Unit 3 Topic 2

Question 1

Review the history of welfare in the UK.

Answer 1

From the days of the Elizabethan Poor Laws in the early 1600s, the government, at both national and local levels, has accepted some responsibility for providing relief to the poor. The Poor Law Act of 1601 established the principle that money raised through taxation should be used to provide food and clothing to the ‘deserving’ poor (those who were sick, disabled or elderly).
The indolent poor - those deemed to have caused their own poverty by being too lazy to get a job - received little or no help.

Question 2

What did the Poor Law Act of 1601 establish?

Answer 2

The Poor Law Act of 1601 established the principle that money raised through taxation should be used to provide food and clothing to the ‘deserving’ poor (those who were sick, disabled or elderly).
The indolent poor - those deemed to have caused their own poverty by being too lazy to get a job - received little or no help.

Question 3

Define the indolent poor.

Answer 3

Those deemed to have caused their own poverty by being too lazy to get a job.

Question 4

What did state welfare develop further with?

Answer 4

State welfare provision developed further with the introduction of Old-Age Pensions Act 1908 and the National Insurance Act 1911.

Question 5

What did the Old-Age Pensions Act of 1908 introduce?

Answer 5

The 1908 Act introduced a national state pension - paid for out of general taxation - which was paid to those over the age of 70 who were ‘of good character’, had lived in the UK for at least 20 years and had worked throughout their lives.

Question 6

Was the Old-Age Pensions Act of 1908 affordable?

Answer 6

The eligibility criteria (those over the age of 70 who were ‘of good character’, had lived in the UK for at least 20 years and had worked throughout their lives) taken with the fact that the average life expectancy in the UK at the time was less than 60, led politicians to believe that the new pension scheme would not be too costly and could easily be funded from general taxation.

Question 7

How was the National Insurance Act 1911 funded?

Answer 7

The national insurance act 1911 did not rely only on taxpayers to fund the welfare benefits that it made available. Instead, it introduced the idea of compelling workers and employers to pay fixed weekly contributions: the worker contributed 4d (4 old pence) and the employer contributed 3d into a ‘national insurance fund’ (equivalent to around £6 and £4.50 a week in today’s terms). The government also paid 2d per week per worker into the fund, which it paid out of general taxation.

Question 8

What did paying contributions into the National Insurance Act 1911 allow workers?

Answer 8

Paying contributions into the fund gave workers the right to a basic level of free medical care and also entitled them to draw a weekly employment benefit (known as ‘dole money’ or ‘the dole’) for up to 15 weeks in each year.

Question 9

What did the principle of contributing towards the cost of welfare benefits later extend into?

Answer 9

The principle of contributing towards the cost of welfare benefits was later extended to state pensions under the Pensions Act 1925.

Question 10

How was the welfare state reformed after the Second World War?

Answer 10

The whole welfare system was radically reformed after the Second World War (1939 - 45) by the Labour government. In 1948, two new pieces of legislation - the National Insurance Act and the National Assistance Act - brought in what became known as the ‘welfare state’, which was based on a promise that the state would take care of people ‘from the cradle to the grave’.

Question 11

What does the term welfare system refer to?

Answer 11

The term welfare system refers to the state provision of a package of health care and education, low-cost social housing, and a comprehensive system of contributory and non-contributory pensions and social security benefits.

Question 12

What was the most radical change in the welfare system?

Answer 12

The establishment of the National Health Service (NHS) was perhaps the most radical change, meaning that people no longer had to pay for medical treatment when they needed it: as taxpayers, they had already paid for it.

Question 13

Is the welfare system expensive for the UK?

Answer 13

Although the financial crisis of 2007 - 08 and the economic recession that followed it led to widespread cuts in state welfare spending, the UK still has one of the most extensive welfare systems in the world. In terms of its expenditure on welfare services and benefits as a percentage of its national income - as measured by gross domestic product (GDP) - the UK ranks among the top 20 countries in the world.

Question 14

List the top 20 countries with the highest spending on social welfare.
List their expenditure as a percentage of GDP as well.

Answer 14

1. France - 31.2%
2. Belgium - 28.9%
3. Finland - 28.7%
4. Denmark - 28.0%
5. Italy - 27.9%
6. Austria - 26.6%
7. Sweden - 26.1%
8. Germany - 25.1%
9. Norway - 25.0%
10. Spain - 23.7%
11. Greece - 23.5%
12. Portugal - 22.6%
13. Luxembourg - 22.4%
14. Slovenia - 21.2%
15. Poland - 21.1%
16. UK - 20.6%
17. Hungary - 19.4%
18. Czech Republic - 18.7%
19. Netherlands - 16.7%
20. Switzerland - 16.0%

Question 15

Why has state welfare remained?

