Universal Credit Scottish choices: evaluation - qualitative research - annex b

4. Perceptions of the impacts of Scottish choices for people on Universal Credit

Key findings

Perceived impacts of Direct Payments to Landlords

• Positive impacts of direct payments included simplifying claimants' money management, ensuring their rent was paid, and reducing their worries about their housing and money.
• The impact of direct payments in reducing worry was particularly evident among those claimants who had previous negative experiences of housing insecurity, and among those whose health issues meant they were more susceptible to serious negative impacts from stress.
• However, although there were clear examples of the positive impacts the Direct Payments to Landlord option could have, issues with the payment system had created significant unexpected negative impacts for some claimants, with issues with 'technical arrears' creating considerable emotional and financial stress.
• Other examples of problems people had experienced after opting for direct payments related to other elements of how it had been operationalised (for example, people falling into arrears in the first assessment period, before they are allowed to opt for Scottish choices), or how it works in practice for particular groups (such as those whose income is variable month to month).

Perceived impacts of More Frequent Payments

• The positive impacts of receiving more frequent payments largely mirrored people's reasons for choosing this option: it made it easier to make money last, and helped people manage their money in a way that suited them, which in turn helped people to worry less about money.
• As with the Direct Payments to Landlords option, where more negative experiences were reported these tended to relate to specific elements of how the policy has been operationalised - specifically, the fact that payment dates fluctuated.
• There was also a strong view that, while Scottish choices can help some people to manage their low incomes, they cannot overcome all the perceived problems with the Universal Credit system - in particular, the overall low level of payments.

This chapter explores the impact of Scottish choices on the Universal Credit claimants who choose them. It considers both perceived positive and negative impacts of each option, drawing primarily from interviews with people on Universal Credit, but supported by insights from key informants and landlords.

It addresses the following research questions:

• If people decided to accept Universal Credit Scottish choices, what influence on their ability to manage household budgets did this have and did it have any knock-on effects on debt, rent arrears, evictions or homelessness?
• If people chose to be awarded Universal Credit twice monthly and/or to have the housing costs in their Universal Credit award paid directly to their landlord, but then reverted to the default payment method(s), what was the reason for doing so?
• How is the impact of Universal Credit Scottish choices affected by the way it interacts with other aspects of the design of Universal Credit?

Perceived impacts of the Direct Payments to Landlord option for people on Universal Credit

Perceived positive impacts

Participants who felt the Direct Payments to Landlord Scottish choice had helped them reported benefits in three key areas: it had ensured their rent was paid on time, simplified their money management and, as a result, it had helped them worry less about money and housing.

Participants spoke positively about the Direct Payments to Landlord option ensuring their rent was paid in full and on time. For example, one participant noted that being on this option meant both that she felt more certain her rent was paid, and that she could not be held responsible for any problems that arose around rent:

"I just I feel safer that way. I know it's there and it's one of your biggest worries you obviously want a roof over your head and that takes the element, it takes stress away from me and it goes directly to them and I don't need to worry about it, and because it's getting paid that way nothing will ever come back to me. I can't get accused of anything because I've not had the money in my hand in the first place."

(Interviewee 33, Female 45-65, on DPL)

Key informants also spoke positively about direct payments helping to safeguard tenancies. For key informants who worked in organisations that helped represent tenants in court, they noted that being on the Direct Payments to Landlord option (as proven by their Universal Credit Journal) was commonly used in court as a defence to show that tenants were not at fault for any technical arrears and should not be evicted.

In addition to ensuring that rent was paid, claimants also felt that having their rent paid direct to their landlord had simplified their money management more generally. One reason for this was they did not have to keep money aside to use on rent, or factor rent into their budgeting:

"It's made a big difference it getting paid to the landlord instead of us. […] I know when I get my £600, I take so much off for food, so much of for bills and all that - it makes it much better."

(Interviewee 12, Male 18-29, on DPL)

Another way in which it had simplified participants' money management was by removing the "temptation" to spend rent money on other things.

These two interrelated positive impacts (making sure rent was paid and making it easier for claimants to budget) in turn led to positive wellbeing benefits for claimants. The fact that their rent was automatically taken care of gave them "peace of mind" and meant that rent was "one less thing to worry about". The impact of direct payments in reducing stress was particularly evident among those claimants who had previous negative experiences of housing insecurity, and among those whose health issues meant they were more susceptible to serious negative impacts from stress, as illustrated in Case Study 2, below.

