Budgeting advances

Introduction

A UC claimant can apply to get a lump sum of UC to meet a critical, one-off need. This ‘budgeting advance’ is discretionary and repayable. Budgeting advances start at a minimum of £100 and can be for as much as £812 for a household with children, £464 for a couple without children, or £348 for a single adult. The claimant will usually repay the advance through UC deductions over the following 12 months.

The DWP does not regularly publish information about how many people take out budgeting advances, but there have been reports to CPAG’s Early Warning System that this year’s cost of living pressures are driving more claimants to apply.

In this context, it is worth noting that the maximum sums for budgeting advances have not increased since they were introduced in 2013, despite significant price increases in the same period.1

What are budgeting advances for?

• essential household items; eg, furniture or appliances;
• clothes and shoes;
• costs related to housing – eg, moving costs, rent in advance or the costs of home maintenance;
• funeral expenses;
• the costs of getting or keeping a job.

This list, set out in DWP guidance,2 is not exhaustive. The DWP has discretion about whether to make a budgeting advance and the law only specifies that it must be for an ‘intermittent expense’.3

Budgeting advances ‘are not intended to help pay for unexpectedly high household bills, for example an electricity or gas bill’, according to the guidance. There are questions about whether this is the right approach in law, particularly if it amounts to a blanket policy. However, in practice, other energy debt options could often be more affordable than repaying an advance.

Remarkably, the DWP at one point envisaged an online application process for budgeting advances in which ‘applications will not depend on the purpose of the advance as that would add unnecessary complexity and cost’.4

Can anybody get one?

No: certain requirements apply. An application must be made, and:5

• the applicant (or her/his partner) must not have an outstanding budgeting advance (ie, has finished paying off any previous budgeting advance). S/he should be able to get a budgeting advance if repaying a different type of advance;
• usually, the applicant must not have earned more than £2,600 (or £3,600 jointly for couples) in the last six months (strictly speaking, over the last six complete monthly assessment period);
• usually, on the date of application, the claimant (or her/his partner) must have been continuously getting a qualifying means-tested benefit (UC, income-related employment and support allowance, income-based jobseeker’s allowance, income support or pension credit, for six months;
• the claimant must not have (or claimant and reportpartner jointly must not have) savings that are more than the total of their maximum budgeting advance plus £1,000 – for example, a single adult with savings over £1,348 will not be able to get a budgeting advance;
• the DWP is satisfied that it will be able to recover the budgeting advance, taking into account the applicant’s (and her/his partner’s) other debts and liabilities.

There are slightly different rules when a claimant’s application is ‘necessarily’ related to employment. These claimants can get budgeting advances even when they have been on means-tested benefits for less than six months – and the earnings limit that applies to them is different too. The other exclusions above still apply.

All claimants with savings over £1,000 will see the maximum amount of their budgeting advance reduced, even if they are not completely excluded from getting one under the capital rule above.

How do claimants apply?

At the time of writing, there is no publicly available application form. The gov.uk website6 directs claimants to apply for a budgeting advance by contacting their work coach. It would usually make sense for an applicant to have quotes, invoices and other costs information ready before making that contact.

How and when is payment made?

If approved, an advance will be paid by BACS within three working days – or, in exceptional circumstances, by same-day payment.7

What happens if the application is refused?

Budgeting advances are discretionary. If an application for a budgeting advance is unsuccessful, there is no right of appeal, although an applicant can ask the DWP to look at its decision again. In some cases, the decision might also be open to judicial review. CPAG’s Judicial Review Project ([email protected]) can provide more information on how this works and when it might be appropriate.

How is it repaid?

Budgeting advances are usually paid back through monthly deductions from UC over the course of 12 months. The claimant should be told the amounts of these deductions at the application stage.

If a claimant stops getting UC, the DWP can recover an advance in a range of ways – eg, through a voluntary repayment plan or a direct earnings attachment.

Can repayments be paused or reduced?

• Repayments can be paused for up to three months if someone is struggling financially. DWP guidance states that this will only be agreed in exceptional circumstances.8
• The latest guidance from the DWP also states that ‘if you’re struggling, you can ask for a financial hardship decision to reduce the amount of benefit debt you pay. You may be considered for this if you have money taken from your universal credit for (…) advances.’9

Finally: should your client apply for a budgeting advance?

This difficult question can only be answered on a case-by-case basis, but there are some consistent pros and cons.

Among the pros is the fact that budgeting advances can pay for essential items and are interest-free. This means that an advance is often a more affordable option than a commercial loan or a hire-purchase agreement.

A clear downside of taking out a budgeting advance is the fact that it is not a grant, the need (usually) to repay it within a fixed term, and the fact that deductions are taken directly from the borrower’s UC, which might be her/his main or only source of income. A claimant with children who has taken out the maximum possible advance will lose £67 of her/his income every month for a year, putting a serious dent in the family’s finances.

It is always worth considering alternative debt options and sources of support before taking out advances. The Flexible Support Fund might help with costs associated with work, for example, and a discretionary housing payment might be available to help with moving costs or rent in advance. Unlike a budgeting advance, neither of these has to be paid back.