Answer 15

The personal, social and financial problems that state welfare provision is designed to address today have not fundamentally changed over the past 400 years. Despite the fact that, since the 1600s, the UK has enjoyed huge growth in national wealth and standards of living - and despite it now being one of the richest countries in the world - there are still many people of working age who rely on state benefits as the source of all, or part, of their income.
Many more of those over the age of 65 have no private income and are consequently wholly dependent on basic state pension and other benefits.

Question 16

How is state welfare related to sustainable personal finances?

Answer 16

The provision of state benefits and pensions is very much integral to understanding how individuals can maintain sustainable personal finances even when affected by adverse circumstances.

Question 17

Define sustainable personal finances.

Answer 17

Sustainable personal finances means achieving and maintaining a balance between personal income and expenditure - for the short, medium and long terms - so that an individual can satisfy their needs and achieve as many of their wants and aspirations as they can afford within their budget.

Question 18

Who is the benefit system designed to help?

Answer 18

The system of benefits payable to people who are temporarily or permanently in need of financial help is designed to be a financial ‘safety net’ to help those who:

• have unexpectedly lost their main source of income
• have a low level of income
• are not able to earn an income at all

Question 19

How do people typically find themselves in situations where they may have reduced income or no income?

Answer 19

People typically find themselves in these situations because they have been made redundant, or because they do not have the skills, experience or qualifications that they need to get a well-paid, full-time job, or because ill-health or disability prevents them from working, or because they have stopped work after retiring.

Question 20

How is the UK’s benefits system divided?

Answer 20

The UK’s benefit system today - as it has been since the National Insurance Act 1911 - is divided into two types of benefit, contributory and non-contributory.

Question 21

Describe contributory benefits.

Answer 21

Contributory benefits are paid to eligible claimants provided that they have paid the required number of National Insurance contributions.
Employers automatically deduct NICs (and income tax) from employees’ salaries, but self-employed workers have to make arrangements to pay their own NICs.

Question 22

Describe non-contributory benefits.

Answer 22

Non-contributory benefits are paid to those eligible claimants who either have not paid enough NICs to claim contributory benefits or who need a ‘top-up’ payment because the contributory benefits that they receive do not meet their income needs.

Question 23

What is the principle behind contributory benefits?

Answer 23

The principle behind contributory benefits is that the contributions that each person pays give them the right to receive a set, flat-rate benefit when they need it.
The creators of the National Insurance system made it compulsory partly as a way of funding the benefits, but also because the believed that some people would be too proud to accept the benefits unless they felt that they were fully entitled to them because they had contributed to them when they were able to.

Question 24

Why are some benefits compulsory?

Answer 24

The creators of the National Insurance system made it compulsory partly as a way of funding the benefits, but also because the believed that some people would be too proud to accept the benefits unless they felt that they were fully entitled to them because they had contributed to them when they were able to.

Question 25

Why are benefits paid at a flat rate?

Answer 25

Benefits are paid at a flat rate rather than being varied according to the claimant’s income because this helps to keep the costs of the system in check and also avoids the problems involved with ‘means testing’.

Question 26

What is ‘means testing’?

In relation to benefits

Answer 26

When benefits are income-related, claimants have to undergo a means test - a detailed examination of their income - to which some people object, because they feel that it pries into their private lives.

Question 27

What help is there for people out of work or unable to work full-time?

Answer 27

Jobseeker’s Allowance (JSA)

• contribution-based JSA
• Income-based JSA

Question 28

What sickness and disability benefits are there?

Answer 28

Statutory sick pay SSP
Employment and support allowance ESA
Employment and support allowance (cont’d)
Disability and carer benefits

Question 29

What housing benefits are there?

Answer 29

Housing benefit

Support for Mortgage Interest (SMI)

Question 30

What additional benefits are there?

Answer 30

Income support

Help for those in retirement

Question 31

What is Jobseeker’s Allowance (JSA)?

Answer 31

Job seeker’s allowance is the main benefit for those of working age who are not working full-time, but who are able to work, available for work and making every effort to find work.
There are contributory (contributions-based) and non-contributory (income-based) JSA benefits, but eligible claimants receive the same weekly cash benefit - with a higher rate paid to those aged 25 and over - regardless of which type of JSA they are claiming.

Question 32

Describe contribution-based JSA.

Answer 32

If you were employed (not self-employed) for the two tax years (6 April - 5 April) before you claim and you paid NICs throughout that period, you might be entitled to claim contributions-based JSA if you are out of work.
You will get it, however, only if you are:
- aged between 18 and retirement age
- not a full-time student
- work on average less than 16 hours a week
- able to work and fully available to work
- able to demonstrate that you are actively seeking work
- willing and able to attend a JSA interview every two weeks (or when asked) to show what you have been doing to find work.