Case study 2 - Callum

Callum is in his late 20s and lives alone. He first applied for Universal Credit because he was homeless and was advised to apply for Universal Credit to get temporary accommodation. He has health problems and lives with a disability.

Callum does not remember ever being informed about the Direct Payments to Landlord Scottish choice. When he first started on Universal Credit, he was under the impression that his rent would automatically be sent to his landlord. When he realised this was not the case, he worried that he might be at risk of becoming homeless again, and immediately asked the Jobcentre if they could change things so his rent was paid directly.

Once he had direct payments set up, he felt much better. He was glad to know that he had a roof over his head, and it helped reduce his anxiety levels. However, he had experienced some issues around the timeliness of rent payments through this option. His housing provider had called him up to let him know that that month's rent payment had not come through. His housing manager was very understanding, and said they were hopeful that the payment would be included in next month's payment run. Callum said his housing team was "brilliant", kept him informed, and had helped set up food parcels for him in the past. However, he did not understand why that month's rent hadn't been paid by when he had opted for direct payments months ago. Given his past experiences of homelessness, this sort of uncertainty around his housing made him really nervous. He felt that as long as it says on his Universal Credit journal that he's on the Direct Payments option then he can show the fault is not with him, but he still felt quite anxious about it and hoped it would be sorted soon.

Despite this issue, overall Scottish choices had made Callum's life easier and reduced his worrying about money and housing, and he planned to stay on both Direct Payments to Landlord and More Frequent Payments (which he had opted for early on) for the foreseeable future.

Callum still struggles with his money and regularly seeks help from food banks, but Scottish choices have improved his wellbeing and made his money management easier. He thought that the choices should be more widely advertised because a lot of people (including him at first) do not know about them.

"It made a difference to my anxiety levels and stuff like that not worrying about, basically not having to worry about having to get the rent paid and being homeless again as well."

Another claimant described having experienced a serious mental health crisis a few years ago. He spoke about how reducing the number of things he had to worry about was an important part of his recovery - having his rent paid direct helped him avoid stress and focus on his own wellbeing rather than worrying about paying rent.

"I've shrugged the responsibility; I have handed it to somebody else. They are dealing with it and I don't need to worry about it, which is great as far as I'm concerned - the last thing I need in my life is worry."

(Interviewee 27, Male 45-65, on both DPL and MFP)

Landlords and key informants confirmed the view that direct payments were particularly beneficial for potentially vulnerable claimants, such young people who are new to financial independence, people with addiction issues, and those with a history of arrears.

"The Direct Payment to Landlord choice particularly benefits those who struggle with paying rent - those with vulnerabilities such as health conditions, being involved with social work, people with kids - all these groups are more vulnerable to rental worries. Also, people who have experience of eviction and those with debt."

(Key informant 13)

However, although the positive impact of the Direct Payments to Landlord option on wellbeing was most apparent among vulnerable claimants, even those participants who had always found it straightforward to pay their own rent reported benefits. They may not have found it too difficult (administratively or financially) to pay their rent, but they were nonetheless glad to have that responsibility taken off their plate and about having "one less thing to worry about".

Perceived negative impacts

The experiences above indicate the scope for the Direct Payments to Landlords option to have an extremely positive impact for people on Universal Credit. However, there were also examples where people had experienced problems with the operation of this option, leading to negative impacts on their finances and wellbeing.

The first set of negative impacts related to difficulties with the payment system to landlords. As discussed earlier (see Chapter 2, Box 2), the misalignment between bulk payment dates and individual Universal Credit payment dates meant that it was not uncommon for people on direct payments to fall into 'technical arrears'. Claimant accounts indicated that different landlords had different attitudes to these technical arrears. Some said their landlords were understanding and flexible about when their rent arrived, accepting that it was not the tenant's fault and that the landlord would receive the rent eventually. Others had been pursued by their landlord for technical arrears money that (because they were on direct payments) had never even been in the claimant's bank account. Case Study 3, below, illustrates the negative impacts this had for both financial and mental wellbeing.

