I’ve had two queries recently about payments made by social
services to service users. Local authorities may want to draw on
service users’ experiences when developing policies, or they want
input on interview panels or training courses. Whatever the reason,
however, it is important that social services departments
acknowledge the impact that payment can have on the benefits that
service users might be receiving.
The Fostering Services Regulations 2002 require all fostering
agencies in England to establish fostering panels. At least one of
the “independent members” on the panel should be a foster carer
from a different agency. Some panels just pay “expenses”, but
others are considering paying a fee for the time, commitment and
skill involved. If a non-employed panel member such as a foster
carer receives a payment or fee, I was asked, what impact would
this have on benefit claims? Would “expenses” paid to a
non-employed panel member affect benefits claims?
I also got a query from a youth support service about the treatment
of certain payments they make to young people and the possible
impact this would have on means-tested benefits. This authority was
paying care leavers a £10 “attendance allowance” plus child
care costs and travel expenses to sit on interviewing panels for
the personal advisers that they were recruiting. Similarly, they
also pay young people to attend monthly meetings of a youth
It is only proper that service users are paid for their time and
expertise. But the way the benefit system treats “earnings” can be
a major deterrent.
I usually work on the principle that if something walks like a
duck, quacks like a duck and swims like a duck, it’s a duck. These
payments are therefore earnings. If the payment is a set amount
such as the £10 fee referred to above, unrelated to
expenditure, then it’s earnings, and will have to be treated as
such. Only if it is a payment of genuine expenses will it be
ignored for benefit – and tax – purposes.
The payments could be classed for benefit purposes as “charitable
or voluntary payments”. If paid irregularly, they would then be
treated as capital, not earnings, so would in effect be ignored –
unless they took the person over the relevant capital limits. If
paid regularly, they can be ignored as long as they are “intended
and used for anything except food, ordinary clothing or footwear,
fuel, council tax, rent and so on”. If not disregarded in full, a
£20 a week “disregard” would apply.
However, I think that this is stretching the definition of a
charitable or voluntary payment, which is really intended to cover
payments made by charities and so on to vulnerable individuals. The
payments to foster carers are much more like a fee that a
professional or freelance consultant would earn – a payment for
their knowledge, skill and time. Councils are “buying” their
The payment would therefore be treated as earnings and would be
taxable. Also, national insurance contributions would be due on it
– unless the person earned below the overall NI threshold – and it
would count as earnings for benefit purposes in the week it was
received. Some bright spark might suggest spreading it out over a
few weeks to minimise the effect and to take advantage of the
“disregard” rules within most means-tested benefits. But don’t be
tempted by this option – it’s unlawful.
Surely it’s about time, however, that the Department for Work and
Pensions gave some thought as to how the payments should be
treated, and introduced additional “disregard” to enhance service
users’ ability to shape the services they receive without suffering
Gary Vaux is head of money advice, Hertfordshire Council.
He is unable to answer queries in person, either by post or by
telephone. If you have a question to be answered in Welfare Rights,
please write to him c/o Community Care.