Question 33

Describe income-based JSA.

Answer 33

Income-based JSA is available to unemployed people who have not paid the required amount of NICs. The main differences between this and contributions-based JSA are that:

• while contributions-based JSA is paid only for 6 months, income-based JSA is not subject to a time limit.
• to be eligible for income-based JSA, you (and your partner, if you have one) must have less than £16,000 in savings)
• your partner (if you have one) should be working less than 24 hours a week (on average).

Income-based JSA is also means-tested, which means that the amount of benefit you receive may be reduced if your household income is above a certain level or if you have more than £16,000 in savings.

The benefit can also be claimed by those who were previously self-employed if they can show that the business is no longer trading.

If a claimant for JSA is also eligible to claim Universal Credit, the JSA element may be added to the Universal Credit payment.

Question 34

Can students claim JSA?

Answer 34

Full-time students cannot normally claim JSA; the exception is students who have children, who may be able to claim JSA during the summer break.

Part-time students may be able to claim JSA provided that they fulfil the eligibility requirements listed above, including being willing to give up the part-time course of they find a full-time job.

Question 35

What are sickness and disability benefits designed for?

Answer 35

There are a number of sickness and disability benefits designed to provide an income when short-term sickness, long-term illness or disability prevents someone from working.

Question 36

Describe statutory sick pay (SSP).

Answer 36

If you are employed, your employer has to pay you at least SSP if you have been off sick for four or more days. The benefit is a fixed weekly amount that is paid for a max of 28 weeks (although many employers build much more generous sick pay arrangements into their contracts of employment, such as six months’ full pay, followed by six months’ half pay).
If you are self-employed or not working at all, you cannot claim SSP.

Question 37

Describe employment and support allowance (ESA).

Answer 37

If you have been getting SSP for the maximum 28 weeks or if you are self-employed, you may be eligible to claim ESA in the event that illness or disability prevents you from working. Like JSA, ESA is either contributions-based (for those who paid sufficient NICs) or income-based. It is paid at a standard weekly benefit for the first 13 weeks for all claimants aged 25 or over and at a lower rate for those under the age of 25. After 13 weeks, claimants are assessed and allocated to one of two categories.

• The work-related activity
• The support group

Question 38

What are the two categories of the employment and support allowance?

Answer 38

• The work-related activity

- The support group

Question 39

Describe the work-related activity group in the employment and support allowance benefits.

Answer 39

The work-related activity group includes those whose illness or disability is not considered too severe to prevent them from returning to work (although the work may not be the same work as that which they did before they became ill). These claimants have to attend regular meetings with advisers, who offer help and advice, and who arrange work-related activities. The benefit can be temporarily reduced (known as ‘sanctioned’) if a claimant fails to attend a meeting with an adviser. Claimants are allowed to work part-time (for no more than 16 hours per week) and yet still claim, provided that their earnings are below a weekly limit.

Question 40

Describe the support group in the employment and support allowance benefits.

Answer 40

The support group includes those whose illness or disability seriously limits the work that they can do. They are not required to attend adviser interviews, but can talk to an adviser if they need to. Claimants in this group are also allowed to work for up to 16 hours a week, but doing only ‘supported permitted work’, supervised by someone from the local council or one of the voluntary organisations that arrange work for people with disabilities.

Question 41

Describe the employment and support allowance (cont’d).

Answer 41

The weekly amount that ESA claimants receive may be affected by any income or savings that they or their partners might have: it will not be paid at all if savings are more than £16,000.
Claimants have to complete a ‘limited capability for work’ questionnaire and are likely also to have to attend a ‘work capability assessment’ to determine how much their illness or disability affects their ability to work.

Question 42

Describe disability and carer benefits.

Answer 42

An additional benefit - Personal Independence Payment (PIP) - is payable to those aged between 16 and 64 who have a long-term illness or disability that means they are unable to perform basic daily living activities or have limited mobility.
Anyone over the age of 65 who is in a similar situation can claim attendance allowance instead, attendance allowance helps to pay for older people to be looked after in their own home, instead of going into residential care.

Question 43

What is the purpose of disability and carer benefits?

Answer 43

The purpose of these benefits is to allow claimants to pay for things such as home help, cleaning services, mobility aids and taxis, so that they can remain independent for as long as possible, rather than having to move into a residential care home. The amount of benefit paid out will depend on how much help the claimant requires (which decision is made by an independent health professional).

Question 44

Who can claim carer’s allowance?

Answer 44

Anyone over the age of 16 who spends 35 hours per week or more looking after someone who has ‘substantial caring needs’ can also claim a carer’s allowance, although this is taxable and may affect other benefits.