Case study 3 - Marion

Marion has been on Universal Credit since coming off Employment Support Allowance. She and her husband opted both to receive more frequent payments and to have her rent paid direct to her landlord after having the Scottish choices options explained to them by someone at the Jobcentre. They also showed them how to log in to their Universal Credit online account and select them as options. They felt that having their rent paid direct would give them "peace of mind" knowing it was paid and opted for twice monthly payments as they felt it fit better with their existing direct debits, which were spread through the month.

The More Frequent Payments option had worked as expected - they used their online account to monitor exactly when they would be paid, so did not have any issues with it being twice a month rather than fortnightly. However, they experienced a lot of problems with their direct payments. About two months after signing up for direct payments, they received a letter from their landlord (the council) telling them they were hundreds of pounds in arrears. They were extremely upset about this, as they had never been in arrears before. After ringing their landlord to find out what had happened, they established that the issue was with the way the DWP was paying the Council, which meant their rent was not being paid on time and that they were in 'technical' arrears. However, even after establishing this, they continued to experience problems, receiving multiple arrears letters and even visits from the rent arrears team.

While they had considered coming off direct payments and paying their rent themselves, they felt they could not do this while the arrears were outstanding, as they were unclear when the payments would be made to the Council (and did not want to cancel in case this caused further confusion).

Their issues were eventually resolved, and they were no longer in arrears. However, while the issue was ongoing it was a source of "unbelievable stress" for them. They were concerned they might lose their home and decided to pay off the arrears caused by late payment by increasing the direct debit for their own share of the rent. This had a substantial impact on the money available for other things:

"You get to a point where you think, 'right, well this has got to be paid, we can't not pay it, so do we eat? Do we pay the bills? What do we do?' When you get to a point where you have to choose between eating, staying warm or paying the bills, it's pretty horrendous."

As has already been discussed, the DWP is currently in the process of transitioning to a new payment system which will bring payment dates in line with the dates on which Universal Credit is paid. This should mean that issues arising from 'technical arrears' and a lack of alignment between the date direct payments are made and the date tenants receive their Universal Credit are resolved (although whether this will resolve all issues with payments from a landlord perspective is unclear - see discussion in Chapter 5). However, to date the payment system has clearly created significant unexpected negative impacts, which have served to partially undermine the positive benefits of direct payments for people in Scotland.

In addition, claimants reported a number of other problems with their Direct Payments to Landlord arrangements which were not related to the payment schedule. These included:

• Issues arising from the claimants' housing element not covering the entirety of their rent, or their Universal Credit entitlement (and therefore their housing element) varying from month to month. For example, a woman who worked part-time said that throughout her Universal Credit claim she had had issues because her employer did not declare her wages to the DWP in a timely manner. This made it very difficult for her to keep track of how much 'top-up' rent she was supposed to be sending in addition to the element covered by her direct payment. Another claimant (who eventually reverted back to paying his rent himself) said he felt "terrible" when he went into arrears for the first time in his life because he had not realised that his housing element (which was being paid through Scottish choices) did not cover his full rent. Key informants and landlords echoed these experiences.
• Issues relating to the fact that claimants are not offered Scottish choices until the start of the second assessment period. This meant that some claimants ran into arrears before then, because they had not realised that they were responsible for their own rent in this period (particularly for those with experience of Housing Benefit, which was automatically paid to landlords):

"Yes, I have [chosen the DPL option], because when they were giving it to me, I didn't know it was housing, and I used it. And then I realised it was for that, so I said to them I didn't want it paid to me, I wanted it paid directly to the landlord."

(Interviewee 24, Male 18-29, on DPL and MFP)

• Issues arising from the interaction of other features of Universal Credit with being on the Direct Payments to Landlord option. Key informants cited cases where people had significant additional deductions from their Universal Credit, and the remaining Universal Credit money after their direct payment was processed was then nowhere near enough to live on. Key informants suggested that, in some circumstances, it might be better for claimants to go into rent arrears than go hungry, but that being on the Direct Payments to Landlord option meant that in crisis situations, claimants were not able to prioritise anything over rent. A general lack of money for other things was cited by another participant on Universal Credit as a reason for cancelling her Direct Payment arrangement - she had needed money to replace an essential item of furniture. One social landlord also highlighted that Christmas was a time when people might decide to opt out of Direct Payment to Landlords, because of the additional expenses they faced at that time of year. The same landlord reported that publicity around mortgage holidays, announced by the UK Chancellor in March 2020, had caused some confusion among tenants who assumed this meant they would get a rent holiday. These issues all relate to the wider Universal Credit system (particularly the use of sanctions, deductions, and the level of payments), but demonstrate the impact this may have on the ability of Scottish choices to achieve their aims for all those who opt for them.

