Prepaid benefit cards

The idea of paying social security benefits via a prepaid card has been popular in certain political circles for some time. It has now reached the stage of a live test with a small number of vulnerable claimants and their support workers. The Department for Work and Pensions (DWP) has evaluated the trial and the results can be found here.

In the past, the prepaid card has been favoured by many politicians, including the former Secretary of State Iain Duncan Smith, as a means of restricting what claimants can spend their benefits on. A prohibition on cigarettes or alcohol was very popular amongst politicians who seemed to believe that most people dependent on benefits were incapable of budgeting, and if they were in dire straits it was probably because they had squandered their meagre incomes. The prepaid card then proposed seemed designed to stigmatise and control claimants.

To be fair, the card tested in the current trial has several positive features, and seems to reflect a less judgemental attitude. It can be used to withdraw cash, there are no restrictions on what can be purchased, and it can be used online, or to set up Standing Orders and Direct Debits. In this way, it would seem to give access to a form of banking, which some claimants currently do not have. The DWP concludes that "it would be feasible for DWP to carry out a more extensive trial of using prepaid cards to support vulnerable claimants." It is difficult to imagine, however, that if the cards were officially adopted for ‘vulnerable claimants’ and proved to save money on administration, that they would not then be rolled out to all claimants.

Despite the positive features of the cards used in the trial, the scheme still raises many concerns and questions.  Yes, it is in some ways like having a bank account - but would claimants choose to bank with the DWP? The DWP has a quite a reputation for making errors in payment, or disputing what a person is entitled to. Using these cards, will the DWP simply be able to remove money it believes has been paid in error? Will use of the card identify someone as a benefit claimant, and attract stigma? Even if a prepaid benefits card is established with relatively benign rules, isn’t the potential there to change the rules in the future, and apply harsher terms and conditions? The company who supplied the cards for this trial, PFS, obviously sees that as the main selling point of such cards. On its website it pitches its product to government by saying,  "Prepaid for Government : A PFS prepaid solution provides complete visibility and control on all payments. Cards are restricted to specific merchant IDs so funds cannot be spent on needless goods and services."

In an Appendix to the DWP’s evaluation of the trial, we can read how the cards are currently being used by some Local Authorities (LA) to make Direct Payments for social care, and there are some worrying implications for the potential use of the cards amongst the wider claimant population.

For instance, "It is important to note that the council remains the owner of the card and has ownership of the funds placed on it. This allows them to easily retrieve funds, for instance when someone dies or an overpayment has been made."

Also, worryingly, "LA participants reported that certain functions of the prepaid card can be ‘turned on and off’. For example, the fund-holder can decide whether to allow ATM cash withdrawals and ‘cash- back’. They can also place a cap on the amount of cash that can be withdrawn. Also, the fund-holder can restrict certain merchant codes – known as ‘merchant blocking’ – so that cards cannot be used to purchase certain products and cannot be used at certain retailers/services. For example, one LA placed restrictions on things such as adult entertainment, gambling and theme parks."

For years the DWP has worked on the basis that poverty is often not due to economic injustice and incomes too low to meet basic needs, but the feckless, stupid or irresponsible behaviour of poor people. Policies have been geared not to raising the incomes of people living in poverty, but to changing their behaviour, whilst simultaneously cutting their incomes. The prepaid cards used in this trial may seem to have attractive features, but are they not just one more way of treating benefit claimants as different from the general population? Wouldn’t a basic bank account, an adequate income, and genuine support for vulnerable claimants do far more to enhance people’s ‘life chances’ than yet another scheme which treats claimants as somehow ‘other’?  

To some extent, this is about whether we trust the DWP to always act in the best interests of claimants, and so feel happy to give it yet more control over their lives. Given the harm caused in recent years by benefit sanctions, disability assessments, the bedroom tax, and numerous other policies, this trust is sadly not possible. But even if it were, as Dr Simon Duffy of the Centre for Welfare Reform says, "there is no need for DWP control of what should be a basic and universal entitlement in modern life."

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© Bernadette Meaden has written about political, religious and social issues for some years, and is strongly influenced by Christian Socialism, liberation theology and the Catholic Worker movement. She is an Ekklesia associate and regular contributor. You can follow her on Twitter: @BernaMeaden