Question 45

Who is eligible for housing benefits?

Answer 45

If they pay rent, they may be eligible for Housing Benefit, but single people under the age of 35 will be able to claim Housing benefit only if they live in a ‘bedsit’ or a single room within a house or flat that they share with other people.

Question 46

What does housing benefit cover?

Why is it reduced?

Answer 46

Housing benefit will often cover the full monthly rent, but it can be reduced if:
- you are paying an unreasonably high rent to a private landlord
- you are in social housing (housing supplied by a council or housing association) and are assessed as having more bedrooms than you need
- you household income is above a certain threshold
- you have savings of more than £6,000.
Other factors that may affect how much housing benefit you receive include your age, the number and ages of any children that you may have, and whether any family members are disabled.

Question 47

When may claimants not receive housing benefit?

Answer 47

Claimants may receive no housing benefit if their savings are over £16,000.

Question 48

What has housing benefit been replaced by?

How does this affect eligibility?

Answer 48

As housing benefit is being replaced by Universal Credit, from 15 May 2019 couples who are new applicants are only eligible for housing benefit if they have both reached state pension age, or if one of them has reached state pension age and started claiming housing benefit before 15 May 2019.

Question 49

Describe SMI (Support for mortgage interest).

Answer 49

Someone making a claim for certain qualifying benefits, and who needs help with interest payments on their mortgage or loans taken out to make certain repairs and improvements to their home, may also be able to claim SMI.
The benefit will cover only the interest due on the mortgage (calculated at a standard rate) and not any capital repayment (repayment of the amount originally borrowed), insurance policy payments or mortgage arrears (missed payments).
The benefit is subject to a time limit.

Question 50

List some additional benefits.

Answer 50

Those eligible for JSA, ESA and/ or housing benefit may also be able to claim a variety of additional benefits and discounts, such as council tax reduction and cold weather payments (an extra payment of £25 a week paid to people already receiving benefits when the temperature in the local area drops to an average of 0 degrees celsius or below over seven consecutive days).

Question 51

Who is eligible for income support?

Answer 51

For someone who is not working or who is working less than 16 hours per week - because they are pregnant, because they are a full time carer or because they are a single parent with a child under the age of 5 - and who is not eligible to receive JSA or ESA, there is a final safety net called Income support.

Question 52

What is income support?

Answer 52

Income support provides a weekly cash benefit , the amount of which varies depending on the claimant’s age and circumstances, including their income and whether or not they have savings of more than £5,999.

Question 53

What help is their for those in retirement?

Answer 53

State pension.

Question 54

Describe state pension.

Answer 54

Basic state pension is a non-means-tested (not income related) contributory benefit paid to everyone who has reached state pension age and who has paid (or been credited with) sufficient NICs.

Question 55

When do people reach the new state pension?

Answer 55

People who reach state retirement on or after 6 April 2016 receive new state pension.

Question 56

How much NIC does state pension require?

Answer 56

The scheme requires people to have 10 qualifying years of NIC contributions or credits to get any state pension and 35 qualifying years to get the full new state pension,

Question 57

How much does basic state pension rise by each year?

Answer 57

The rate of basic state pension (both new and old) increases every year, either in line with the rate of inflation in the UK - measured by the consumer prices index (CPI) - or in line with the annual increase in average earnings, or by 2.5% (whichever is highest).
This is the so-called ‘triple lock guarantee’.

Question 58

What is the triple lock guarantee?

Answer 58

The triple lock guarantee is designed to ensure that state pension stays the same in ‘real terms’ from year to year - that it grows at an annual rate that allows it to purchase the same representative basket of goods as it did the previous year.
The link to average earnings means that if earnings are rising faster than prices, pensioners will enjoy the same increase in income as people in employment.

Question 59

Why is state pension age changing?

Answer 59

State pension age, which was fixed at 65 for men and 60 for women for most of the 20th century, is in the process of being radically changed.
This is partly to cut costs - because the increasing number of people over the age of 60 in the UK is increasing the costs to government of providing pensions - and partly in response to pressure from the European Union to treat men and women equally with regard to pension entitlement.

Question 60

What is the state pension age?

Answer 60

The state pension age remains 65 for men born before 6 December 1953, but those born after this date have to wait longer before they can claim.
Pension age for women, meanwhile, has gradually risen from 60 to 65 for women born after 5 April 1950 and before 6 December 1953.

Question 61

How is the state pension age going to rise?

What bill raised this?

Answer 61

The pensions bill 2013 - 14 raised state pension age for all women to 65 by 2018. By October 2020, the age for men and women will increase again to 66 and there is a further planned increase - to 67 - scheduled to be phased in between 2026 and 2028. The legislation will also establish an automatic link between pension age and average life expectancy, so that state pension age will be raised again in line with increases in life expectancy.

