Universal Credit has a basic premise, to be a benefit which helps unemployed to become employed and to support the under-employed to become full time employed. To do this the benefit is paid monthly like a wage, it includes help for housing costs as a wage would. Further it is administered by one department, the DWP, who will have limited communication with other agencies such as social landlords. In other words it gives the claimant a lump sum once a month to manage themselves.
Under current practices, housing benefit departments have exceptional relationships with social landlords all over the country. There is an enormous amount of data sharing and cooperative working to help vulnerable claimants receive their correct housing benefit awards and prevent homelessness. It appears that until recently the DWP had no idea about the extent of this data sharing.
Housing benefit sends award letters for every claimant to their social landlord explaining how much they will be paid each week and when these payments will appear in the rent account. The letters do not detail any personal information about the claimant such as how the calculation has been done or what their income is. The information is used by landlords to explain to their tenants what their shortfalls are and how and when to pay. Good practice, although some would argue this is a breach of data protection rules and also cumbersome and expensive for the tax payer to communicate on paper this way.
Under Universal Credit claimants alone will receive this information and will need to assess how much they pay each month for their rent.
This poses a number of difficulties:
- Many social landlords charge a weekly rent and the new benefit is paid monthly. Many claimants believe there are four weeks in a month and will therefore under pay their rent.
- Other problems arise when you take social landlords out of the equation, such as rent increases. Until recently the DWP believed that rent increases only happened in April, in fact they occur at all different times of the year with some landlords having multiple rent increases cycles across their properties. At present this information is sent electronically to Housing Benefit to be processed. Under Universal Credit the DWP expects each claimant to declare their rent increase individually and they believe they can process these one by one by the time the next payment is due. For over 12million claimants that’s no mean feat.
- Some claimants will not pay their rent, they will use their housing cost money for other debts or other urgent expenses. If the claimant has been sanctioned they may use their housing costs as living costs.
Of course DWP have put in place safeguards to prevent homelessness and rent arrears. Namely Alternative Payment Arrangements (APA). These should be put in place when the claim begins if the claimant has rent arrears, other money troubles or certain vulnerabilities. They can also be activated as soon as a claimant reaches eight weeks arrears alongside a third party deduction which claws back the money owed at 5% of the standard allowance (or £15.70 a month for a single person). If you live in West London in a one bedroom flat you may have £1640 of rent arrears by eight weeks and it will take eight years to pay these back at £15.70 a month, but then again under the UC system you shouldn’t be out of work for eight years and be able to pay the debt back at a higher rate once you are employed. It can also be difficult to get an APA in place at time of claim, the Job Centre staff rely solely on the claimant knowing how much their rent arrears are and then disclosing this.
Aside from the obvious difficulties of having housing costs paid directly to the claimant landlords will have to manage their rent accounts differently. Under the current system the national insurance number is the reference for a claim and when an APA is in place the only information a landlord has to go by is the NINO, amount of money paid and dates the money covers. If the landlord doesn’t have the NINO for their tenant or it is kept somewhere they have to manually access then it can take a long time to allocate the payment to the rent account. This isn’t too much of a problem now when landlords only have a handful of claimants but if they have thousands, or tens of thousands claimants then they will need to ensure their housing management systems can allocate payments automatically. The DWP have announced that the reference number for UC will not be the NINO from the February 2015 nationwide rollout, yet UC is live now and the NINo remains the reference. DWP also haven’t announced what they propose to replace it with. Landlords are calling out for a UC reference number in the same way a HB reference number is used. However DWP are looking into using existing tenancy references which leads to problems such as two different associations having the same reference for two different tenants. It also doesn’t account for the difference in the format of the tenancy reference, some landlords use eight digits, some ten, some use mixtures of numbers and letters, how will the UC IT system cope with this?
Universal Credit is fundamentally an excellent idea. It replaces three different benefit offices who all work out their benefits differently. Housing benefit is worked out weekly, tax credits are worked out annually and income replacement benefits are paid fortnightly. The DWP are right that this drip of money which comes in weekly, fortnightly and four weekly makes it harder for people to budget when they start work and are paid monthly.
Universal Credit also has the major advantage that it allows real time information to be used so claimants who’s work hours change weekly and monthly don’t have to trudge to their local benefit office every fortnight wage slip in hand to have their benefits suspended, readjusted, paid and clawed back.
DWP have simply underestimated how complex the benefits system is and the many players involved, not just claimants and administrators. Social landlords are the key to the success of this brilliant idea, they need to be worked with, listened to and consulted. It does appear that DWP are finally receiving this message, they are working with housing providers, employing housing staff for projects and sending out regulations for consultation. If the communication between DWP and landlords continues to grow as it is now, then UC will not just be the biggest change to the benefits system since its inception it will also be the greatest.