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The government’s insistence that paying housing benefit to tenants won’t harm the finances of social landlords has always been somewhat puzzling.

It is fairly clear that if you put tenants in charge of paying their rent – rather than having the government do it for them – then arrears are going to increase, and this will have a detrimental impact on the balance sheets of housing providers.

You can argue about the extent of the arrears that will be incurred, and the level of damage to the confidence of housing associations’ financial backers, but surely some impact is undeniable?

And yet denying is exactly what the government has done. In January work and pensions secretary Iain Duncan Smith told Parliament welfare reforms would have no impact on housing association finances, a message repeated since by his officials and ministerial colleagues. How the government intends to deliver on this promise is now becoming clear.

A response from the Communities and Local Government department to a select committee report on the impact of welfare reform on local authorities, published last week, states landlords will be able to contact the Department for Work and Pensions once a tenant has run up enough arrears to request that the debt is recovered through deductions to future payments.

It notes that existing laws allow deductions of up to 5 per cent, but that the government is considering whether this should be increased as part of its flagship welfare reform policy, universal credit.

This mechanism should certainly help to ensure lenders retain their confidence in the sector, and will limit the damage that direct payment can do to housing associations’ finances. However it does not solve all the problems of direct payment.

For tenants who have ended up in rent arrears because they are struggling to make ends meet, having 5 per cent or more of future payments cut until they have paid back the arrears will make life even more difficult.

As our anonymous columnist explains in this week’s issue, getting the message about direct payment across is not straightforward, and the size of the chasm between introducing government policy and making it a workable reality on the frontline should not be underestimated.

For landlords too, the arrears recovery mechanism has problems. Social landlords take the social part of their role seriously, and will still feel the need to employ extra staff to help struggling tenants and ensure arrears do not get out of hand.

If the government hopes this latest addition to the detail of how universal credit will work in practice will allow Mr Duncan Smith to make good on his promise, it is likely to be disappointed.

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