Universal Credit Scottish choices: evaluation

Findings

This chapter sets out the evidence for each theme that has been gathered from the three strands supporting the methodology, management information, population-level data and qualitative research

Applying for Scottish choices

This section covers the application processes for Scottish choices, and looks at the following outcomes that were identified in the theory of change, as being necessary for Scottish choices to be accessible to those on Universal credit.

• Choices are well promoted among eligible clients and landlords
• Eligible clients and landlords are aware of choices
• Application process is clear and easy
• People find accessing the choices straightforward
• Choices are administered well

The qualitative research found that awareness of the term 'Scottish choices' among the people on Universal Credit interviewed was very low, with some interviewees not being aware of the options prior to being contacted for research. 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. Where people were aware of Scottish choices, a variety of additional routes were mentioned, including social media, word of mouth and support organisations.

Information on client experience of the application process also comes largely through the qualitative research. Although a lack of awareness was a key barrier to access, opting into Scottish choices generally appeared to be straightforward among those who were aware of them, making use either of their online account or receiving help to go through the application

However, there was evidence of confusion around key aspects of how the More Frequent Payments work, including payment dates and amounts, such as when the second payment in the month would be made. There was also some confusion around how the 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 months' rent themselves. There was also a lack of clarity regarding what would happen where Universal Credit does not cover their full rent, and when it would be paid to landlords,

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. Claimants' digital literacy and confidence in dealing with online transactions may affect their ability to exercise Scottish choices, as well as manage their wider UC claim. There was a belief that greater support in using the online journal would be necessary for some clients. Concerns were also raised that the journal notification did not have enough specific information on the details of how the payments would work.

Landlord support for applications

As well as the processes experienced by benefit clients accessing Scottish choices, we also examined the evidence for landlords supporting their tenants, namely the following objective:

• Landlords make tenants aware of choices

Most private landlords surveyed in the commissioned research 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 DWP payment system and the impact this had (for both them and their tenants) in creating 'technical arrears'^[2].

Decisions to take up Scottish choices

The section examines the decisions to take up Scottish choices, the numbers involved, and why claimants made their decision. The evidence from management information and qualitative research, is used to assess the following outcome:

• Choices are taken up if suitable

Management data provided by the DWP and published by the Scottish Government shows key trends in take-up of Scottish choices up to the end of August 2020, out of a client base of 518,000 people who were offered one or both Scottish choices.

• Since October 2017, a total of 195,540 new claimants who were offered have taken up one or both choices.
• The rate of new UC full service claimants who took up at least one of the Scottish choices offered to them was 38 per cent in August 2020. This rate has decreased over the last year, from 46 per cent in August 2019. This decrease coincides with the increase in the number of offers as more people came onto UC as a result of COVID-19.
• In total since October 2017, 224,790 people have taken up one or two choices, either with or without an offer (this includes new, existing and live to full transfer claimants).
• Of those people, 82 per cent (184,150 people) have taken up more frequent payments (MFP) with or without an offer and 33 per cent (75,030 people) have taken up direct payment to landlords with or without an offer.

Previously published data, shows that 24 per cent (30,640 people) of those who implemented MFP have chosen to revert back to monthly payments by the end of March 2020. 16 per cent (10,510 people) of those who implemented DPL have chosen to revert back to receiving their UC payment instead of it going direct to landlords.

A certain percentage of people have chosen not to exercise flexibilities, and a number of have reverted to their original choices. It is clear then that "if suitable" is an important qualifier in people's decisions. The qualitative research explores the reasoning for those who do or do not take up the Scottish choices flexibilities. As will become clear, this reflects the fact that UC not only replaced "out-of-work" benefits, but also maintains those who are in work, but on lower incomes, and may accordingly may have different expectations for when income should be paid and how to schedule outgoings, compared to recipients of "legacy" benefits.

The published data have further information on how choices break down by local authority, and a breakdown of the client group in August 2020. In addition, Department of Work and Pensions data published on Stat-Xplore^[3] showed that 85 per cent of households exercising the Direct Payment to Landlords were headed by single adults, and 88 per cent of those exercising More Frequent Payments.

