1. SFHA, Glasgow, 26th NOV. 2012
Meeting the challenge of financial capability and
inclusion for Universal Credit claimants
“our reforms are about changing the culture of welfare,
so that it acts as a springboard rather than a trap”
Rt Hon Iain Duncan-Smith
Secretary of State for Work & Pensions
June 2012

2. THE POPULAR NARRATIVE
Never let the truth get in the way of a good story

3. THE COALITION’S REASONING
Address key identified deficiencies
in the existing benefits system:
• complexity
• weak work incentives &
• costly administration
The central proposal is the
introduction of a Universal
Credit, replacing various means-
tested working-age benefits,
to be implemented in 2013
and completed by 2017

4. FEW DISAGREE
“welfare dependency is now a way of life.
This destruction of aspiration has never
been morally acceptable. Moreover, it‟s
now financially unaffordable”
Dr Steven Brien Then, Centre for Social Justice.
Now, Expert Advisor DWP. The Spectator, March 2010
“The idea behind Universal Credit is that
work becomes a sensible choice and is
financially rewarding”
Christian Guy MD. Centre for Social Justice
quoted on “You & Yours” Radio 4, October 2012

5. £1 IN £8 SPENT ON WORKING AGE BENEFITS
“Spending on working-age
benefits and tax credits
increased by almost 50% in
real terms in the ten years to
2011/12. The state can no
longer afford to pay people
disproportionate amounts in
benefit each
week, sometimes in excess of
what someone in work may
take home in wages”
DWP Impact Assessment for the
benefit cap 16/7/2012

6. CROSS PARTY VOTER SUPPORT
“there are
reasons to
predict that
opinion has not
followed the
pattern of
previous
100
Should welfare levels overall be reduced?
recessions, becau
se the public has
94
90
(Source You Gov/Prospect Magazine March 2012)
80
embraced a more
76
74
70
60
tough-minded
59
50
view of welfare”
40
30 32
20
BSA29 October 2012
17
15
10
11
9
8
3 3
0
Yes No Dont know
Labour Lib Dem Conservative all

8. ATTITUDES TO WELFARE HARDENING
“In 1991, 26% agreed if benefits “In 1991, 27% agreed
were less generous people unemployment benefits were
would stand on their own two too high and discouraged
feet, now 54%” work, now 62%”
“We see the public is becoming less supportive of the government taking
a leading role in providing welfare to the unemployed, and even to the
elderly in retirement. There is less enthusiasm about public spending on
all types of benefits and an increasing belief that the welfare system
encourages dependence” All quotes from BSA29, October 2012

9. “Where is the fairness for the shift
worker, leaving home in the dark hours of
the early morning, who looks up at the
closed blinds of their next door
neighbour sleeping off a life on benefits?”
Rt Hon George Osborne MP (Oct 2012)

10. WELFARE REFORM : THE MAIN CHANGES
• Bedroom Tax: housing element cut if
deemed to be in home too big for needs. A
14% cut for 1 extra bedroom, 25% for 2
• Non dependent deduction: 18+, living in
tenants home, working = contribution
• Universal Credit: monthly in arrears, to
replicate wages
• Benefit cap: £350/wk (single) £500/wk
(couple)
• LHA: based on 30th percentile of rents in
area, paid to tenants as part of UC, not
landlords, linked to CPI
• Many other changes including: DLA, crisis
loans, child benefit, winter fuel
allowances, changes in backdating claims

11. THE BEDROOM TAX : DO YOU KYC?
Do landlords know their tenants circumstances and needs?

12. THE PREREQUISITES
• All UC recipients must have a
transactional account...
...and internet access!
• Paid monthly, in arrears, with real
time updates online
• Around 1 in 5 social housing
tenants, are unbanked
• How many will need internet access?
(digital by default)

13. WILL THE WHEELS COME OFF?
“Challenges are fundamentally
around the I.T., implementing
something on this scale...two
others, changing system and
behavioural change: changing
the culture”
Deven Ghelani
founder of Policy in Practice and key architect of
UC speaking to Credit Today, 28th Aug 2012

14. THE IMPACT IN SCOTLAND
• 484,790 HB claimants in Scotland
• 387,060 (80%) are social housing tenants
• receiving £81 average per/week
• £1.6bn in HB (social housing), of which
• £1.2bn (approx.) to working-age recipients
• Tenant has to make arrangements to pay a
landlord haunted by the L&Q experience
Sources: DWP HB/CTB caseload data May 2012

15. THE CHALLENGE FOR ALL STAFF
• L&Q “direct payment” pilot in 2002
saw arrears rise 133% from 3% to 7%
• 2002 economy was not as harsh
• Arrears would probably increase
anyway with economic
climate, without additional UC
challenge
• For a landlord with 4.25% arrears, a
133% increase = circa 10% arrears
• But, it‟s not just an arrears issue – loss
of rental income affects
investment, jobs and wider role

