The introduction of the universal credit benefit is "a terrible move for financial inclusion" for those who struggle to manage their monthly budgets, according to MoneySavingExpert.com founder Martin Lewis, who has told Parliament that ring-fencing should be introduced to protect vulnerable people.
Universal credit will replace six existing benefits, including jobseeker's allowance and housing benefit, and is currently being rolled out across the country. The new system is based on a single monthly payment, transferred directly into a bank account.
However, Martin believes the new all-encompassing benefit could prove a "ticking time bomb" for people with mental health problems as well as others who struggle to organise their finances, because they lack sufficient support.
He said one solution would be so-called "jam jar" accounts – which let account holders ring-fence money so it's set aside for bills and rent – and suggested the Government should provide the funds for creating and running these accounts.
Giving evidence to the Financial Exclusion Committee in the House of Lords this morning (8 November), Martin appeared in his capacity as MSE's founder and executive chair, as well as founder and chair of the Money and Mental Health Policy Institute, which researches and campaigns for the financial wellbeing of people with mental health problems.
He spoke alongside the institute's director Polly Mackenzie, who joined him in calling for those with mental health problems to receive help with budgeting, such as the ability to "tramline" their money towards rent or bills without having to actively focus on paying them.
She also called for direct debits to become more flexible to take account of fluctuating incomes that arise from insecure work, and said vulnerable people should be able to nominate a trusted person who can monitor spending on their bank account and step in to ensure bills are paid.
Evidence given by Martin and Polly will go towards the committee's report on "financial exclusion and access to mainstream services" in the UK. The report will be published by 31 March 2017.
Check out our Mental Health and Debt guide for help with managing your money if you're experiencing mental health issues.
Financial education win 'a Pyrrhic victory'
Speaking about his long and ultimately successful campaign to have financial education added to the national curriculum, Martin said such lessons in schools were vital to people's financial inclusion.
But he said it had proved to be a "Pyrrhic victory" – a victory in which the victor's losses are as great as those of the defeated – because the Government has failed to fund classroom teaching of the subject, and because schools are converting to academy status, meaning they no longer have to follow the curriculum.
He said: "We got the box ticked but have since seen no resources put into teaching it, no resources put into training teachers in how to teach it.
"I have heard things [said] such as 'banks and financial services companies should be footing the bill'. Well, we don't ask GlaxoSmithKline to pay for chemistry [lessons]. This is on the national curriculum. Why are we asking banks to pay for it? It's something that should be taught.
"We have a real problem too with the academisation of schools, because they don't have to follow the national curriculum... Now we have to go round and persuade each head teacher to resource it."
'No need for payday lenders'
Addressing the select committee this morning, Martin also criticised payday loan companies, saying he believed the industry "created a need by marketing" rather than there being a "latent demand" for their services.
He said he thought people would be "better off without them" and rejected the assumption that this would drive more people to use dangerous lenders such as loan sharks.
Credit unions, which are typically member-owned community lenders with low interest rates, were starting to fill the gap, he added, and should be far more strongly encouraged than at present.
Highlighting MSE's contribution to financial awareness, he said the site had been "phenomenally successful – and far more than I ever thought it would. [It has] 15 million unique users each month and 11 million people get the weekly email in the UK."
When pressed for one overall recommendation to be included in the report, he said the UK needed "a body that's continually responsible for assessing the financial capability of the country," and that "funding needs to be focused on where the gaps are".