Payments to care leavers leads to benefits muddle

Care leavers who live with their foster carers after 18 should be feeling the benefit of a Work and Pensions intervention. But will they, asks Gary Vaux

Have you ever tried to make something better but only succeeded in making it worse?

Well, that’s what the Department for Work and Pensions has managed to do with a recent change to how payments made to ex-foster carers are treated by the benefits system.

The DWP was told there was a financial problem when looked-after young people carried on living with their foster carers after their 18th birthday, when they are considered to be independent. Those ex-carers were used to getting a fostering allowance that had no effect on any benefits they were receiving.

Once the fostering allowance stopped, the young person would be supported (and the ex-carer recompensed) by a combination of after-care payments made under sections 23/24 of the Children Act, housing benefit towards the rent being charged, Supporting People money to meet non-housing related support costs and, in some cases, the young person’s own income from wages. It’s a messy picture.

Worse still, the DWP would treat any money that the ex-carer received from the various pots described above as income if they were also receiving any means-tested benefit. It was as if they had a commercial lodger living with them and were receiving rent.

Not only that, but like any other private landlord, the income from letting-out a room was taxable, unlike the foster allowance, which usually isn’t.

So something had to be done to make it more financially attractive for ex-carers to offer post-18 accommodation to the young people they were caring for pre-18.

Unfortunately, this is where the DWP got it wrong. Rather than have extensive discussions with professionals, it came up with its own idea of how to solve the problem. This solution was implemented from 7 April and it has caused much confusion. It would probably have caused more, except most councils and foster carers aren’t yet aware of it.

The DWP has decided that any section 23/24 money that is paid to the young person, which they in turn hand over to their ex-carers as a contribution to housing costs, will be ignored when the ex-carer applies for benefits. That’s all well and good if that was the only money being used to fund the post-18 placement (and if the young person could be trusted to hand the money over). But the amendment ignores all the other sources of income that the placement may be using.

It’s a partial solution at best. For example, if the council pays the section 23/24 payment directly to the foster carer, it seems that they would have to declare it as income if they applied for income support. But if the same money is paid to the young person, and they pass it on, then it won’t count as income.

Similarly, imagine a young man who is staying-on with his ex-carers and they need an income of £150 a week to match what they used to get through fostering. He is working and receives £70 a week from housing benefit towards the rent. He is expected to chip in £30 from his wages £30 is provided by Supporting People and £20 is provided by the social worker. Only the latter would be ignored as income if the ex-carer claims benefits for themselves. But if the housing benefit claim is not made, and the social worker provides £90 to the young person to pass on, the ex-carer is better-off.

The local authority, of course, isn’t.

Gary Vaux is head of money advice, Hertfordshire Council. He is unable to answer queries by post or telephone. If you have a question e-mail natalie.valios@rbi.co.uk