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Demonstration projects have shown ‘value of jam jars’ - MP

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Demonstration projects have shown ‘value of jam jars’ - MP

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Published by 24publishing for 24dash.com in Housing and also in Local Government, Universal Credit

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A Tory MP says the Government’s demonstration projects trialling direct housing benefit payments to tenants have shown the “value” of jam jar budgeting accounts and has asked Iain Duncan Smith to pay “particular attention” to credit unions in any future state tendering process.

Last September the Department for Work and Pensions (DWP) announced it was looking to implement a scheme to subsidise access to bank accounts or alternative financial products (e.g. jam jars) with specific budgeting functionalities for Universal Credit (UC) claimants. It estimated that around 2.5 million claimants would need additional support to manage their money during the transitional period of UC.

Budgeting accounts like jam jars allow claimants to split their monthly benefit into separate pots for spending, saving and bill payments etc. They are currently offered by only a number of financial providers: Royal Bank of Scotland, Secure Trust, Think Banking and Spectrum Payment Services and some credit unions. Barclays, Lloyds and bill payment specialist allpay - which provides rent collection services to housing associations and councils - are also exploring the concept.

The prior information notice issued by the DWP said: “Our key requirement is to ensure claimants have access to a range of suitable financial products i.e. transaction accounts that will enable claimants to manage rent and bill payments more effectively on a monthly basis through automated transactions such as direct debits/standing orders.”

It added: "DWP is currently agreeing the commercial approach to subsidising these accounts, including the number of providers that we intend to work with."

Yesterday in Parliament Damian Hinds, Conservative MP for East Hampshire, asked work and pensions secretary Iain Duncan Smith what assessment he has made of the potential of jam jar budgeting accounts under Universal Credit and that particular attention should be given to credit unions in any future tendering process.

He said: “The demonstration projects have shown the value of jam jar accounts, and commercially they could have much wider application. In the tendering process, will my right hon. Friend pay particular attention to the unique possibilities of credit unions, given their local base and links with housing associations?”

Iain Duncan Smith said he would and that the Government was doing its level best to get credit unions going.

He said “…we are giving credit unions extra money and backing them enormously to get going. I think that they will develop hugely, and I hope that they will eventually replace the payday lenders—it is really important that we all agree about that. On the jam jar accounts and the way we are making these payments, everyone warned us that there would be problems if we paid housing benefit direct. We have trialled that in one of the demonstration projects and, importantly, only 3% of those who receive their housing benefit payments direct are having to revert to indirect payments because they have been unable to cope. That is a major advance from the existing local housing allowance.”

Richard Graham, Conservative MP for Gloucester, asked Mr Duncan Smith whether Post Office accounts could be a useful alternative mechanism for those without bank accounts. Post Office Card Accounts (POCAs) can’t currently make outward payments other than in cash to the account holder.

Mr Duncan Smith said: "It is correct that Post Office accounts would be a useful measure in ensuring that we can give people the right kind of choice and the right kind of places for their accounts. Under Universal Credit, people will be given an opportunity to begin to live their lives in the same way as they would live them if they were back in work. That is a critical and huge change that will allow them to get back into work rather than not have to make the changes that could change their whole outlook."

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