16. FINANCIAL RESILIENCE IS LOW
“Low levels of debt & high levels of savings;
alongside the capability to sustain this position”
• Three most commonly cited • Govt. say 75% paid monthly in
reasons for budgeting arrears but 42% of those in
pressure: bottom 40% are paid weekly
– food prices • Frequent payments ration
– fuel prices income & encourage restraints
– bringing up children • Hypothecated spending
• Cost pressures & squeezed decisions will suffer
incomes lead to sacrificing • Using cash is illogically logical:
one need for another more easily juggled or withheld
• 3/4 in lowest income quintile • More month than money
have no savings

17. POVERTY PREMIUM IS HIGH
October 2013 – could there be a worse month to start?
Provident (PFG) share price hit 10 year high in Oct. 2012

18. FOR MANY: A PREFERENCE FOR CASH
• Mistrust banks, prefer Post Office
Card A/C (POCA) & cash
• >850,000 basic bank A/C‟s (2009)
• with 840,000 returned item charges
• Avg bank charge is £14 per item
• £11.7m in bank charges
• For remaining few an account is
only opened after a trigger event
(clothing grant, loan offer, or UC)
• Expect a late rush!
• Social landlords need options

19. WHAT ARE SOCIAL LANDLORDS DOING?
Bank accounts
Debt Community
CU prepaid
management regeneration
Card accounts
“To either cut down on beer or the kids new gear,
it’s a big decision in a town called malice” The Jam (1982)

20. OPTIONS: BASIC ACCOUNT
20% of low income basic bank account holders incur charges
60
DD‟s are date driven – 50
not credit driven!
40
30
20
10
It‟s either in or 0
it‟s not it – it‟s UK
% of population with gross income <£15,000
Scot
not nearly in!
% of population with gross income <£15,000 who have BB A/C + trnd item charges
% of population with gross income <£15,000 who have BB A/C
Bank AC management is tricky, requires
financial capability, budgeting & planning.
Will be present in many tenants but not all

21. PCU: JAMJAR + PREPAID CARD
£39 set up cost includes UC paid into PCU AC
f2f PCU/tenant meeting triggers mandates to jamjars
Claimant (for household) nominates transactional account DWP pays Universal Credit monthly
Step 1
PCU meets with tenant
(60mins) to establish bill Step 2
payment mandates (inc. rent)
Step 3 Step 3 rent
PCU pays tenants bills (inc. One-off fee to landlords set up scheme.
rent) on receipt of UC.
Landlord charged monthly fee when
Residual balance swept tenant pays rent
same day onto PCU prepaid
PCU employ client manager to liaise with
card for everyday use.
landlords.
Some charges apply for
No rent = no fee.
card use.
Residual balance swept
Rent paid confirmation
onto prepaid card for
incurs £5 pcm charge
everyday use

22. SCOTCASH A/C OPEN + MONTHLY SUPPORT
Since 2007 Scotcash has opened >1,500 basic bank ACs
for tenants. In ¾ of cases there has been a “trigger” event
Post opening three month
•account opening meeting •tel/f2f follow up •Tel call
•evaluation of tenants •check DD successful •check bank account
financial capability / •experience of process •Tel call functioning properly
assessed by tel/f2f •address concerns
wider support needs •check bank account •address concerns
•check DD set up functioning properly
•assess wider progress
•address concerns •address concerns
One month •assess wider progress six month
Initial meeting
meeting follow up
• Estimate 1,900 accounts could be opened in Y1, and
• follow-up phone calls to the same number
• Estimate 25% (475) of clients will accept financial guidance
and account management advice and
• a separate 20% (380) client will require and be provided
with debt and money advice support

23. GRAND CENTRAL : HOMEGUARD
• 2,600 account held in their two branches
• Vast majority of customers are social housing tenants
• Male (71%) <40yo (60%) state benefits (70%)
• HomeGuard Account
• Can receive UC
• Credit-triggered
• Intensive f2f support by
GCS tellers ensures 14
day cooling off period
adhered to
• Could be local service

24. 365 DAYS AND COUNTING
• KYC / research
• Workshop with staff/tenants
• Segment tenants by level of support required
• Expect a late rush
• As it stands third sector orgs will be overwhelmed
• Some third sector orgs planning for UC – but it costs!
• Needs to be a win/win
• “open book” discussions landlords/third sector
• Landlords will pay – but how do they know results &
estimates will be delivered?
• Who might back “proof of concept” or underwrite?

25. SUMMARY
• Welfare reform already taking effect
• Widespread popular support
• Hardening public opinion
• Some tinkering; but it will happen
• Banking & Digital by default
• Pilots underway: one in Scotland
• Prep. important, but expect a late rush
• KYC, research & workshop
• Customer segmentation required
• No “low or no cost” answer
• Welfare reform; a „wedge issue‟ at
next election between political parties

26. 07799 875864
niall9a@hotmail.com
www.niallalexander.com