Report (2nd Day) (Continued)

Part of Welfare Reform and Work Bill – in the House of Lords at 10:45 pm on 27th January 2016.

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Photo of Lord Freud Lord Freud The Minister of State, Department for Work and Pensions 10:45 pm, 27th January 2016

This amendment requires the Secretary of State to make regulations that would allow universal credit claimants to opt to have the housing cost element of their award paid direct to the landlord, irrespective of the reason. One key principle of UC is that the single, monthly payment mirrors the payment of monthly wages that most claimants would receive if they were in full-time employment. Whether they are receiving UC or are working, tenants need to make similar decisions on managing their money, including paying their own rent.

The Government understand that a move to a single, monthly household payment is a significant change for many claimants and that some will require help and support. Regulations came into force in February last year to allow DWP to inform social landlords whenever one of their tenants makes a claim for or is awarded universal credit with housing costs or when an existing universal credit claimant moves to one of their properties. This enables the social landlord to decide whether the claimant requires advice, support or assistance in budgeting so that they can manage their rental payments.

There will, of course, be instances where the claimant needs additional support and, to this end, the Secretary of State already has powers to pay all or some of a claimant’s UC entitlement to a third party through alternative payment arrangements—or APAs, in the trade. There are three APAs: paying rent directly to the landlord; making more frequent than monthly payments; or splitting the payment within the household. APAs can be considered by the Secretary of State at any point during the universal credit claim, whether at the outset or later on, if a claimant cannot manage the monthly payment arrangement.

Recent improvements allow the landlord to email their APA requests, which are dealt with in a matter of days as a priority—so some of the early teething problems as we started rolling out the system have been addressed to speed up that process. Wherever possible, these arrangements are time-limited and delivered with appropriate budgeting support to help claimants make the transition to monthly budgeting.

The arrangement also covers claimants who are in rent arrears, and managed payments to the landlord will be considered where claimants have arrears of at least one month due to repeated underpayment or where the claimant owes arrears of at least two months and is at risk of eviction. These protections, combined with the measures enabling landlords to recover arrears from a tenant’s UC award, already mitigate any impact on landlords’ income or on homelessness.

We are in fact making a series of initiatives in this area and one of the most interesting is the trusted partner trials, where we are working with local authorities so that they decide the people who should be put on an APA, at least initially, and then look to see the budgeting support that a person needs to run their own funding.

Picking up the point made by my noble friend Lord Cathcart on experience, in terms of arrears we did an elaborate direct payment project and we found that, in the early stages, the numbers who paid in full were running at 95.5%, compared with 99% of those where the state paid. However, by the 18th payment—these were weekly payments in the comparator in this project—the direct payments figure had risen to 99%. Interestingly, this happened when the removal of the spare room subsidy came in, and those tenants who had become used to managing their own rent handled the removal of the spare room subsidy better than the ones who had been on the state-managed payments system. That is not surprising because the managed payments system is not necessarily an easy option where there are reductions for non-dependants, the spare room subsidy and so on, because the claimant will still need to pay the shortfall to the landlord.

The other factor, which I am surprised that noble Lords have not clocked, is that a large number of the families on universal credit are in work. It is not like the old legacy system where you have one lot out of work and one lot in work; this is a blended group and people are moving from the out-of-work group into the in-work group. Therefore, the idea that you can be halfway down the taper—in the jargon—and have a managed payment would be incredibly hard for any organisation, including the DWP and the tenant, to manage. Two million households is equivalent to a quarter of the case load.