Cash vs Vouchers – Which Is Best?

When it comes to supporting vulnerable households, local authorities and charities face an important decision: should they provide direct cash payments or distribute vouchers for essentials like food and energy? 

At Huggg, we work with councils and community organisations to deliver effective support in the most targeted way possible. But the question remains: which approach delivers better outcomes—cash or vouchers? Let’s explore the evidence and outcomes to help you decide which is best for your community.

The Challenge of Local Welfare Support

Since the introduction of the Household Support Fund (HSF), local welfare assistance has become a critical tool for supporting vulnerable households. 

The main goal of local welfare support is to help households meet essential needs—particularly for food and energy. However, how this support is delivered can significantly impact the overall effectiveness and satisfaction among recipients. Councils must decide between offering direct cash payments, via cash voucher or direct to bank accounts, or distributing vouchers for specific items or services. Each method has distinct benefits and challenges.

Cash Payments: Flexibility and Control

Direct cash payments involve transferring funds directly into recipients' bank accounts, giving them the freedom to decide how to spend the support based on their most immediate needs.

✅ Advantages of Cash Payments:

• Flexibility: Recipients can use cash to cover a wide range of expenses, including rent, debt repayments, or household essentials.
• Dignity and autonomy: Allowing individuals to decide how to spend the support increases feelings of independence and control.
• Simplified administration: Cash transfers are often easier and faster to administer for councils. Cash vouchers are just as simple on a platform like Huggg.

❌ Challenges of Cash Payments:

• Risk of misuse: Some councils are concerned that cash might be used for non-essential or inappropriate purchases.
• Tracking and reporting difficulties: Monitoring how funds are used is more challenging with cash support, making it harder to measure impact and effectiveness.
• Potential to be absorbed by debt: If a recipient is in financial difficulty, cash payments might be absorbed by existing debts rather than being used for immediate essentials like food and energy.

What the Data Shows About Cash Payments

An independent evaluation of HSF4 by Ipsos UK (full report here) revealed key insights into the outcomes of cash-based support:

• Cash payments were effective in helping households with general expenses, particularly for utilities and rent.
• However, satisfaction levels were lower when support was given as cash rather than vouchers.
• Recipients who received cash were more likely to report that the funds were absorbed by existing financial pressures rather than meeting immediate needs for food or energy.

Voucher-Based Support: Targeted and Effective

Voucher-based support involves distributing vouchers that can be redeemed for specific categories, such as food, energy, or household essentials. This type of support allows councils to issue vouchers that are easy to redeem and tailored to local needs.

✅ Advantages of Vouchers:

• Targeted spending: Vouchers ensure that support is used for essential needs, such as groceries or energy bills.
• Higher satisfaction rates: Recipients tend to report higher satisfaction when support is provided as vouchers, especially for food and energy.
• Better tracking and reporting: Vouchers offer clear data on redemption, helping councils measure the success and reach of their programs.
• Security and fraud prevention: Vouchers reduce the risk of misuse or theft compared to cash.

🔎 Challenges of Vouchers:

• Reduced flexibility: Vouchers limit how recipients can use the support, which may not cover all of their most pressing needs.
• Logistical complexity: Distribution and redemption require a well-organised process (a support management platform like Huggg can help with this).
• Stigma: Some recipients may feel there is a stigma attached to vouchers vs cash.

What the Data Shows About Vouchers

The Ipsos UK evaluation found that voucher-based support tends to lead to better outcomes in terms of both impact and satisfaction:

• Food and energy vouchers were among the most positively received types of support.
• Recipients who received vouchers reported higher satisfaction than those who received cash.
• Vouchers for food and household essentials helped recipients avoid borrowing money and improved their ability to manage daily expenses.
• Voucher-based support was particularly effective in keeping homes warm during cold weather and helping households cover utility bills.

The Power of Retail and Cash Vouchers

An important distinction within voucher-based support is between retail vouchers (redeemable at supermarkets or stores) and cash vouchers (which can be used more flexibly).

• Retail vouchers are particularly effective for ensuring that support goes directly toward food and essentials.
• Cash vouchers offer more flexibility than retail vouchers while still maintaining a degree of control over how the funds are used.

Why a Blended Approach Works Best

So, which is better for community support—cash or vouchers? The answer is that a balanced approach is often the most effective.

• Cash payments provide flexibility and autonomy but can be absorbed by other financial pressures.
• Vouchers ensure targeted spending and higher satisfaction, particularly for food and energy needs.

A mixed model—combining the strengths of both cash and voucher-based support—allows councils to provide effective, tailored support that meets the diverse needs of their communities. 

The Ipsos UK evaluation showed that councils using a mix of both retail and cash vouchers achieved better balance and higher satisfaction among recipients.  

The data suggests that councils achieve the best outcomes when they offer a combination of cash and vouchers. This approach allows them to provide flexibility while ensuring that support directly meets essential needs.

🔹 Direct awards (where recipients automatically receive support without needing to apply) tend to result in higher satisfaction and better outcomes.

🔹 Joint delivery models (involving both local authorities and third-party organisations) increase the reach and impact of support.

🔹 Combining retail vouchers for food and cash vouchers to cover bills and utilities helps balance flexibility with control.

How Huggg Supports Councils with Voucher-Based Solutions

At Huggg, our support management system makes it easy for councils to issue vouchers tailored to the specific needs of their communities. Our solution provides:

 ✔️ A wide range of payout types in one self-serve platform
 ✔️ The UK’s only energy voucher that both can pay bills and make top-ups
 ✔️ Integration with common CRM systems to save councils time and effort

By using Huggg’s platform, councils can ensure that support reaches those who need it most while maintaining control over how funds are used.

Get in touch to find out how you can use Huggg to support your community with cash, retail vouchers or both!