Benefit reforms 'risk backfiring'

Iain Duncan Smith's welfare reform plans have been criticised by the Social Market Foundation

Iain Duncan Smith's welfare reform plans have been criticised by the Social Market Foundation

First published in National News © by

Low income families could be pushed further into financial difficulties and debt by a shift to monthly benefit payments under Iain Duncan Smith's welfare reforms, a think tank has warned.

Attempts as part of the new Universal Credit system to encourage claimants to budget properly and make their own rental payments risk "backfiring", the Social Market Foundation said. It called for the introduction of an online budgeting tool allowing claimants to set the frequency of payments themselves and allocate income to different items of expenditure.

Under the Universal Credit there will be one single monthly benefit payment - rather than weekly or fortnightly as at present - and social tenants will have to pay landlords themselves. The Government says it will be "flexible" with those who struggle to manage their money.

Research by the Social Market Foundation, entitled Sink or Swim: the Impact of Universal Credit, found that most low income households were opposed to the moves, expressing fears that they would not be able to budget properly and could end up in rent arrears and facing eviction.

Nigel Keohane, the think tank's deputy director and co-author of the report, said: "The Government's laudable aim that Universal Credit should prepare families for work, boost their resilience to financial shocks, and simplify the system is at risk of backfiring.

"By moving to a single monthly payment for all benefits, the Government is removing the markers and aids that families currently rely on to budget effectively. Our research shows that this will throw people in at the deep end leaving them either to sink or swim. This laissez-faire approach will create real problems not only for families themselves, but also for public service organisations, such as social landlords and childcare providers, that families will end up owing money to."

Dr Keohane doubted whether plans by the Government to provide special arrangements for certain vulnerable individuals was adequate. "Instead of mandating monthly payments and centrally planning which families to exempt, the Government should allow low income families to take the decision themselves through an online budgeting tool," he said. "This would allow the reforms to work with the grain of wider government objectives like personal responsibility and increased financial capability rather than working against them as the current system seems set to do."

A Department for Work and Pensions spokeswoman said: "Universal Credit will be paid monthly because most people in work are paid that way and the system should help people get used to the patterns of working life. But we will make sure that no one falls through the cracks, and we are working with local authorities and the financial industry on how best to support individuals. We have always said we would be flexible with people who might struggle to manage their money."

Asked about reports of unease within Whitehall about the prospects of a successful introduction of Universal Credit, Prime Minister David Cameron's spokesman said: "Universal Credit is on track and on budget. We are bringing it in to replace the current system and it will make it a simpler welfare system and it will make sure that work pays.

"There is a big implementation programme under way. Clearly it is a very large, complicated project and we will manage it accordingly. Any large IT project involves some risks and you have to make sure you have the processes in place to manage those risks. We believe we do. This is an absolutely vital part of our welfare reform agenda and we are fully committed to it."

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