A final potential negative impact was that the direct payment to landlord option meant that claimants who were new to managing their money did not learn how to pay their own rent. A key informant suggested that there should be more Journal notifications or similar giving information about the direct payments (e.g. when the housing allowance has been paid to the landlord and how much it is each month), to highlight to people that they are still ultimately responsible for rent, and that the rent is being paid. One young claimant, who had only recently lived on their own for the first time, expressed a similar opinion:

"I would only say the only negative thing is I still have no idea of how to actually make a payment towards a landlord, that would be the only one thing, because well, we all know schools don't damn teach us it. But that would be the only one downside, that would be it."

(Interviewee 38, Male 18-29, on MFP and having rent paid directly, though not through DPL)

In summary, experiences of the Direct Payments to Landlord Scottish choice varied widely among people interviewed for this study. While it was clear that, for some, it had made a very significant positive difference, for others, it had been a contributing factor in causing major stress or financial difficulties. While the principle of being able to have rent paid directly to landlords was generally supported by people on Universal Credit, these negative impacts had largely stemmed from specific elements of the way in which direct payments to landlords have been implemented (the payment system, the fact it is not offered until the second assessment period) or its interaction with other features of Universal Credit (the overall amount paid and the use of sanctions and deductions) - both of which are largely the responsibility of the DWP rather than the Scottish Government. As Marion (Case study 4, above) put it:

"When it works, it's a fantastic option. When it doesn't work, it is an absolute horror story."

(Interviewee 40, Female 45-65, on both MFP and DPL)

Perceived impacts of the More Frequent Payment option for people on Universal Credit

Perceived Positive impacts

The positive impacts of receiving more frequent payments cited by those who felt this option had worked well largely mirrored the reasons they had given for choosing this option, discussed in Chapter 3. Participants felt that receiving more frequent payments had made it easier for them to make their money last and helped them manage their money in the way that suited them best. Again, these impacts meant this Scottish choice also helped participants worry less about their money.

The More Frequent Payments option particularly benefited claimants who, prior to going onto them, were having a hard time making their money last the full month, and who regularly had to borrow money, go into their overdraft, or seek crisis support. The increased regularity of payments meant they were less likely to reach that crisis point.

"Every other month we were in overdraft and that was always in the back of our mind. [MFP] helps keep us out of default."

(Interviewee 3, Male 45-65, on both DPL and MFP)

However, while the More Frequent Payments option reduced the risk of reaching crisis point, it did not remove it, and people on this option still reported sometimes running out of money for essentials. In these situations, receiving more frequent payments still made a positive difference by reducing the time before they would next receive income.

"Well, when it comes to the point that I'm starting to struggle, I'm due to get paid within a day or two at least couple of days, three days, which makes things easier for me because it's either that or I'm maybe having to wait a week or two and run out of gas and run out of electricity and all the rest of it."

(Interviewee 32, Male 30-44, on both DPL and MFP)

There was also a sense that getting paid twice monthly allowed participants to budget and spend their money in the way that best suited them. Participants gave examples of how they organised their money differently as a result of getting it in two half payments per month:

• Spreading out their direct debits to fit with the two payment dates so that they didn't have everything leaving their account at once
• Using the two payments on different things - for example, spending the first payment on food for the month and using the second to pay all bills (or vice versa).
• Spending 'less on everything but more often' - For example, one participant who paid all their bills using a top-up card said getting more frequent payments helped because he found it hard to predict how much gas and electricity he would use, and preferred to top up his prepayment meter more regularly, but by smaller amounts.

For those claimants who were used to being paid a wage or a legacy benefit either fortnightly or weekly, receiving more frequent payments meant they were able to keep to their established systems of budgeting and avoid worrying over adjusting to less frequent payments. Another participant who had moved from a high-paying job onto Universal Credit said they had found it less stressful getting paid twice monthly because it had helped him adjust to the significant drop in income.

