“Universal Credit is a new benefit for people on low income or out of work. It is paid monthly, the way most people’s salaries are paid. This can help you prepare for the world of work as you get used to handling your money on a monthly basis.”
So says the Department for Work & Pensions guide to universal credit and budgeting.
Universal credit is paid five weeks in arrears into a post office account that cannot have any other money paid into it, such as wages. This basic post office account, which the DWP has contracted until 2021, doesn’t allow for any direct debits or standing orders. It provides for the state to pay in universal credit and the claimant to withdraw it in cash.
Now, I don’t know about you, but I don’t withdraw all my salary on the day it is paid in and manage all my outgoings from that withdrawal, but that’s what universal credit claimants are expected to do.
In our house, it goes like this: get paid into personal bank account, immediately move money via a standing order to joint account for household contribution. From joint account, pay by direct debit for mortgage, insurance, utilities, savings etc. What’s left in the joint account is for food and petrol.
What’s left in my own account after that is for shoes, wine, girly lunches and make-up. Managing money in this way has sustained a marriage for 24 years and ensures the proportions spent on mortgage versus wine are broadly right.
The consensus in our house is that we would skirt financial disaster if we had to manage the universal credit way. My husband says I’m better acquainted with the council finances than those of our household. I asked Doncaster Chamber of Commerce’s president for his view (he owns a company) and he would similarly struggle. It’s hard to see, then, how universal credit is going to help people best handle money on a monthly basis.
There’s another thing too: most people don’t get paid a monthly salary, and the DWP’s evidence base on the value of monthly payments is unclear. Ninety per cent of Doncaster’s businesses employ 10 people or fewer, and the vast majority of them operate on a weekly or fortnightly wages basis, paid either in cash or into a proper bank account.
Most jobs growth is in those businesses and most jobs contraction is in public sector monthly salaried positions. Doncaster is not unique in its business make-up and employment profile, so universal credit is not entirely helping to prepare people for the world of work, in my view.
And what of payments five weeks in arrears? Have you asked your staff how many of them have savings to let them function for a month without any income? I’ve taken a straw poll, and it is fewer than one in five.
The Financial Inclusion Commission reported in March this year that 13 million people did not have enough savings to support themselves for a month if they had a 25% drop in income, and two million adults had no bank account. Thirty-one per cent of the UK population displayed signs of financial distress. I recommend that report, which can be found at www.financialinclusioncommission.org.uk.
So, come on DWP, you are clearly proceeding with a lengthy and costly universal credit system (I look forward to the value for money assessment from the National Audit Office at some point), so please sort this out – if you really mean business about helping people manage their money and prepare for work.
Let’s stop stereotyping the “feckless poor” who need educating in financial management, and give them the same tools at their disposal that you and I take for granted. Ask yourself if you could function and function well the universal credit way. I wager that I am not alone.
Jo Miller, chief executive, Doncaster MBC