12Speeding up payments - shortening the fifth week
203.In the Department’s view, each week of the five-week wait plays a necessary role in the design to pay claimants monthly in arrears. It uses the first month to evaluate a person’s claim, assess their household needs, and verify their identity.244 It uses the final week to issue the payment. DWP currently uses the Bankers’ Automated Clearing Services (BACS) payment validation process to make Universal Credit payments. BACS payments are an electronic system to send money directly from one bank account to another. They are generally used for direct debits and take around three working days to clear. The Department allows a week for the payment to arrive, because at Easter and Christmas there can be four non-working days in a row.
204.Tom Loosemore, who founded the Government Digital Service, told us that the Department could speed up how it pays people by switching all payments in Universal Credit to “Faster Payments”. Faster Payments generally take a few minutes to process, and occasionally take up to two hours. Tom Loosemore told us that he believed the reason the Government does not use Faster Payments “is because Treasury does not want to cough up the money”. He said the decision not to use Faster Payments “adds potentially up to four days to people’s payment regimes”.245
205.DWP has said that it uses Faster Payments when there are “insufficient banking days between the issuance of a UC payment via BACS and the date it is due”.246 This is particularly the case during holidays like Easter and Christmas where Bank Holidays could prevent the Department from making a payment in time if they use the BACS system.247 Neil Couling, the Senior Responsible Owner for Universal Credit, told us that there is a limit on the number of Faster Payments that banks can process for the Government. He gave the example: “Last month [June 2020] we probably made around 4 million payments of Universal Credit. The Faster Payments limit is around, I think from memory, 200,000”. He said that, in response to coronavirus, DWP had quadrupled its number of Faster Payments in case it faced a “massive surge” of requests for Advances.248
206.We asked the Financial Secretary for the Treasury, Jesse Norman MP, what the DWP’s limits are when using Faster Payments. He explained that NatWest is the supplier bank for DWP and can submit Faster Payments at a rate of around 40,000 per hour. It shares these payments across its customer base, including its personal, corporate and Government customers, although out of its Government customers, only DWP submits Faster Payments in high volumes. He said that DWP can only process a maximum of 360,000 Faster Payments per day because DWP requires each transaction to be shown separately and NatWest statement reports cannot exceed 360,000 lines of data. He said that, more widely, the technical capabilities of individual banks affect the number of Faster Payments that they can process.249
207.In oral evidence, Neil Couling told us that the Department takes costs into account when it considers how it pays Universal Credit. He said that “BACS payments are extraordinarily cheap. Faster Payments come at a higher price, so there would be an Exchequer cost to doing it at the moment”.250 The Financial Secretary to the Treasury confirmed to us in writing that, in terms of transaction costs, a Faster Payment is currently ten times more expensive than a BACS payment. Neil Couling said that a benefit to BACS payments is that they give claimants certainty about when their money will come through, allowing people to budget and plan.251 He told us that the period of the “middle of this decade” is a better timeline for a wider roll-out of Faster Payments.252
208.Faster Payments offer the Department a quick and efficient way to pay claimants. They could, if more widely used, reduce the time that people have to wait for a first payment. The Department already has plans to increase its use of Faster Payments. That will have costs and will require work across multiple bodies, including the Treasury and the banks. We recommend that the Department maintain its target to increase its proportion of Payments permitted by banks, to shorten the fifth week of the Universal Credit process. We urge the Department to set out in more detail its proposed strategy for rolling out Faster Payments, including its expected timings and its plans for engagement with the banking sector, in response to this report.
244 National Audit Office, Universal Credit: getting to first payment, July 2020, para 1.8
Published: 19 October 2020