Question 62

What is the average life expectancy for men and women?

Answer 62

Figures from the Office for National Statistics (ONS) suggest that men born in the early 1980s may expect to live to the age of 71, while women born at the same time may expect to live to 77.
For those born in 2012, however, life expectancy is 79 years for men and 82.7 years for women - and it is expected to rise to 87.3 years and 90.3 years, respectively, over the coming 50 years.
It has been estimated that this may mean that anyone born after 1970 will have to wait until they are at least 67 years old before they can claim state pension.

Question 63

Can people who work full time claim benefits?

Answer 63

People who work full-time, but are nevertheless living on a low income, may be entitled to claim certain benefits, allowances and tax credits.
The definition of ‘full-time’ depends on circumstances : it is 30 hours per week or more for some and 16 hours for others (e.g. disabled workers, those over the age of 60 and single parents).

Question 64

Explain working tax credit and child tax credit.

Answer 64

Working tax credit and child tax credit (which can include an amount to help with childcare) can be claimed by eligible low-paid workers and each provides an additional income designed to top up wages to an amount that ensures that claimants are better off working than being unemployed and claiming other benefits.
Couples make joint applications for these credits. The partner who works the most hours each week normally receives the working tax credit payment, but the child tax credit is paid to the one who spends the most time caring for the child (the main carer).

Question 65

What help is there for families, in terms of benefits?

Answer 65

Statutory Maternity Pay
Statutory Paternity Pay
Child Benefit

Question 66

Why is there help for families?

In terms of benefits

Answer 66

The benefit system has always recognised that parents with dependent children (aged 19 or under and in full-time education) have higher living costs than childless individuals or couples. Additional benefits are therefore available to help families to meet at least some of these additional costs.

Question 67

Describe statutory maternity pay (SMP) and statutory paternity pay (SSP).

Answer 67

SMP works in a similar way to SSP: if a woman is employed (full-time or part-time), her employer must pay SMP (up to 90% of her average weekly earnings for the first six weeks) for up to 39 weeks so that she can take maternity leave to look after the baby.

Eligible fathers are also entitled to SSP, but this is paid for only one or two weeks unless the mother chooses to return to work before using the full 39 weeks of maternity leave, in which case the father can ‘use up’ the unused maternity leave by taking additional paternity leave.

Question 68

Explain child benefit.

Answer 68

This is a flat-rate cash benefit paid to all families or single parents with dependent children. Like SMP and SPP, it is generally not means-tested, so everyone receives the same amount regardless of how much they earn or how wealthy they are. There is, however, an additional tax charge (the high income child benefit charge) that any individual earning over £50,000 a year will have to pay if they or their partner receives child benefit.
The amount of child benefit payable is higher for the first child than for subsequent children.

Question 69

What help is there for those in exceptional circumstances?

Answer 69

From the late 1980s until April 2013, a government-funded Social Fund provided additional grants and interest-free loans to claimants in ‘exceptional circumstances’. Community Care Grants, Crisis Loans and Budgeting Loans were available as one-off assistance in emergency situations.

Question 70

Which act abolished the social fund?

Answer 70

The welfare reform act 2012 largely abolished the social fund, although the government has since given some money to local councils with the intention that they will use it to provide their own grants, loans and practical assistance to people who would have been eligible for a Community Care Grant or Crisis Loan.
It has been left to the discretion of each local council, however, to decide how to use this money in its own local area.

Question 71

What are budgeting loans being replaced with?

Answer 71

Budgeting Loans are being replaced by a provision in the new Universal Credit that allows claimants to get an advance benefit payment that they can use to cover the costs of occasional ‘big ticket’ items, such as furniture or kitchen appliances.

Question 72

Why were there changes to the benefit system?

Answer 72

A number of changes to the benefit system came into force during 2013, largely driven by austerity measures taken in an attempt to cut government debt after the economic recession.

Question 73

What are austerity measures?

Answer 73

Austerity measures refer to government policies that aim to reduce public sector debt.

Question 74

What were the changes in the benefit system, refer to the benefits cap?

Answer 74

Since April 2013, the benefit claimants aged 16 - 64 (ie those of working age) have been subject to a payment cap (a maximum limit) on the total amount of income that they can receive from benefits. At the time of writing, that cap is £257 per week for a single person with no children and £384 per week for a couple or a lone parent (regardless of the number of children in the household). Any household previously receiving benefits higher than that cap saw their benefits reduced. The cap is higher for claimants who live in London.

Question 75

How much will the benefits caps affect government spending?

