February 18, 2014 5:25 pm

Decision time looms for UK universal credit

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A pedestrian passes a job centre in London, U.K©Bloomberg

The government’s flagship welfare reform must start delivering results by the next election or risk being drastically scaled back or even abandoned, according to senior Whitehall sources.

The principle behind the flagship welfare reform, which rolls six different benefits or tax credits into a single payment to sharpen incentives for people to re-enter work or increase their hours – is widely endorsed. But its execution has been beset by difficulties.

In parts of government there is disquiet over Iain Duncan Smith’s decision to continue putting money into the existing technology, which is not capable of supporting a full national rollout of the scheme, while also developing a separate IT system to underpin its extension across the whole country.

The scheme continues to command support among the main political parties. But some officials believe that the next government – even if it is Conservative-led – will have to review the £2bn programme. They forecast an incoming regime would want to determine whether sufficient numbers will eventually leave the benefit rolls, or raise their working hours, to justify continued investment.

The timetable for implementing the plan has slipped sharply in the past two years. Under the original blueprint, 1.7m were to have been enrolled by 2014-2015. But figures in the small print of documents published by the Office for Budget Responsibility in December showed that only a statistically insignificant number – registering as “zero” – will be claiming the benefit by the election.

It emerged this month that the government has already spent £612m on the programme. As of October last year 2,720 people were on the new system. Francis Maude, cabinet office minister, recently complained in an interview with ITV News that “a lot of money” had been wasted in “the very poor implementation of the project over its first two years”.

The programme has also suffered multiple changes of leadership with one previous incumbent dying and another retiring after taking long-term sick leave. Its current head, Howard Shiplee, has been off work since before Christmas after contracting pneumonia.

Relations between George Osborne and Mr Duncan Smith have improved from a low, 18 months ago, when the chancellor reportedly tried to get the welfare secretary reshuffled to the Justice department. Mr Osborne is understood to have praised the scheme’s progress at a recent Cabinet meeting. In the past, however, there have been well-documented tensions between the two men over the cost of setting up the programme.

The question will be whether it works or not, and then whether it is scalable to vast numbers of people at rapid speed – if they can’t it will be a complete disaster

- Anne Begg, work and pensions select committee chair

Even in embryo, universal credit has had some largely unsung successes. A scheme called Real Time Information, under which employers must send staff payment information to HM Revenue & Customs as soon as a payment is made, is operating at the “top end of expectations”, says DWP, which will use the system to determine the level of universal credit for working claimants.

Supporters point out that the “claimant commitment”, which requires job seekers to sign a document stating what they will do to find work, has already doubled the time claimants are spending looking for a job.

Allies of Mr Duncan Smith suggest there is a growing rapprochement with Number 10 and in particular David Cameron’s powerful elections strategist Lynton Crosby, who is concerned about a public perception that the Tories are obsessed with fiscal prudence. He is said to believe that Mr Duncan Smith’s message – that the reform is about changing lives, rather than saving money – will resonate with voters in the run-up to polling day.

Anne Begg, chair of the work and pensions select committee, said the crunch time would be in November when the new digital system was tested on 100 households. “The question will be whether it works or not, and then whether it is scalable to vast numbers of people at rapid speed – if they can’t it will be a complete disaster,” she said.

It was true that RTI and the claimant commitment had worked well, she said, but added: “You don’t need universal credit for any of that. With the claimant commitment, if you force people to spend more time looking for work, and take away their benefits when they don’t, then obviously they will try harder.”...


The issue: The department for work and pensions has been forced to write off £40m of spending after technology developed for universal credit proved unsuitable to support a national rollout of the scheme.

Next steps

Under a controversial “twin track” approach, investment will continue in the original system, supporting several pilot programmes, while the department develops an “enhanced” version able to deal with all claimant types.


The issue

In November 2011, Mr Duncan Smith announced that 1m people would be claiming the benefit by April this year, including both new and existing claimants, their partners and dependants. All 12m benefit claimants would be moved on by 2017, he said.

Next steps

By April this year, the scheme will still be limited to pilot schemes only, in 10 areas of the country, dealing with the simplest cases. Allies say this reflects Mr Duncan Smith’s determination to test the system extensively before full-scale implementation to ensure claimants do not suffer. He has acknowledged that the 2017 deadline to complete the transfer of claimants to UC will not now be met.


The issue

The philosophy of universal credit is that work must always pay more than a life on benefits. In pursuit of that aim, a big shake up in the payroll system is under way, obliging employers to report payments to staff in “real time” – on, or before, the day they are made. The DWP will use the information gleaned through RTI to calculate how much universal credit individuals will receive.

Next steps

Even the scheme’s critics acknowledge that this has become one of the success stories of UC. Although businesses had initially expressed concerns about the tight timetable and the administrative burden, more than 47.6m live individual PAYE records are now reported in this way – more than 99 per cent – and almost all employers expected to implement RTI this year have done so.


The issue

Mr Duncan Smith’s original bid to the Treasury for funding was based on the assumption that UC would save money in the long term because more people would either leave the benefit rolls or raise their hours of work, reducing strain on the welfare system.

Next steps

In pursuit of that goal, benefit claimants are being asked to sign a “claimant commitment”, recognising that their benefits will be reduced or stopped if they do not complete activities agreed with their “work coach”. Early research shows that they are spending twice as long looking for work and applying for more jobs each week than non-signers. The commitment is due to be extended to all jobcentres by April.


Letter in response to this report:

Universal credit is proving burdensome for small business / From Frank Field MP

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