Service: GovCoin Proof of Concept

Novel payment models will enable HM Treasury (HMT) and the Department for Work and Pensions (DWP) to distribute welfare support more efficiently and improve policy delivery. By applying DLTs in the registration and payment processes for government grants and benefits, DWP will be better equipped to: (1) Prevent financial losses through fraud and error, (2) Support the most vulnerable citizens by offering them the benefits of full financial inclusion, (3) Support the achievement of the government’s wider policy objectives, especially getting people out of poverty in a sustainable way and (4) Offer good value for money and place public expenditure on a sustainable footing. A large number of welfare claimants are un- or under-banked and face barriers to greater financial inclusion such as credit checks, access to traditional financial products, and the costs of unauthorised transactions. DLTs offer a cheap and supportive means of getting these claimants into the benefits system. Digital identities could be confirmed through distributed ledgers running on securely-encoded devices — or even through software on a mobile device — which would allow end-users to receive benefits directly, at reduced transaction costs to banks or local authorities. This may allow them to become more fully included in the financial system through a secure distribution point that is more reliable than a bank account. Such a solution could also be linked with other systems to reduce the level of fraud and official error in the delivery of benefits, as identities would be more difficult to forge. Such activities may help to achieve one of the DWP’s principal policy objectives: to lift people sustainably out of the cycle of poverty and state dependence. Through the innovative application of such technologies, it would be possible — with agreement from the benefit claimant in question — to set rules at both the recipient and merchant ends of welfare transactions. This may present the opportunity for ministers to consider options for achieving better policy outcomes from the distribution of welfare support by agreeing or setting rules around the use of benefits.