Report backs prepaid cards for personal budgets and Social Fund

Local authorities should explore using prepaid cards for the distribution of personal budgets, asylum seeker and care leaver payments and for emergency fund schemes like the Social Fund, a new report recommends.

Think tank Demos last week published a report revealing the result of a Freedom of Information request to English councils which showed that a quarter of them are already using prepaid cards – with 30% more planning to use them in the next 12 months.

Its report outlines the experiences of those councils currently using them for the direct payment of adult social care. Brent Council says it expects to shave 10% off the £5 million a year it currently spends on direct payments, with another council, Bury, admitting that it had paper audit trails going back several years before turning to prepaid cards.

Prepaid cards are similar to normal debit cards. Funds are loaded onto the cards which can’t go overdrawn.

Payment specialists allpay, which were highlighted in the report, already supplies its prepaid card solution to a number of local authorities and housing associations. It’s currently in discussions to deliver instant issue cards local authorities can use to award Social Fund payments from April, following the Government’s decision to devolve the duty locally. allpay has developed its prepaid solution following demand from local authorities for cashless systems.

Once money is loaded on to the cards, the local authority can monitor the spend through a web-based system.

Nick Peplow, allpay’s business development director, said: “The key driver from a local authority perspective is that the spend can be monitored electronically, for example, in accordance with a care plan to ensure that funds are spent appropriately. Local authorities have a statutory duty to monitor spend already – using a prepaid system makes the process simpler, reducing the amount of time spent on collecting and auditing receipts and bank statements, thus increasing productivity in other areas.”

The Demos report says: “At a time when social care funding is under unprecedented pressure, any reductions in staff time and associated costs made in back office functions can mitigate the effects of cuts on front line services.”

From a care user perspective, the main benefits outlined in the research are that users don’t need to send in paperwork and receipts for all of their spending, and their carers are paid quickler.

Looking ahead, Demos believes the Government should explore prepaid cards as a way to distribute Universal Credit for the unbanked. The report notes that Brent is keen to extend its use of prepaid cards to the payment of Universal Credit, while Bury said in the future it would consider using the cards for its money management service to residents who are unable to manage their own finances (appointeeships).

In these cases, prepaid cards could be used for people to manage a weekly cash allowance, while the council manages receipt of their benefits and payment of household bills.

Prepaid cards are becoming popular for personal budget distribution as they put an end to paper-based auditing

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