POLITICS
17/09/2012 18:00 BST

Work And Pensions Secretary Iain Duncan Smith Defends Monthly Benefit Payments

Work and pensions secretary Iain Duncan Smith has insisted shifting to monthly benefit payments would help the poorest and dismissed claims the move will push low-income families into debt.

He told MPs on Monday the new Universal Credit had been designed for the majority but would also help longer-term claimants by weaning them off fortnightly payments before they return to work.

The work and pensions secretary said the current system was set around the "problems of a minority"

The Tory minister also defended moves to encourage claimants who have limited internet skills to apply online arguing it would be a "very good opportunity to get these people back in to the 21st century".

MPs on the work and pensions committee were also told that waiters, hairdressers and any other worker that receives tips will have to declare them if they claim the new benefit.

"Tips are counted as income," welfare reform minister Lord Freud said.

Under the Universal Credit there will be one single monthly benefit payment - rather than weekly or fortnightly as at present - and social tenants will have to pay landlords themselves.

In a report published on Monday, the Social Market Foundation think tank raised fears the poorest households would face further financial difficulties by changes to monthly payments.

It said attempts as part of the new Universal Credit system to encourage claimants to budget properly and make their own rental payments risk "backfiring".

SEE ALSO:

Universal Credit Could 'Backfire' On Poor People, Think-Tank Warns

But Mr Duncan Smith, who refused to move to another Cabinet brief in the recent reshuffle, said the current system was set around the "problems of a minority" while the majority of people went into the benefit system through temporary job loss. Most of those had been paid monthly, he added.

"Getting this set for the majority is critical so we can get that cycle," he told the Work and Pensions committee.

"For those who have been longer term unemployed and have got used to fortnightly the point is that now the barrier to work is that going to monthly payments once you are in work is the wrong moment to identify when you have a problem because that means you are likely to crash out of work at that point because you can't cope."

MPs were told the government is putting up to £140 million into helping people access "jam jar" style accounts, where money can be hived off into pots for rent and other expenses, or other accounts to help them budget. The Department for Work and Pensions has asked for banks and other institutions to apply to be part of the scheme.

Research by the Social Market Foundation, entitled Sink or Swim: the Impact of Universal Credit, found that most low income households were opposed to the move to the new system, expressing fears that they would not be able to budget properly and could end up in rent arrears and facing eviction.

Nigel Keohane, the think tank's deputy director and co-author of the report, said: "The government's laudable aim that Universal Credit should prepare families for work, boost their resilience to financial shocks, and simplify the system is at risk of backfiring.

"By moving to a single monthly payment for all benefits, the government is removing the markers and aids that families currently rely on to budget effectively. Our research shows that this will throw people in at the deep end leaving them either to sink or swim.

"This laissez-faire approach will create real problems not only for families themselves, but also for public service organisations, such as social landlords and childcare providers, that families will end up owing money to."

Dr Keohane doubted whether plans by the government to provide special arrangements for certain vulnerable individuals was adequate.

"Instead of mandating monthly payments and centrally planning which families to exempt, the government should allow low income families to take the decision themselves through an online budgeting tool," he said.

"This would allow the reforms to work with the grain of wider government objectives like personal responsibility and increased financial capability rather than working against them as the current system seems set to do."

A Department for Work and Pensions spokeswoman said: "Universal Credit will be paid monthly because most people in work are paid that way and the system should help people get used to the patterns of working life.

"But we will make sure that no one falls through the cracks, and we are working with local authorities and the financial industry on how best to support individuals.

"We have always said we would be flexible with people who might struggle to manage their money."