Being on this Scottish choice thus helped to reduce the money worries of those who preferred to manage their finances twice monthly.

"No, it's chilled me out a lot more rather than worrying about it. Like, I feel more calm, rather than just like stressed, because I was stressing out that I was going to have no electric and no gas and all that. But yes, it's chilled me out a lot more."

(Interviewee 37, Male under 30, on DPL and MFP)

Perceived Negative impacts

Again, although the More Frequent Payments option had clearly had a significant positive impact for some, some unexpected negative impacts were also reported. As with Direct Payments to Landlords, this did not generally reflect issues with the principle of more regular payments, but rather how they operated in practice (specifically, the fact that payment dates fluctuated and that people were not always clear about this in advance) and how they interacted with other elements of Universal Credit (in particular, the overall level of the payments).

Fluctuating payment dates causing issues for claimants were mentioned by both claimants and key informants - depending on the length of the month, claimants waited different lengths of time for their second payment. Key informants indicated that it was now clearer when payments would be received, since the DWP had improved the information included on Universal Credit payment statements. Nevertheless, the varying date of the second payment had still caused some issues for people who had bills to pay on set dates:

"But the second date, they can just go doolally with it and have the date changed on the second payment whenever they want and it's not good (…) Like with my Wi-Fi, I have had standing payments set up and it would usually be on the second week that my Wi-Fi bill would come through. I actually had to cancel that and pay for it on my own and, you know, because with that date being changed the payment wouldn't go through straight away."

(Interviewee 38, Male under 30, on both DPL and MFP)

The fact that people are required to wait until the end of the first assessment period before receiving more frequent payments was also seen as a negative - social landlords reported that some people opted for more frequent payments but then dropped off "almost instantly" when they realised they would receive an initial half payment after having had to stretch out their previous full Universal Credit payment over a whole month (this research did not include any claimants who cited this themselves, although as discussed in Chapter 3, it was mentioned as a reason for not opting for this Scottish choice in the first place).

Both key informants and claimants also stressed that although flexibilities like Scottish choices can help some claimants to budget on a low income, they cannot overcome some of the wider perceived problems with the Universal Credit system, such as the five-week wait for a first Universal Credit payment after registering. There was also a clear view that getting paid twice a month cannot make a major difference financially when the total amount claimants are entitled to is still low. As one person put it:

"It's had a positive effect, but you can still find yourself running low, it's not a lot to live on."

(Interviewee 19, Male 30-44, on both DPL and MFP)

Another reflected that, while receiving more frequent payments had reduced his money worries to some degree, other aspects of the Universal Credit system had caused him tremendous stress and impacted negatively on his mental health. Case study 4, below, illustrates how all these factors led one young couple to revert back to monthly payments, after having opted for the More Frequent Payments choice. Overall, interviews served to highlight that Scottish choices are often just a small element of most claimants' wider experience of Universal Credit.

Case study 4 - Eilidh

Eilidh is in her late teens and made a joint claim for Universal Credit with her partner. This was her first time claiming any kind of benefit.

At first, they found budgeting around a monthly payment difficult. While their rent was covered after their Work Coach had help them to set up a Direct Payments to Landlord arrangement, they would often run out of food towards the end of the month. As a result, they were often reliant on support from their local food bank and felt stressed about their financial situation. After a couple of months on Universal Credit, Eilidh found out about the option for More Frequent Payments after her partner showed her a notification on his online Journal. They decided to try this to see if this would help them stop running out of money to buy groceries.

Initially, this did have the impact they had hoped for: they found they were running out of money less quickly, and, as such, were less reliant on food banks. However, the switch also had had a knock-on impact on their finances which they were not expecting. Although they had enough money for food, they found they did not retain enough money in their bank account for bills. As a result, their utility payments, which came out in monthly direct debits, began to bounce, leaving them without internet access to search for jobs and update their Universal Credit Journal.

In the end, they felt their Universal Credit payments were simply not enough to cover both bills and sufficient food. They chose to prioritise their bills and reverted to monthly payments. They felt this was the least stressful option of the two, as they felt they could always rely on food bank parcels should they need to.