Universal Credit Scottish choices: evaluation

Executive Summary

Introduction and methods

This report presents findings of the evaluation of Universal Credit Scottish choices. It combines management information, information from population surveys, and research conducted by Ipsos MORI Scotland on behalf of the Scottish Government.

Scottish choices are flexibilities implemented by the Department for Work and Pensions (DWP) on behalf of the Scottish Government. The two current Scottish choices options allow people on Universal Credit in Scotland to:

• Opt to have their housing element (if they are entitled to this) paid directly to their landlord by the DWP (the 'Direct Payments to Landlord' option), and/or
• Opt to receive their Universal Credit Payments twice a month, rather than as one monthly payment (the 'More Frequent Payments' option).

Information was gathered from Management Information provided by DWP, and the Scottish Household Survey, conducted by the Scottish Government. The commissioned research aimedto explore experiences of Scottish choices among both people on Universal Credit and landlords. The approach was largely qualitative in nature, involving in-depth telephone interviews, conducted between May and early September 2020, with:

• 45 people who were claiming Universal Credit in Scotland
• 20 Landlords (including a mix of private and social landlords), and
• 14 key informants, working with either landlords or people on Universal Credit.

In addition, a short online survey was completed by 260 landlords, including 178 private and 81 social landlords.

Perceived impacts of Scottish choices for people on Universal Credit

People on Universal Credit described a range of positive impacts from having their rent paid direct to their landlord, including: simplifying their 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 with health issues that meant they were more susceptible to serious negative impacts from stress. Direct payments were viewed as a means of removing the risk of arrears, eviction and homelessness particularly – though not exclusively – by those with experience of these issues.

However, although there were clear examples of the positive impacts the Direct Payments to Landlord choice could have, issues with the payment system had created significant unexpected negative impacts for some claimants. In particular, problems around 'technical arrears' had created considerable emotional and financial stress. Further examples of issues experienced after opting for direct payments also related to features 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).

The positive impacts of more frequent payments included making it easier for claimants to make their money last, and helping people manage their money in a way that suited them, which in turn helped them to worry less. As with the Direct Payments to Landlords option, where more negative experiences were reported these tended to relate to features of how this policy has been operationalised – specifically, the fact that payment dates fluctuate.

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, they cannot address the overall level of Universal Credit payments (which falls outwith the power of the Scottish Government to change).

Long-term outcomes for claimants of Universal Credit will take time to identify as the client base builds up. It is not possible to identify a difference in confidence in financial management between the current group on Universal Credit and the group prior to Scottish choices, due to small sample sizes in the Scottish Household Survey. However, the group on Universal Credit appear to be less confident in their finances than those on legacy benefits.

Perceived impacts of Scottish choices for landlords

Social landlords were divided in their opinion of the impact of the Direct Payments to Landlords option on arrears. Those who were positive indicated that it had helped mitigate the increase in arrears some reported seeing since Universal Credit was introduced. Those who were more negative largely traced problems back to the system the DWP used to make payments to landlords.

The new updated payment system was described as a 'game changer'. However, it was also suggested that it would not address every problem around the administration of Scottish choices. There was criticism of the 'data flow' from the DWP to landlords around Scottish choices, which was reported to make it difficult both to keep on top of rental income, and to intervene quickly when tenants might be at risk of arrears. The fact that tenants were not able to access Scottish choices until the start of the second assessment period was also viewed as reducing its potential impact on arrears, since tenants might fall into arrears before reaching this point.

Private landlords were much more positive about direct payments. However, this was not always based on direct experience of them: social landlords reported far higher levels of awareness and understanding of Scottish choices compared with private landlords. One view among private landlords was that it ought to be compulsory for rent to be paid direct to landlords for tenants on Universal Credit.

Unsurprisingly, landlords had less to say about the More Frequent Payments option, generally seeing it as having no impact for them one way or another. However, some concerns were raised about whether it could make it difficult for people to retain enough money (across the two payments) for rent.

Reasons for taking up Scottish choices

As of August 2020, 195,540 households had taken up one or more of the Scottish choices, representing 38 per cent of the eligible population.

A desire to reduce stress by ensuring that rent was always paid was a key driver for taking up the Direct Payments to Landlord Scottish choice. This was particularly true for groups who were not used to paying rent, those who were in poor mental or physical health, and those experiencing crisis.

