Universal Credit and personal service charges

Friday, 13 March 2020 - 11:02am

Timothy Platt from The Salvation Army calls on the government to rethink how personal service charges are managed for those claiming Universal Credit.

With the national rollout of Universal Credit completed in December 2018, new claimants needing welfare assistance must claim Universal Credit for help with rent and daily living costs.  One of the largest concerns of the sector at the time was how people in supported accommodation were expected to engage with the system, and after significant efforts across the country, the DWP agreed to exempt residents with their housing costs, and allow them to continue to apply for housing benefit directly if they need help with their rent costs. 

While this was a huge win, we are concerned that more needs to be done, that the people we see across the country are still struggling to manage their housing costs under Universal Credit. Recently, we are increasingly concerned that government needs to rethink how personal service charges are managed.

Rent costs in supported accommodation can usually be divided between core rent, and communal or personal service charges.  The core rent and communal services can be met by housing benefit, but personal service charges must be paid by the resident themselves.  These include personal utility charges, meals and other recreational facilities, with residents meeting these costs from their Universal Credit claim. 

Under the old system of ‘legacy benefits’, claimants could be helped to manage their finances by having personal service charges paid direct from their benefits.  This would be put in place when arrears had reached £100 or more and included a small deduction towards the arrears.

This provided piece of mind for residents that their rent was being paid and meant that supported accommodation providers did not have to consider asking a resident to leave their accommodation due to arrears.  Many people we support have problems with mental  health issues and/or substance dependency issues, so the assurance that rent was being paid allowed them to concentrate on these and other independent living skills.

Unfortunately, this provision was not carried over into Universal Credit.  A claimant may have the housing costs element of Universal Credit paid to their landlord under an ‘alternative payment arrangement’, plus a further deduction for rent arrears.  However, this does not help residents in supported accommodation as they do not receive the housing costs element.

This leaves residents in supported accommodation vulnerable to incurring rent arrears for non-payment of their personal service charge, with support workers spending increasing amount of time on Universal Credit related issues.  The Salvation Army has seen average resident debt for personal service charges increase by 35% between 2017 and 2019.

In October 2018, a housing coalition of Riverside, YMCA, St. Mungo’s and The Salvation Army published research looking at the difficulties residents face when attempting to make and maintain a claim for Universal Credit.  This found residents often had difficulties with the online claims process, communicating with the DWP, accessing bank accounts and managing their finances.

The research found that all residents in supported accommodation see the payment of their personal service charge as a priority.  However, with only half the residents declaring competence with budgeting and others experiencing mental health issues and/or substance dependency issues, there is a high risk that personal service charges will not be paid.  Residents experience stress and anxiety as a result, exacerbating existing problems. Despite additional support from our debt, employment and benefit services to cushion the negative impact on residents, The Salvation Army has seen a 25% increase in abandonments in the months immediately following the rollout of Universal Credit.

Amongst the recommendations in the research was a call to allow personal service charges to be paid direct to the landlord.  The regulations already give the DWP discretion to pay an amount of Universal Credit to another person, so it does not require any legislative change.

Guidance alone can be amended to replicate the provision seen under legacy benefits that service charge arrears would trigger direct payment to the landlord.  A small deduction for arrears could also be made, though there is concern that the 10 - 20% currently allowed would be unaffordable for residents.  There was only a 5% deduction for rent arrears under legacy benefits and this would be a more appropriate amount for residents in supported accommodation.

The Salvation Army is calling on the DWP to look again at the way vulnerable claimants can be supported.  The current ‘Move to UC’ managed migration pilot in Harrogate is examining ways this can done with trials of a ‘who knows me’ scheme.  Support workers should be treated as partners in helping support claimants, including payment of the personal service charge.  If processes can be amended to allow the direct payment to landlords, this will help prevent problems with rent arrears and abandonments.  As the number of rough sleepers is still unacceptably high, it is imperative that the Government does all that it can to help people most in need of support in our society.

We are interested in hearing from other organisations who have the same concerns. Please get in contact with Timothy.platt@salvationarmy.org.uk