Demos analysis of ‘cashless’ welfare payments fuels moral debate if authorities try to control recipients’ spending choices
Social security benefits such as universal credit and crisis loans should be issued on debit card-style cards, despite fears that they will enable authorities to block recipients from spending the cash on alcohol, cigarettes and gambling, according to a report by the thinktank Demos.
In what it says is the first analysis of the potential of “cashless” welfare payments, the report says prepay cards can help recipients control debt and build up budgeting skills, as well as delivering huge administrative savings for the state.
But it calls for a public debate on the “moral and ethical implications” of using the technology, which would allow authorities to adopt a more punitive US-style approach to benefits, for example by blocking the purchase of alcohol and pet food on food stamp cards.
A backbench Tory MP, Alec Shelbrooke, introduced a parliamentary bill in December calling for the introduction of a welfare cash card that would restrict claimants to “priority” purchases such as food, clothing, energy, travel and housing, while blocking expenditure on “luxury” items such as cigarettes, alcohol and Sky television.
Shelbrooke’s bill provoked furious debate about the dangers and benefits of prepay welfare cards, and divided commentators and politicians on both the left and right.
But report co-author Claudia Wood said that although it was “sensitive and emotional” area, the potential advantages for both recipients and state should not be dismissed: “The debate over controlling benefits to stop so-called ‘non-essential’ spending will go on and on, but it shouldn’t distract from the positives … used well, this technology can be empowering for service users – there is much more to it than state control.”
Last month the work and pensions minister, Iain Duncan Smith, appeared to back prepay cards as a way of ensuring that some groups of benefit recipients, such as drug addicts with children, did not spend the money they get inappropriately, but aides subsequently denied that ministers had any plans to introduce them.
Polling carried out by Demos for the report found that 59% of the public supported some form of state control over benefits, with support highest for controls on payments to claimants with gambling or substance addictions (77%). Over half of respondents identified “things that are bad for your health” such as smoking and booze as areas on which benefits should not be spent.
But when the issue was discussed in focus groups initial support for controls fell away, the report found: “It was interesting to note that focus group participants tended to support the idea of other people (particularly younger people) having their benefits monitored, but not themselves.”
In the US all 50 states use prepay electronic benefit transfer (EBT) cards for food stamps and temporary assistance benefit payments. A recent survey found that all states block the use of EBT cards in casinos, while 40% blocked their use in strip clubs, bars and taverns, and bingo halls.
The report, which was financed by Mastercard, found that use of the cards is already widespread among English local authorities, with a quarter using them to issue personal budget payments to social care service-users. Of those local authorities not using the cards for personal social care budgets, a third said they plan to introduce them over the next 12 months, with many attracted by the apparent opportunity to make substantial savings in administrative and audit costs.
Several councils are considering extending use of the cards to include payments to asylum seekers, care-leavers and individuals who qualify for crisis payments under the social fund, although others said they were held back by high charges imposed by banks.
Prepay cards are similar to normal debit cards. Funds are loaded into an account linked to the card and then spent by the cardholder until the balance reaches zero. They do not have an overdraft facility. Users can set up direct debits using the cards, which can also be enabled to make withdrawals from cash machines.
Demos says introducing cash cards for recipients of Universal Credit would help recipients without bank accounts to manage the shift from weekly to monthly social security payments. Cardholders could volunteer to have weekly spending limits imposed.