for social tenants go directly to social landlords in most cases.

This senseless move is based on yet another of Iain Duncan Smith’s pet obsessions, which is that housing benefits going direct to tenants will teach claimants to manage their money.

Housing Associations have been horrified by the changes, issuing warnings that they expect rent arrears to soar.  The DWP’s panicky response to this has been to decide that claimants who fall two months in arrears will automatically have payments switched back to landlords.

This means that tenants concerned about the impact of Direct Payments can simply avoid paying their rent for a couple of months.  This will automatically trigger their benefits to be directed back to their landlords, removing a stressful and senseless burden for already struggling claimants.

To be extra sure that their tenancy is not affected, claimants can keep hold of the cash and as soon as the two months are up then simply pay off the arrears.  Alternatively they could arrange to pay back the money owed in installments and use the two month’s housing benefit as an interest free loan.

It is not clear if tenants will be switched back to Direct Payments once rent arrears are paid off.  If they are then they will just have to stop paying their rent for a couple of months again.  As long as there is a continuous willingness to pay, and arrears stay around the two month mark, then few social landlords will launch formal eviction proceedings.  And just in case they do, the canniest tenants will make sure the rent is safely in the bank to be handed over any time the situation gets a little too hot for comfort.

In fact with Housing Associations also set to take a hit due to the new payments system, it would even in be their interest to support tenants to go into short term arrears. Social landlords are likely to ignore rent arrears once they hit five to six weeks, knowing that the trigger point, which will  clear up any future rent problems, is just a fortnight away.

This is exactly the kind of perverse incentive that the Government promised would be brought to an end due to welfare reforms.  In truth it will be the first of many as 50 year’s of steady development in the Welfare State is thrown away overnight in favour of Iain Duncan Smith’s endless back of the envelope crazy schemes.

The DWP have made clear that this arrangement may not stay in place as Universal Credit is fully rolled out.  The alternative however could leave some social housing providers on the brink of bankruptcy as the most marginalised tenants – who may have well documented drug, alcohol, gambling or debt problems, are given a huge monthly cash sum intended to pay their rent.  The reality is for some this will be a temptation they are unable to resist and lead to huge rent arrears.

Ultimately this will mean more evictions, which will be devastating for those tenants most in need of help, and hugely expensive for both social landlords and the tax payer alike.  Those evicted are likely to be shunted into the far more costly private sector or even face the extortionate rents charged by temporary accommodation and hostels.

Iain Duncan Smith and Lord Fraud are about to learn a stark lesson which will no doubt teach them exactly why the welfare system was quite complicated.  Unfortunately by the time that happens it will be too late for all of us, as the Daily Mail inspired delusions of two desperately out of touch rich men plunge millions of claimant’s lives into chaos.

Follow me on twitter @johnnyvoid


Has Lord Fraud Bungled the Universal Credit Launch?

lord-fraud-freudEvidence is emerging that a vital component of Iain Duncan Smith’s welfare reforms –  intended to protect vulnerable tenants and social landlords alike – has been bungled by Minister for Welfare Reform Lord Fraud.

The ‘financial products’ which Lord Fraud promised would support low income tenants with budgeting when the new payment structure is introduced don’t appear to actually exist.

To much fanfare Lord Fraud announced last September that private companies were being invited to create ‘financial products’ to help claimants manage their money under the new regime.  A tender was issued which astonishingly revealed that claimants were to be charged for this service and also seemed to include a possible entry point for High Street loan sharks to trap claimants in debt.

The successful bidders were supposed to be announced last December.  They weren’t and no explanation was ever given why.  The only clue as to what’s actually going on comes from allpay.net, a company eager to get their greedy hands on some tax payers cash via the welfare reforms.

According to them“allpay was one of a number of financial providers that attended the DWP’s procurement day and had been expecting the DWP tender in November. However, following a revised timetable for the procurement, allpay is not expecting to be updated on the DWP’s position until January. The department has also warned suppliers not to expect a tender in either January or February.”