More frequent payments were viewed as helping with money management by making it easier to spread direct debits or other payments across the month, and by providing claimants with the security of knowing more money would be coming in sooner, should they spend their income too quickly or experience an unexpected outgoing. Those who were used to budgeting on a more frequent schedule were particularly likely to cite these as reasons for choosing this option, including those who had previously received income fortnightly from legacy benefits and those who used pre-payment meters for their gas and electricity.

Reasons for not taking up Scottish choices

Claimants who chose not to have their rent paid direct to their landlord were typically already used to paying their own rent (including those currently or recently in work) and saw no need to change how they managed this. Those whose housing element did not cover their full rent or whose Universal Credit payments fluctuated month on month also felt that this option would not benefit them, since they would still have to pay an element of rent themselves.

Other reasons for not taking up direct payments included: wanting to retain control over income and outgoings (linked, in part, to being able to withhold rent if their landlord failed to maintain the property); awareness of issues other people had experienced with 'technical arrears' (where issues with the system for paying rent directly to landlords meant rent had not been paid by the day it was due and people were contacted by their landlord about 'arrears'); not wanting people to know they were on benefits; and wanting or needing their housing allowance for other expenses.

Reasons for deciding not to opt for more frequent payments included: being used to managing with a monthly income; concerns about managing on an initial half payment after having stretched out a monthly payment prior to this; being put off by the fact the second payment date was not completely fixed; and uncertainty about how this option would interact with any deductions and sanctions.

Management information also shows that a number of claimants reverted to default methods for paying Universal Credit.

Landlord roles in encouraging or discouraging take-up of direct payments

Most private landlords stated they would be very or fairly likely to encourage tenants to take up the Direct Payments option. In contrast, social landlords were much more divided on whether they would encourage this.

For both social and private landlords, the guarantee that landlords would receive their rent payment was the main reason for encouraging tenants to take up the option. Social landlords who had discouraged some or all tenants from taking up direct payments explained this primarily with reference to issues with the payment system and the impact this had (for both them and their tenants) in creating 'technical arrears'.

Awareness and understanding of Scottish choices

Although Scottish choices are well received and useful for many, the overall awareness of the term 'Scottish choices' among the people on Universal Credit interviewed for this research was low. There was also considerable variation in: whether people had heard of one, both, or neither of the options they were eligible for; whether people recalled having seen the Journal notification offering Scottish choices as an option; and whether their Work Coach had discussed Scottish choices with them.

Although a lack of awareness was a barrier to access, opting into Scottish choices generally appeared to be straightforward among those who were aware of them. However, there was evidence of confusion around key aspects of how Scottish choices work, including payment dates and amounts, and how the Direct Payments to Landlord option works for those whose Universal Credit does not cover their full rent. There was also some confusion around how the More Frequent Payments option interacts with Universal Credit advances. There was evidence that those migrating from legacy benefits, in particular, were not always clear that the Direct Payments to Landlord option is not applied automatically, or that claimants are responsible for paying their first month's rent themselves.

People on Universal Credit, key informants and some social landlords felt there was an over-reliance on the online Journal for communicating with people on Universal Credit about Scottish choices (and in general), and that this may be affecting levels of awareness and understanding of Scottish choices among those eligible.

Suggestions for improvements to Scottish choices

There was a clear belief across all interviewees for this research that Scottish choices could be better publicised. Suggestions for improving this focused on a) improving the content and nature of notices about Scottish choices within people's Universal Credit online accounts and b) employing other communication methods instead of, or in addition to, the online Journal, to ensure that all claimants are fully aware of their options.

Other problems or frustrations with Scottish choices were rarely a reflection of the principle of the policy, but rather how it had been implemented in practice. Suggestions for improving this included:

• Allowing everyone to apply for Scottish choices from the start of their claim, rather than requiring them to wait until the start of the second assessment period
• Improving the payment system for making direct payments to landlords– although this is already in hand, there was a desire to ensure this also enabled people to align direct payment dates with the date rent was due
• Making payments fortnightly rather than twice a month.

Finally, although not the focus of this research, it is important to note that participants spontaneously mentioned various improvements to the Universal Credit system that they felt would significantly improve people's lives.