Bringing budgeting into the spotlight

There is a new emphasis in local authorities on helping customers manage their money. As well as paying out benefits, increasingly local authorities are proactively getting involved in helping people on benefits budget more effectively.

A number of factors have brought the issue of budgeting into the spotlight. Perhaps foremost is the growth of debt during the recession and the increasing number of individuals struggling with payday loans. It is only natural that local authorities will be concerned to ameliorate the impact of debt on their communities, and assisting people on a low income to manage money better is part of an approach to help individuals help themselves. As such, budgeting support sits alongside other services to improve citizens’ social and financial inclusion.

A second factor is the effect of April 2013’s welfare reforms, with the spare room subsidy restriction and localisation of council tax benefit creating a gap between outgoings and benefit income. Clearly these changes have added pressure on household budgets which were previously having their rent and council tax paid in full. In turn this has meant growing arrears and knock-on impacts on housing associations’ and local authorities’ income, and the services they can provide.

Third, the greatly increased use of Discretionary Housing Payments (DHP) creates a need to assess applicants more systematically, and many local authorities now require customers to provide income and expenditure details in order to have their DHP considered. Even if the only reason that customers start a budget is so that they can apply for a DHP, this still creates an opportunity to work with them on how to manage money better and what opportunities there may be to reduce spending or increase income.

The last factor is the introduction of Universal Credit (UC). Arguably it is the change in how benefits are administered under UC, with claimants receiving one monthly payment including rent, which is more significant than the various changes in benefit rules contained in the legislation. Though the number of people so far affected by UC is very small, it is becoming increasingly apparent from the pilot areas that many people will struggle with managing the single monthly payment. Early evidence suggests that a third or more of recipients are likely to fall into arrears with their rent. Providing extra support to this group, helping them budget on a monthly basis and pay rent themselves, is one of the roles envisaged for local authorities under the UC local services support framework.

For all these reasons, it is necessary to invest in new budgeting tools. Not only do these have to be ready for the introduction of UC, but they need to help right now with existing demand for money advice, help in dealing with rent and council tax arrears, and in applying for DHPs.

The new budgeting tools should have a simple design, with users able to enter a quick budget in a couple of minutes, using only basic headers such as ‘bills’, or to create a more detailed budget that drills down to individual items. The idea should be to provide flexibility for the user, accommodating individual preferences rather than forcing a particular kind of data entry structure. For many of the people with the most need to budget, using such a tool will be the first time they have thought about where their money goes. Hence the emphasis is on finding a quick and easy way to start the process, with the ability to add detail later in the process.

Our version presents a graphical illustration of the user’s spending and targeted messages and budgeting tips, with supporting text set by the provider organisation. This means people can be pointed towards local sources of help and advice. Where a customer wants to, they can save a number of budgets, perhaps to look at the effect of alternative scenarios such as going into work or moving home.

The entitledto budgeting tool also includes the facility to pre-populate the budget using a benefit calculation. The idea is to provide a comprehensive income maximisation and budgeting service in one responsive, easy-to-use service.

Finally, a range of features is included to help people move between adviser-led and self-service budgeting. As well as a ‘find an adviser’ feature, for people who start a budget themselves but then find they need help, there is also the facility to share budgets with clients so that they can take ownership of the process. Advisers also have access to an outcomes and next steps page, which can be used to triage customers or to identify those where direct payment of rent (so called ‘Alternative Payment Arrangements’) are most likely to be needed.

Download Phil's article in IRRV Benefit magazine (August 2014 edition).

For further information on the budgeting tool visit www.entitledto.co.uk/budget or contact info@entitledto.co.uk

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