Universal Credit is due to be begin in April, which means that the protection for so called vulnerable claimants that Lord Fraud has long promised, will not be ready for the launch.

This may come as a shock to Social Housing providers who have repeatedly warned that they anticipate losing millions due to the change in the way benefits are paid.  This will create a homelessness double whammy as more tenants are evicted for rent arrears, and social housing providers have less money to build new houses.

When Universal Credit begins in April this year, claimants will receive payments monthly as opposed to fortnightly or weekly as most do now.  Housing Benefit payments, which many claimants currently have paid direct to landlords, will in future be paid to tenants.

This has led to concerns from Social Housing providers that many tenants – already struggling under the tsunami of cuts – will find it difficult to balance budgets and are likely to slip into rent arrears.  A series of pilots of the new payments system has revealed these fears to be well founded, with rent arrears doubling in areas where the new system was trialled.

Up until recently Lord Fraud’s new ‘financial products’ were the answer to all these problems as he claimed:  “Accounts that provide people with extra budgeting services could help to ensure people’s essential bills are covered – helping them to build up their credit rating and break the cycle of financial exclusion.

“We are anticipating the call for new financial products may open up a new market place, where competition is strong.”

In a downbeat speech this week Lord Fraud did not even mention the bodged procurement, instead garbling:  “we recognise that there will always be some hard cases. Where this is the case vulnerable claimants could be made an exception to the payment rules for a period of time. Budgeting support will also be made available to support these individuals so that they can make a successful transition over time to the Universal Credit standard monthly payment.”

Not for the first time, it sounds like he’s making it up as he goes along and his ‘financial products’ seem long since forgotten.

Lord Fraud hasn’t been given much to do when it comes to the nitty gritty of welfare reform.  Iain Duncan Smith may be stupid, but he’s clever enough to know that all the old fraud is good for is standing round looking posh.

But these financial products were his chance to show that he isn’t just some comedy toff with a pervy grandad. And he fucked it up.  The truth is the Minister for Welfare Reform couldn’t run a bath without flooding out the building and getting his knob stuck in the plug hole.

Follow me on twitter @johnnyvoid

2 Million Face Rent Arrears Due to New Benefits System Admits Lord Fraud

Almost half of all claimants of Universal Credit feel they will be unable to manage their money when the new benefits regime is introduced next year research has revealed.

Universal Credit will replace all out of work benefits, housing payments and in work benefits such as Working and Child Tax Credits.  Unlike the current system, all payments will be made monthly, whilst there will no longer be an option to have rent paid directly to landlords.

This has led to concerns that those already on pitifully small incomes may have difficulties managing budgets and may fall into further poverty and rent arrears due to the changes.

The DWP are currently carrying out pilots projects to test the new payments system and the transition to monthly, online only benefits administration.  Predictably they are refusing to reveal the exact results of these projects.  What they are prepared to tell us reveals why.

Ever the optimist, Lord Freud, the Minister for Welfare Reform, claims that just 54% of claimants feel they will manage the transition to direct payments – when housing benefit payments are no longer sent direct to landlords.  The number of people claiming Housing Benefits, which is available to those in and out of work alike, is over 5 million.  What scant information has been revealed from the pilots suggests that around two and a quarter million people may fall into rent arrears due to the implementation of Universal Credit.

Astonishingly Lord Fraud attempts to spin this as a good thing, although concedes that ‘more work is needed’.  Perhaps of most concern is that the study appears to have been carried out using social housing tenants, where rents are lower and some support is already available through housing offices for struggling tenants.

In the private sector, where rents are soaring and landlords can evict tenants at the drop of the hat, the impact of Universal Credit is likely to be even more devastating.

Along with a toxic combination of housing benefit cuts and rocketing rents, the impact of this Government’s flagship welfare reform increasingly look like levels of homelessness never before witnessed in the UK.  This social deficit, of poverty, poor housing and desperation, is the real legacy that Iain Duncan Smith and Lord Fraud are leaving to the next generation.