Answer 75

The government’s department for work and pensions (DWP) estimates that the cap will reduce the incomes of around 40,000 households by an average of £93 per week, cutting £110m from the government’s benefits bill.

Question 76

How did the benefit disability living allowance (DLA) change?

Answer 76

Disability Living Allowance was replaced by the benefit personal independence payment (PIP) from April 2013 for those aged 16 - 64. Fewer people are eligible to receive PIP than were able to claim DLA. The rate paid depends on how a claimant’s condition affects them, not on the condition itself.

Question 77

What are the changes to housing benefit?

Answer 77

Since 1 April 2013, households entitled to Housing Benefit have seen their benefit cut if they are renting council-owned or housing association properties that are larger than they need. The rules allow a property to have one bedroom for each adult or couple. Up to two children under the age of 10 must share a bedroom, and the same applies to same-sex children aged between 10 and 16.
While the government has referred to this as the spare room subsidy, it has become more commonly known as the ‘bedroom tax’ (even though it is not, of course, a tax payment).

Question 78

What was the biggest change to the benefits system?

Answer 78

The biggest change to the benefits system in 2013 was the introduction, on a trial basis in selected areas, of an entirely new benefit - Universal Credit.

Question 79

What is the purpose of Universal Credit?

Answer 79

The stated purpose of Universal Credit is to simplify the benefits system by replacing six existing benefits with a single monthly payment for those living on a low income (whether employed or not).

Question 80

What are the six benefits replaced by universal credit?

Answer 80

• Income-based JSA
• Income-related ESA
• Income support
• Housing benefit
• Child tax credit
• Working tax credit

Question 81

When is universal credit supposed to start?

Answer 81

Universal Credit has been slowly ‘rolling out’ across the country since October 2013 and, following repeated delays, is scheduled to be fully in place by 2024.

Question 82

How many people will be affected by Universal Credit?

Answer 82

The DWP (department for work and pensions) estimates that 8 million people will be affected and that, on average, households will be £16 per month better off.

Question 83

How is the rate for Universal Credit determined?

Answer 83

The term ‘universal benefit’ has traditionally been used to describe a flat-rate benefit paid to all those who met the eligibility requirements, regardless of their income.
The new Universal Credit, however, will be means-tested (income-related) like the benefits that it is designed to replace. Claimants will not face a weekly limit on how many hours they can work, but the benefit amount that they receive will be steadily reduced if their income rises.

Question 84

When is Universal credit paid?

How might this be a problem?

Answer 84

Like the existing benefits, Universal Credit will be paid straight into a bank, building society, credit union or post office current account.
Unlike many existing payments, however, it will be paid once a month rather than every week, every two weeks or every four weeks (as was the case with the benefits that it replaces). In theory, this is not a significant change: in practice, some claimants may find it difficult to plan a budget that spans a month rather than two or four weeks at a time. It is therefore possible that such claimants may find themselves running out of money towards the end of each month.

Question 85

What could universal credit do to housing payments?

Answer 85

Claimants who are social housing (council or housing association) tenants, who are used to having housing benefit paid directly to the council or housing association, will also have to get used to receiving the money as part of their Universal credit and taking responsibility for paying it to their landlord on time. In combination with the change in the frequency of payments, it would not be surprising if some claimants were sometimes to feel that the only way of meeting their family’s basic needs at the end of the month is to use some or all of the ‘rent money’.
The result could be a rise in social housing rent arrears.

Question 86

What was the problem with how universal credit was delivered?

Answer 86

Those who were eligible for Universal Credit in pilot areas in 2013 were beset by problems, including payment delays, arising mainly from issues relating to the computer systems and software developed specifically to deliver the new benefit. In a report on the early progress of the scheme’s implementation in Nov 2013, the chair of the house of commons public accounts committee said:
‘‘The failure to develop a comprehensive plan has led to extensive delay and the waste of a yet to be determined amount of public money. £425 million has been spent so far on the programme. It is likely that much of this, including at least £104 million worth of IT assets will now have to be written off.’’

Question 87

In addition to benefits, how do agencies try to help people maintain financial sustainability?

Answer 87

Providing a system of monetary support for those on low income is not the only way in which government and non-government agencies try to help individuals to maintain financial sustainability. In addition to the state benefits, allowances, pensions, etc, support also takes the form of financial advice, information, guidance and education.

Question 88

What are the key agencies that offer financial advise?

Answer 88

The money advice service (MAS)
Citizens advice
The money advice trust (MAT)
Local council debt counselling services
(non-government)=
Stepchange debt charity
Payplan
Provider debt advice

Question 89

Why were financial advisers set up?

