APPENDIX 1
Memorandum submitted by the Department
of Social Security (PAC 00-01/158)
Q.120. Simplification of the benefit rules
and Benefit Payment Card processes
Legislative constraints, customer service requirements
and the need to minimise the risk of fraud meant that it was not
possible to introduce the amount of simplification that ICL Pathway
would have wished in certain areas. The Department did, however,
where they could, try to find ways in which existing payment processes
could be simplified. As a result, some significant changes were
made (or planned) including:
— A single nominated Post Office
for each customer: the Benefit Payment Card arrangements required
customers to have a single nominated Post Office at which to collect
all the benefits to which they were entitled. Previously, customers
could nominate different Post Offices for each benefit to which
they were entitled. Since the ICL Pathway solution relied heavily
on being able to predict accurately where the vast majority of
encashments were to take place, this was a significant simplification.
— Agency arrangements: Regulations
introduced in April 1996 simplified the Agent arrangements for
the Benefit Payment Card. Where a customer appointed an Agent
to collect a benefit, that person became the Agent for all other
bendfits received by that customer. Previously, it had been possible
to appoint a different Agent to collect each of the benefits to
which the customer was entitled.
— Plans to change the arrangements
for Signing Agents: the Signing Agent facility is employed
when the person appointed to collect benefit for a customer is
effectively a "post" or "body" rather than
an individual, eg, Local Authority Finance Director. ICL Pathway
security procedures relied heavily on knowledge of personal details
of the person making the encashment. It was recognised that the
Signing Agent facility would make it very difficult for ICL to
develop a solution. To simplify matters, the Department agreed
to develop a simpler arrangement that could be readily incorporated
within the Pathway solution.
Q.176. Numbers of people who will not have
accounts when Universal Banking Services are in place
Over 80 per cent of benefit recipients already
have a bank or buiding society account, which is suitable to receive
benefit payment by Automated Credit Transfer (ACT).
One of the key objectives for the Government's
plans to make all benefit payments via ACT into bank accounts,
starting in 2003, is to encourage more of the 3.5 million people
who currently do not have bank accounts—and the linked access
to mainstream financial services—to open an account.
Over the past 18 months, the Post Office have
been working with the banks to secure arrangements which mean
that everyone could have access to a bank account. The new universal
banking services package which the Post Office are developing
will provide access to newly designed basic bank accounts (sometimes
referred to as PAT 14 accounts) and simple post office based accounts.
Universal banking services are being designed to cater for the
overwhelming majority of those benefit recipients who do not currently
have access to an account suitable for payment by ACT.
At the same time, this Department has commissioned
research and undertaken a programme of discussions with informed
groups to establish what barriers there might be to universal
access to accounts. This programme of work has included:
— discussions with experts in the financial
services industry (eg, the Financial Services Authority and Building
Societies Association), those with an interest in financial exclusion
(eg, the social exclusion group at the British Bankers Association);
— detailed research by Elaine Kempson
at the University of Bristol[11],
buiding on research she has already undertaken for the BBA and
which was made available to the Social Exclusions Unit's PAT 14
group, which reported on financial exclusion[12];
this research shows clearly that while there are certain vulnerable
people who may need particular help in using a new account-based
payment system, there are no clearly identifiable groups of people
in the UK who could not be paid by ACT eg, because of disability,
religious or other conscientious objections.
Under current plans for access to bank accounts,
it would be possible in theory for everyone to be paid via ACT
into a personal account. This is the situation already in countries
such as Australia and Holland.
We have thought it prudent, however, to plan
on the assumption that there will be some exceptions to payment
by ACT. In particular, there will be a small number of individuals
who are simply unable to operate a bank account, or who for other
reasons making payments via ACT may not be suitable, eg, some
drug addicts, people with learning difficulties, people with mental
illness who have just come out of hospital. First, to ensure a
suitable payment mechanism is in place, DSS intends to tender
for a service provider to make payment to these individuals. Second,
to develop with other service providers an effective way of delivering
such payments, which might involve Post Office, Social Services
Departments and other Agencies.
Although it is difficult to predict exact numbers
at this stage, against the background of our policy objectives
and current plans for Universal Banking Services, we are assuming
thousands rather than millions for planning purposes.
There is a separate issue about the provision
of urgent, payments, such as payment of Social Fund crisis loans.
Together these amount to around one million payments per year.
We are in discussion with the banking industry about possible
arrangements they may be able to provide.
Department of Social Security
13 March 2001
11 Director of the Personal Finance Research Centre
at the University of Bristol. Back
12
"Access to Financial Services" report of Policy Action
Team 14 November 1999. Back
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