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Budgeting Advance to Replace Loans

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Currently, Budgeting Loans from the Social Fund are available to income-related benefit claimants who have been in receipt of such benefit for 26 weeks or more. They are intended to help claimants defray intermittent expenses such as needing to buy essential items such as furniture or household equipment, or expenses related to, for example, maternity or starting work.

Budgeting Advances will replace Budgeting Loans for Universal Credit claimants from 29th April 2013 to ensure that those with the lowest incomes claiming Universal Credit will continue to have access to an interest-free alternative to high-cost lending for emergency and unforeseen expenses.

Budgeting Loans will continue to be available for those claiming legacy benefits until all such claims have been closed or migrated to Universal Credit.

Budgeting Advances will reflect existing Budgeting Loan eligibility requirements and available amounts. As such, Budgeting Advances will in most cases require the claimant to have been claiming Universal Credit – or have had a continuous claim to a old income-related benefit migrating to Universal Credit – for at least six months. To maintain work incentives however, that requirement does not apply if the expense for which a Budgeting Advance is required is necessary as a consequence of the claimant obtaining or retaining employment.

Budgeting Advances are available only to those on the lowest incomes (just as access to Budgeting Loans is restricted to those receiving income-related benefits) and the Regulations will specify a maximum earnings threshold for eligibility to a Budgeting Advance.

The maximum Budgeting Advance Loan available for a claimant will depend on whether the Universal Credit claim is in respect of a single person or a couple, and on whether the claimant is responsible for any children or qualifying young people. The Regulations will specify the maximum loan for each of those categories of claimant and any reductions to apply in respect of capital held by the claimant or their partner.

There will be some clear differences from Budgeting Loans in that Budgeting Advances are intended to discourage dependency on the benefit system and long-term repayment of loans, enabling claimants to take better personal responsibility for their own finances.

As part of the new Welfare changes beginning to come into effect from 1st April 2013, Budgeting Loans will be replaced by a Budgeting Advance for all benefit recipients who are paid Universal Credit. Benefit claimants who are on Jobseekers Allowance, Income Support, Pension Credit or Employment and Support allowance will continue to be able to apply for a Budgeting Loan until they are moved over on to Universal Credit, this is planned to start happening in October 2013 and is estimated to take 4 years to complete moving over all customers to the new benefits system.

• Budgeting Advances will be introduced alongside UC from 29 April 2013 as a replacement for Budgeting Loans.

The Discretionary Social Fund currently enables Budgeting Loans and Crisis Loans to be paid in certain circumstances.

The Welfare Reform Act 2012 abolishes the discretionary Social Fund. In order to retain the protections currently available to benefit claimants via the Social Fund, new regulations will introduce a system of payments on account of benefit to replace Budgeting Loans and Crisis Loan alignment payments as well as Interim Payments of benefit.

Short-term Advances will replace Interim Payments and Social Fund Crisis Loan alignment payments for all benefits from April 2013;
Budgeting Advances will replace Social Fund Budgeting Loans for eligible Universal Credit claimants from April 2013. Budgeting Loans will continue to be available to those claiming legacy benefits until all such claims have either been closed or migrated to Universal Credit.