THE BLOG

The Hidden Costs of Benefits Payments

12/07/2013 15:58 BST | Updated 11/09/2013 10:12 BST

Benefits and their cost have been the catch-cry of the political twitterati recently, as the Government and opposition took to the podium to speak of child benefit, a cap and winter fuel payments. Apparently, they are an expense that cannot be sustained by the UK economy regardless of our ruling party.

Yet while we talk of benefits as an expense to the nation, we rarely look at the expense of providing benefits themselves. I'm not talking about the actual benefit - employment, child or disability related - but the way in which the payments are made and the money often wasted in the process.

Local authorities could save hundreds of thousands of pounds each year if they stopped paying benefits through antiquated methods, which is the hidden cost of benefits provision. It may not change legislation and bring back child benefits for higher rate taxpayers, but it can free up a greater proportion of public money to allow local authorities to do real life-changing work on the ground.

One method by which these benefits can be administered to the significant advantage of both the recipients and councils is through the use of prepaid solutions. This state-of-the-art technology can have unparalleled benefits for local authorities, streamlining benefits payments to help to save money, time and effort.

The process is simple, quick and easy; benefits recipients are given a card with money loaded on to it. Local authorities can recoup unspent funds efficiently and, if they choose, can monitor how funds are spent and block spending on certain items. For example, youth cards can be administered where spending is allowed only in health clubs and not in bars, casinos and so on.

Our unstable economic environment and increased regulation have put public sector organisations under increasing financial pressure in recent years. Under these circumstances, local authorities are tasked with finding more efficient methods for carrying out payments.

Payment solutions need to be quick, cost effective and have a tangible tracking mechanism, covering distribution of funds such as welfare benefits, grants, awards, compensation payments and emergency payments.

From our experience of working with local councils, they are quick, easy and cheap to set up, manage and run; allowing councils to reclaim unspent funds, reduce admin costs and to track spending. The subsequent savings can be diverted to worthy causes, such as paying carers to spend more time with their clients.

For example, one London Council introduced a new Direct Payments programme in order to increase efficiency, reduce expenses, increase contributions recoverability and generate additional revenue through shared services. The results were demonstrable: £150,000 was saved from overpayments in January 2013, compared to just £13,000 in the same period in 2012. Beyond this, however, the ultimate aim was to save council worker time and free up resources. An estimated 135 worker days were saved, enabling a greater number of applications to be processed, ensuring backlogs were cleared and resulting in a greater number of end users benefitting.

In addition, another London council, Camden Council, introduced the Coo-L card, a specially designed prepaid card for young people, that was aimed to actively encourage positive leisure activities and pastimes, which were often inaccessible to the young people in the borough due to social and financial constraints.

The benefits to recipients are manifold: they are a fast, safe and secure way to receive payments, negate the security issues of carrying cash in hand, and allow users to spend online, in store or over the phone and use ATMs, giving them a substantial degree of financial freedom that they have never previously experienced.

In the debate over Universal Credit allocation, Prepaid can provide the only accessible solution to help people on benefits to budget responsibly, and should be trialled by the Government as a possible solution - much like it is in the US.

Prepaid solutions can help local authorities to take control of their cash flow and expenses, empower benefits recipients to take charge of their financial futures, and have a positive impact on society by freeing up local authority funds for what matters.

As the issue of benefits continues to rumble on in the press, why overlook the one word that can save money for everyone involved - prepaid?