Further data which has been provided by the Department of Work and Pensions on how the client base for Scottish choices is composed by certain characteristics. All of these figures relate to the group eligible for Scottish choices in August 2020. Full figures are provided in Annex A below. Overall figures for take-up of Scottish choices may be affected by changes in the composition of the group claiming Universal Credit since the onset of the Coronavirus (COVID-19) pandemic. Between January and December 2020, the caseload increased from 244,000 to 480,000^[4]. Although there were large absolute increases in the group defined as "searching for work", larger percentage increases were seen among the "working – no requirements"^[5] group (211 per cent) and the "working with requirements"^[6]. While there have been some changes in compositions during the period of the pandemic, it suggests that clients in work now account for more of the Universal Credit caseload.

In respect of the household types who take up either direct payments to landlords, or more frequent payments, the high proportions of single-adult households is largely due to their higher likelihood of claiming Universal Credit overall. However, they are still slightly more likely to be on Scottish choices than not. In August 2020, 29 per cent of eligible single adults with children were on More Frequent payments (28 per cent of couples with children). Of the single people without children, 34 per cent of took up more frequent payments, compared to 31 per cent of couples without children. For Direct Payments to Landlords, 31 per cent of single adults with children were exercising the choice (23 per cent of couples with children). 32 per cent of single adults with no children were on direct payments compared to 24 per cent of couples with no children.

In terms of reversions to default payments of Universal Credit, single adults with children on More Frequent Payments were most likely to have done so (9 per cent, compared to 3 per cent of couples with no children). Single adults with children were also the most likely to have reverted on Direct Payments to Landlord (3 per cent).

Clients groups who were assessed as having limited capabilities for work or work related activities were more likely to take up the Scottish choices options. Of those eligible, clients with "limited capacity for work" showed 39 per cent on More Frequent Payments (versus 31 per cent assessed to have capacity for work) and 48 per cent on direct payments to landlord (versus 27 per cent). Clients with "limited capacity for work-related activities" had 36 per cent on More Frequent Payments and 44 per cent of those eligible were on Direct Payments to Landlord.

Clients with limited capacity for work or work-related activities were more likely to have reverted to default methods for more frequent payments (9 per cent versus 6 per cent of those assessed to have capacity for work) and direct payments to landlord (3 per cent versus 2 per cent).

Looking at housing tenure, clients were more likely to take up Scottish choices if they were in social rented housing. For More Frequent Payments, 39 per cent of eligible social tenants were on the option compared to 20 per cent of private tenants and 19 per cent in the own property. This was even more marked for Direct Payments to Landlord, with 47 per cent of social tenants on the option in August 2020 versus 6 per cent of private tenants^[7].

Of those social tenants claiming UC in August 2020, who chose More Frequent Payments at any point, 16 per cent had reverted back by August 2020 (8 per cent of all social tenants on UC). In comparison, 26 per cent of private tenants had reverted back (7 per cent of all private tenants on UC). Proportions were smaller for Direct Payments to Landlord (5 per cent for social tenants, and 14 per cent for private tenants).

In terms of employment status, it appeared that it was the wholly self-employed^[8] who were less likely to take up Scottish choices options. For More Frequent Payments, 19 per cent of those categorised as wholly self-employed were on the option (compared to 32 per of those wholly employed^[9], and 33 per cent of those unemployed). For Direct Payments, 15 per cent of those self-employed, 24 per cent of the employed, and 37 per cent of those unemployed had taken up the option.

As many as 7 per cent of those identified as unemployed had reverted to monthly payments, compared to 4 per cent of the self-employed. However, taking account of all those who had taken up the choice at some point (i.e. adding together those on the choice, and those who had reverted), around similar proportions of both groups who had taken up the choice had reverted (17.5 per cent of those self-employed, 18.1 per cent of the unemployed). 2 per cent of those employed, 1 per cent of those self-employed and 2 per cent of those unemployed had reverted from Direct payments to Landlords.

Reasons for taking up Scottish choices

This section draws entirely from the qualitative research, where claimants were able to report on their experiences and reasoning for taking up Scottish choices.

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. A number of claimants saw ensuring their rent was paid as their top priority. People who had accrued rent arrears in the past as a result of supplementing living costs with rent money saw the Direct payments as a means of avoiding the 'temptation' to do so again

In other cases, claimants struggled to set up direct debits for their rent, and preferred this to be managed another way. Direct payments also reduced the interaction with landlords, which some tenants preferred to avoid.