Answer 89

In the wake of the 2007 - 2008 financial crisis, politicians from all parties agreed that there was an urgent need to improve the general public’s knowledge and understanding of personal finance. It was felt that, when it came to handling their finances and making the best use of appropriate financial products, too many people were ‘financially illiterate’ (knew very little about personal budgeting, about the range of financial products and services available, or about how to avoid getting into unmanageable debt) which led them to make the wrong financial decisions and choices.

Question 90

What did the financial services act 2010 introduce?

Answer 90

The financial services act 2010 introduced measures designed to improve financial literacy. The act required the financial services authority (FSA) to promote consumer financial education; the FSA consequently established the consumer financial education body (CFEB) to fulfil this role.

Question 91

What happened to the CFEB in 2011?

Answer 91

In 2011, the consumer financial education body (CFEB) was renamed the Money Advice Service (MAS) and is now funded by a special levy (tax) on financial service companies. It is part of the money and pension service.

Question 92

What do the Money Advice Service aim to do?

Answer 92

We aim to help people avoid getting into unmanageable debt but, for those who do, we fund the provision of free, high-quality debt advice, delivered by our partners across the UK. The Money Advice Service is the largest single funder of debt advice in the UK.

Question 93

What does the MAS website include?

Answer 93

The MAS has a comprehensive website which features a wide range of information and advice on topics including ‘Births, deaths and family’, ‘Budgeting and managing your money’, ‘Work, pensions and retirement’ and ‘Benefits’. It also provides information about financial products, and offers features. The features include step-by-step guides, educational videos, a mortgage calculator, and interactive tools and resources that allow people to compare current accounts, to draw up a personal budget plan and to complete an online ‘Money health check’, among many other things. The MAS also produces a blog, offers web chats and promotes the service, by means of extensive television, radio, newspaper and poster advertising campaigns.

Question 94

What is the main purpose of the MAS?

Answer 94

The main purpose of the MAS is to provide the information and advice that people need to enable them to make broad financial decisions in answer to questions such as ‘What kind of insurance products should I have?’, ‘How do I decide between different types of mortgage?’ and ‘How can I ensure that I have an adequate pension when I retire?’ It does not, however, offer detailed financial advice or recommend any individual products - this type of specific advice can be offered only by qualified financial advisers.

Question 95

What are the other purposes of MAS?

Answer 95

The MAS also provides information and advice for those who find themselves in financial difficulties. There are a number of pages on the website that explain the options available to people who build up an unsustainable amount of debt to the point at which they can no longer afford to make the monthly payments.

Question 96

What sources of financial advise are government funded?

Answer 96

The government part-funds two national debt and money advice charities:

• Citizens advice
• The money advice trust (MAT)

Question 97

When and why was citizens advice set up?

Answer 97

The first local citizens advice bureaux were set up in 1939, a few days after the outbreak of the Second World War, in accordance with a pre-war plan to enable volunteers to offer free, impartial financial advice to people whose financial situation had been seriously disrupted by the war. Although these bureaux were independent, they were largely funded by the government as part of the war effort.

Question 98

Describe Citizens Advice today.

Answer 98

Today, the Citizens Advice service comprises a registered national charity, Citizens Advice, which can be found online and more than 250 Citizens Advice Bureaux, each of which is an individual charity at local level and which offer face-to-face assistance in more than 2,500 community locations. Citizens Advice regularly helps over 2 million people each year by phone, face to face, by email and through its website.

Question 99

How is citizens advice funded?

Answer 99

Citizens Advice is largely funded by government departments - the Department for Business, Energy and Industrial Strategy (BEIS), HM Treasury and the Department of Health (DH) - but also receives financial support from certain financial services providers (including most of the major banks, the Nationwide Building Society and Prudential Insurance), five of the ‘big six’ energy suppliers and many other commercial or charitable organisations.

Question 100

What does the Citizens Advice website offer?

Answer 100

Citizens Advice offers information, advice, calculators and other interactive tools online. The site offers advice on dealing with benefits and help to those who have built up unsustainable debts. It also covers a very wide range of diverse problems ranging from legal rights, housing, employment, consumer issues, discrimination,, tax, health care and education, to personal relationships.

Question 101

What does the individual bureaux of Citizens Advice provide?

Answer 101

The individual bureaux provide one-to-one help to those who cannot solve their problems by using the MAS and Citizens Advice websites alone. Trained volunteers and a growing number of employed advisers are able to sit with people, discuss with them the details of financial and personal problems, and then guide them towards a solution to those problems. Where the problems are financial, the advisers can explain how to draw up a debt management plan, including how to get creditors to agree to freeze interest and other charges and accept affordable payment arrangements, and can then help people to draw up realistic budgets and cash-flow plans that will help them to avoid financial problems in the future.

