Direct Payments are successful for the majority - but not all!

  • The Government has been warned rent arrears are likely to be higher when direct payment of benefit is rolled out nationally than under the government's demonstration projects.

    This is following Lord Freud announcing success that the pilots show 92%, and therefore the majority, of claimants are paying rent on time, even though this is lower than the current sector average.

     The initial findings published before Christmas of the six pilots for direct monthly payments, showed rent collection rates are 92% on average across the projects.

    This is lower than the current sector average, but the welfare reform minister Lord David Freud has claimed it as a success as the majority of people are paying their rent in full and on time.

    He has told the Capita Group conference in London on Monday that vulnerable claimants who cannot cope with budgeting monthly will be exempt from the new rules of monthly payments. This is following concerns that those unused to planning their finances will fall into difficulties.

    Lord Freud said:

    Early findings from the demonstration projects show the majority of people are meeting their rent payments in full and on time.

    Over the first four months, 6,220 social tenants were paid their housing benefit directly and rent collection rates stood at 92%.

    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.

    Paying housing costs direct is an integral part of Universal Credit and an important way of helping people to manage their own finances and become more independent.

    Budgeting support would look at a claimant's ability to pay housing costs in full and on time, at whether monthly payments are suitable, but Freud insists that they will continue with paying these as direct payments rather than reverting to paying landlords.

    However, outside of domestic violence refuges who are exempt from direct payments, previous criticisms of the system still stand; there does not seem to be a preventative measure for this, and the only way to find out those who should be exempt is to wait until they have fallen into difficulties.

    And even if the "majority" meet payments, there will still mean there are a number that will not. This is likely to mean that both social and private landlords could lose money if tenants prove incapable of budgeting to pay their rent on time. And it would also be very damaging for a claimant who is already struggling

    Freud acknowledged concern:

    I know there is some concern that the switch may cause a ‘mass’ of claimants to fall into arrears at the onset. But that’s not going to be the case.

    The fact is that claimant transition will be gradual over a four year period. There will be no big bang effect and we do not expect landlords to suffer sudden losses of income.

    They have also introduced the support method of different rent arrears ‘trigger' levels would be tested so that if tenants fell behind with payments rents could be temporarily paid direct to landlords - as can happen at present - and "additional support will be offered to the tenant".

    Lord Freud also said the Government would work with local authorities to design local support services to help claimants with budgeting and with handling their finances online.

    However, if universal credit is being launched in April in some areas and nationally in October, it is criticised that these plans should be in place and tested before the launch.

    Freud claims that the results showing 92% success, despite this being lower than normal, show that the majority of people are paying and therefore a successful result. This has brought worries that this may mean the direct payments will be assumed a success from the pilot, where in face the arrears are likely to be higher if the equivalent level of resources are not put in to making the direct payments work once the pilots are finished, especially if they are assumed to be mostly successful.

    Kate Webb, senior policy officer at Shelter, warned the communities and local government select committee of MPs of this and said:

    When you pilot something you want it to work so you put the resources in. Our concern is that those results won't be replicated on a national scale.

     

     


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