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. It may also have been helpful for those less able to monitor universal credit payments (for example because they struggled with computers).

Reasons for not taking up Scottish choices

This section draws entirely from the qualitative research, where claimants were able to report on their experiences and reasoning 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. A number of claimants were new to benefits, and so had not encountered a system whereby landlords were paid direct. Some tenants got used to paying their rent during the first assessment period and did not wish to change.

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, a perception that switching to two payments each month would disrupt existing schedules for direct debits, and being able to cover unexpected higher costs, (rather than having to save from two smaller payments to do so). Some recipients, who received income from employment or benefits, such as Personal Independence Payments, already had payments coming in at other times the month, so did not see the benefit in splitting their UC payments.

There were also concerns about how elements of More Frequent Payments might operate in practice, including: 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.

Landlord attitudes to Scottish choices

This section draws from the survey and qualitative interviews, that were carried out during the course of the commissioned research.

Landlord attitudes to Direct Payments varied, but the landlord survey indicated that private-sector landlords were more likely (84 per cent) to say they would encourage their tenants to take up the option, than Social landlords (50 per cent). Guaranteeing payment of rent was a key reason for encouraging tenants to opt for Direct payments. However, for other landlords, the delays in payments they had experienced due to issues with the payment system outweighed this benefit, and in some cases led them to advise tenants against opting for direct payments. Others felt that Direct payments did not always work well from the tenants' perspective, especially if they had fluctuating income from employment, or their housing element did not cover their full rent.

Generally, they viewed More Frequent Payments as being less likely to be relevant to them, but some social landlords might suggest the option if it was perceived as helping the tenant. However, on other occasions, landlords might be worried about the ability of tenants to save for rent from two payments during the month (and thus might encourage them to take up a direct payment in addition to more frequent payments). They were also aware that uncertainty about when a second payment may arrive during the month might cause some households difficulty. In other cases, they believed that in principle, households should try to get used to budgeting on a monthly basis.

Outcomes for those who took up Scottish choices options.

Scottish choices are intended to give more flexibility to UC claimants to choose to manage their income in a way that is more likely to suit them. This evaluation examines evidence that assesses whether the initiative leads to some of the following outcomes:

• People are able to manage household budgets better
• Reduced risk of unsustainable debt
• People able to manage debt or rent payments better

In the qualitative research, people on Universal Credit described a range of positive impacts from having their rent paid direct to their landlord, including simplifying their money management (as rent had already been taken into account) and ensuring their rent was paid.

Participants reported that they had greater "peace of mind" as the rent had been dealt with, and some reported reduced anxiety. 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, particularly where (some) landlords had chosen to pursue payment. The DWP are updating their systems, so that rent payments are made at the same as the UC is paid, but it is not clear if this will wholly eliminate all the issues identified by tenants and landlords around 'technical arrears'.

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).

Finally, there were issues where tenants were not aware of the need to top up their rent, where the housing element of UC did not cover it in full. In other cases, delays in recalculating benefits created retrospective arrears as it was difficult to keep track of how much money the claimant needed to set aside to top-up the direct payment.

In general there is support for the principle of paying rent directly to landlords, but some have negative experiences about the way it has been implemented, and its interaction with other features of Universal Credit.

The positive impacts of More Frequent Payments largely mirrored people's reasons for choosing this option: it made it easier to make their money last, and helped people manage their money in a way that suited them, which in turn helped them to worry less. Respondents who reported that they had previously been on a weekly wage or legacy benefit, saw greater similarity with their previous income pattern, and some used more frequent payments to spread out bills or commitments during the month.

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 sometimes caused difficulties when bills had been arranged for particular dates, but the second payment did not always align with this. Other tenants reported difficulty when the first half payment came, after having spent a month managing on the initial full payment.

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).

In terms of the overall financial impact of Scottish choices, as discussed above, we are unable to make comparisons from population survey data, due to the small sample sizes of universal credit claimants prior to the introduction of Scottish choices. However, there are larger numbers of claimants of legacy benefits, through which a comparison can be made with more recent UC claimants.