Question 102

What is MAT?

Answer 102

The Money Advice Trust
The second money advice charity that the government part-funds, alongside a large number of financial services providers, is the Money Advice Trust (MAT).

Question 103

What does MAT do?

Answer 103

The Money Advice Trust helps people across the UK to tackle their debts and manage their money with confidence.

Question 104

What does MAT operate?

Answer 104

Since 2000, the Trust has been responsible for operating the National Debtline, an online and telephone advice service that helps people to sort out their debt problems.

Question 105

What does the National Debtline offer?

Answer 105

National Debtline offers financial information and debt management advice, which can sometimes be all that someone needs to solve their problems themselves.

Question 106

Who is the MAT in partnership with?

What have they developed together?

Answer 106

In partnership with Barclaycard, the Trust has also developed an interactive website, www.mymoneysteps.org, which offers free, personalised debt management advice to help individuals to deal with their debt problems.

Question 107

What are local council debt counselling services?

Answer 107

It is not only the national government that funds money and debt advice services; many local authorities (county councils, district and borough councils, city councils) also provide their own local services.

Question 108

Give an example of a local council debt counselling service.

Answer 108

Birmingham City Council has a Debt Advice Team: experienced debt advisers, who are available to meet face-to-face to discuss residents’ financial problems and give them advice on how to maximise their income (earnings from employment and/ or eligible benefits), help them to draw up realistic budget and cash-flow forecasts, and help them to prepare a debt management plan and get the plan agreed with creditors.

Question 109

What are other non-government sources of help and advice?

Answer 109

StepChange Debt Charity
Payplan
Money Charity

Question 110

How do other non-government sources of help and advice support people?

Answer 110

There are many debt advice and debt management companies that will set up individual debt management plans for people who are struggling with their finances. These private, commercial organisations will usually charge a fee for this service; StepChange and Payplan will not?

Question 111

Do StepChange and Payplan charge for their services?

Answer 111

No, they do not charge fees.

Question 112

What is StepChange Debt Charity?

Answer 112

StepChange is a national charity offering free debt advice. It started life as the Consumer Credit Counselling Service in 1993, but changed its name to StepChange Debt Charity in 2012.

Question 113

How is StepChange Debt Charity funded?

Answer 113

Unlike Citizens Advice and the MAT, StepChange does not receive any government funding, relying instead on contributions from the banks and building societies.

Question 114

What does StepChange Debt Charity offer?

Answer 114

StepChange offers a personal debt advice and debt management service, both online and by telephone, which is very similar to the help provided by the National Debtline. Talking to advisers by phone or using the interactive ‘Debt Remedy’ facility on its website will help you to draw up a debt management plan and establish an agree payment schedule with your creditors (who will then, in most cases, stop charging interest, missed payment fees)

Question 115

What is Payplan?

Answer 115

Payplan is a free, online, debt management service that operates in a similar way to National Debtline and StepChange. It is not a charity, but, rather than charging clients a fee for managing their debts, it receives donations from all of the lenders with which it arranges debt management plans.

Question 116

What is the Money Charity?

Answer 116

Another national charity, the Money Charity offers educational personal finance information, advice and guidance online at http://themoneycharity.org.uk. It also offers a range of publications and training workshops. It does not, however, arrange individual debt management programmes.

Question 117

What is provider debt advice?

Answer 117

As well as helping to fund the MAS, Citizens Advice and the MAT, many banks and building societies have now set up their own advice services specifically aimed at helping customers who have debt problems. Barclays, Nationwide, Bank of Scotland and Lloyds Bank for example, all have sections on their websites that provide information and advice to people whose debts are getting out of hand. Each features step-by-step guidance on how to manage debts and includes links to the free debt management services.

Question 118

Why do providers offer debt advice services?

Answer 118

Making a variety of money and debt advice services available to their customers across the country is not, of course, something that financial providers offer entirely unselfishly. Borrowers who default on their loans or mortgages are a costly problem for lenders, because these borrowers may never repay the money that they owe. Making sure that customers have access to advice that will guide them towards ways in which they can repay most, if not all, of the money that they have borrowed means not only that the provider will not be wholly out of pocket, but also that it can avoid the time-consuming and expensive process or pursuing defaulters through the court system.

Question 119

What is corporate social responsibility (CSR)?

Answer 119

In recent years, the public has come to expect all businesses to demonstrate a social conscience - ie to avoid behaving unethically and to care as much about providing high-quality services to their customers as they do about maximising profits for the benefit of their shareholders. Most providers therefore now publish a detailed corporate social responsibility (CSR) report each year, and these will include information on the donations that the business has made to debt and money advice charities, as well as how it is directly helping customers who get into financial difficulties.