According to Scottish Household Survey data, in 2019, 58 per cent of UC claimants said that in terms of financial management they "manage very well", "manage quite well" or "get by alright". This figure in 2018 was 56 per cent of a smaller sample, and, even combining four years of data (2014-17), the comparable figure of 55 per cent was based on a still smaller sample. The differences were thus statistically insignificant. Comparison with the cohort on legacy benefits suggests they are in a significantly better position regarding managing their finances than those on Universal Credit – the comparable figures are 73 per cent in 2019, 72 per cent in 2018 and 75 per cent in 2017. Caution should be exercised in comparing the two groups because of potential differences in social characteristics.

In time greater numbers will be migrate to Universal Credit, either through new claims, or transfer of cases, so greater statistical precision can be brought to this indicator.

Outcomes for Landlords whose tenants take up Scottish choices

This section examines whether Direct Payments for Landlords may provide more security of revenue and whether the impact of Scottish choices may lead to the following outcomes:

• Reduced risk of rent arrears, evictions and homelessness
• Landlords receive rent on time
• Improved housing security for tenants

In the qualitative research, 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. Private landlords were more likely to be positive about the effect on arrears. Landlords who were more negative largely traced problems back to the system the DWP used to make payments to landlords.

The updated new 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. Landlords may not be able to immediately tell the difference between a 'technical' and a 'real' arrear, depending on the mismatches between due dates for rent, dates for tenants' UC payments, and dates when bulk payments were received from DWP.

While the DWP's new payment system was perceived to be likely to improve the situation, it was noted that it would not address other issues of tenants falling into arrears during the five-week wait for UC payments or landlords not being able to see if their tenants are on Scottish choices.

There was a view that Scottish choices allowed for more rapid instigation of direct payments, than the Alternative Payment Arrangement (APA) that could be requested from the DWP if defaulted payments were likely. 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.

As noted, private landlords were 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. This may also be related by the relatively low proportion of private-sector tenants who take up the Direct Payments option. 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.

In terms of their relationships with tenants, there was variation between those who felt that working with their tenants on the options available to them through Scottish choices had improved matters. However others felt that tensions around technical arrears had made relationships more difficult. A third point of view was that it was difficult to separate out the impact of Scottish choices from wider issues around Universal Credit.

Long-term outcomes influenced

As explained above, examining the long-term impact of Scottish choices is difficult, both because of the complex chain of causes that leads to high-level outcomes, and because of range of other factors that may at work in the economy and society at large. In this section, we discuss whether the evidence that has been set out above on Scottish choices is consistent with very high level outcomes that we wish to see in society. We are not attempting measure direct impact, but rather whether Scottish choices has been an appropriate contribution.

• Reduced Poverty

Although we do not have measures of poverty where we can attribute change to the operation of Scottish choices, we can refer to the evidence on the intermediate outcomes set out above to state that on balance Scottish choices was beneficial. Some benefit recipients stated that the options given with Scottish choices represented an opportunity to exercise control over their finances which made for greater control over budgeting. In that sense, the initiative, where operating effectively, made a positive contribution to long-term trends. Whereas some recipients encountered difficulties because of the implementation issues outlined above, the option to revert does allow a return to a more stable approach for their circumstances. This makes the system responsive to people's needs. The evidence of affirmative decisions not to exercise flexibility, or revert to default payments of UC, demonstrates that households are able to choose the most appropriate approach for their circumstances.

• Reduced inequality of outcomes for families and children

This outcome is also difficult to measure in terms of the relationship with Scottish choices. However, the most favourable interpretation would note the positive impacts on budgetary control, as a potential foundation for future improvements in household's financial position. However, it is difficult to track the long-term impact of this on some of the key factors underlying family incomes, notably access to work, reduced costs and so on. Secondly, how this affects the relative financial position of a household is also unclear.

• Improved health and wellbeing

At present we do not have definitive measures of wellbeing for the UC Scottish choices cohort. However, we do have testimony that elements of more frequent payments, or direct payments to landlords are more likely to bring "peace of mind" with regard to rent payments, and relieving stress regarding making money last longer. However, other respondents mentioned the need to have larger payments in order to meet obligations that fall early in the assessment period, and respond to unexpected demand.