Universal Credit

Part of Estimates 2014-15 — Department for Work and Pensions – in the House of Commons at 5:56 pm on 7th July 2014.

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Photo of Anne Begg Anne Begg Chair, Work and Pensions Committee 5:56 pm, 7th July 2014

Universal credit is a major welfare reform. It will eventually replace tax credits and most existing working-age benefits, including out-of-work benefits and housing benefit. It is estimated that, by the time it is fully implemented, universal credit—or UC, as it has now become known—will be paid to 7.7 million households, and we hope that that will be the case.

During last week’s debate on work and pensions, I said that the problem with welfare reform was that it was devilishly complex, took a long time to implement, and always had unintended consequences. I think that all three of those things apply to universal credit. We can agree that its design should bring some advantages. It should improve the position of claimants when they move into work or take on more work, because their benefit will be reduced gradually on the basis of how much they earn, rather than suddenly being cut off if their working hours exceed a certain limit. It should remove many of the “cliff edges” that exist in the current system. Because it is both an in-work and an out-of-work benefit, it will remove the constant applying and reapplying for different benefits as someone moves in and out of work.

However, it is wrong to talk about UC’s “simplifying the benefits system”, because that is not possible to any significant extent. The benefits system is complex because people’s lives are complex, and are constantly changing. UC will be a more streamlined system, but it will not be a simple one. That is clear from the problems that have been encountered in efforts to implement it. The national roll-out of new UC claims was due to take place between October 2013 and April this year. Existing claimants of “legacy benefits”, including jobseeker’s allowance, employment and support allowance and housing benefit, would then be migrated to UC between April 2014 and the end of 2017. However, problems with IT systems meant that major changes to the implementation timetable were made in July 2013, and then again in December last year. That slowed down the process dramatically.

UC claims were introduced on a very small scale from April last year in a few jobcentres in Greater Manchester, which were initially called “pathfinders” but are now referred to by the Department for Work and Pensions as “live service sites”. In the event, national roll-out from last October amounted to the expansion of new UC claims to only a further six jobcentres around Britain, and it has recently been expanded again to a further nine sites in the north-west, bringing the total number of jobcentres where UC is available to 19, less than 3% of the jobcentre network—hardly a national roll-out.

New claims to UC are now not expected to be extended to the whole of Great Britain until 2016 and the bulk of existing claimants will not be moved on to UC until 2016-17. The process will not be completed until later than the original target date of 2017.

The Secretary of State brushes aside any criticism of the very small number of people who are on UC by arguing that the Government are

“taking a careful and controlled approach to achieve a safe and secure delivery.”—[Hansard, 30 June 2014; Vol. 583, c. 645.]

I think we would all agree that it is right to ensure that the system works properly before extending it, but, as the Work and Pensions Committee said, there is a difference between cautious progress and a snail’s pace.

The facts are clear. Since UC started in April last year fewer than 7,000 claims have been processed. By comparison, more than 1 million people claim just jobseeker’s allowance. In January this year alone, there were almost 250,000 new jobseeker’s allowance claims. That is how much churn there is in the system. Almost all the 7,000 UC claims are from people in the simplest circumstances: young, single, and usually recently unemployed. Last week, 15 months after UC began, claims from couples started to be accepted—but only in a handful of the live service sites. We have been told that claims from people with children will begin “later in the summer”. We all know what Parliament’s timetables are like and we wonder when “summer” actually is, so can the Minister give us an idea of what “summer” means in this context?

Achieving only that tiny number of claims to date illustrates the scale of the challenge still facing the Government in trying to replace existing working-age benefits and tax credits with UC by 2017, including migrating all the claimants of the relevant existing benefits over to it. Given the excruciatingly slow pace of roll-out to date, it is hard to see how the target date can be met.

To put this into context, the other new benefit which has had its implementation slowed down is the personal independence payment, although even PIP has more new claims in payment than UC. By March this year 83,900 PIP decisions had been made, which is far higher than for UC, and that involves a smaller cohort and has been done in a shorter time scale. In our report, we asked the DWP to set out its revised estimates of UC caseloads and costs for each year to 2017-18, to reassure Parliament and the public that there is a clear and detailed revised implementation plan. The Government’s response to our report did not include any of that information.

The problems with implementing UC arise largely from failure to get the IT right. Problems with Government IT systems have happened so frequently that they have almost become a cliché, but the UC IT challenge seems especially difficult to tackle and to be throwing up particular challenges. Some £40 million in IT expenditure had to be written off in 2012-13, and a further £90 million is being “written down” in five years instead of 15 because the useful life of the software is much shorter than anticipated. That may seem like an accounting detail, but it shows that the use of public money has not been cost-effective to date, and a great deal more public money is at stake in the UC programme.

The Government’s current approach to the IT problems is to continue to spend millions of pounds—between £37 million and £58 million—on the old IT system during 2014 to extend its functionality so that it can cope with a wider range of claimants in the live service sites. At the same time, extensive sums are being spent on developing IT for the long term. That has had various names and various incarnations: first it was called “the digital solution”, then “the end-state solution”, and the latest terminology seems to be the “enhanced digital service”. Unfortunately we on the Select Committee still do not know what that means. The Secretary of State’s explanation last Monday did not help us clear that up.

The National Audit Office has summed up very well the lack of information available on how the IT for UC will be taken forward. It said last December that the uncertainties include the following: how it will work; when it will be ready; how much it will cost; and who will do the work to develop and build it. We still do not have answers to any of these questions. It would be helpful if the Minister provided some answers to those key points in her response to the debate, because the Work and Pensions Committee has still not had an explanation.

We have asked Ministers for more information about the IT during three evidence sessions over the space of nine months. We repeated this request in our report, including asking the DWP to set out the costs of the IT development work, because the published information on IT costs does not take us beyond November 2014, but we received no answers in the Government response to our report. All it said was that UC will be delivered via

“a multi-channel service that makes greater use of modern technology to ensure the system is as effective, simple and transparent as possible.”

I still do not know what that means, and I do not know if anybody does.

The one thing we do know is that the new “enhanced digital service” will not be ready to test before the end of this year, and even then it will only be tested on 100 claimants to start with. We still have no indication of when it will be possible to test it on a bigger and more representative group of claimants. The challenge of getting from an IT system that is capable of processing 100 claims by the end of 2014 to one that can deal with frequently changing claims from more than 7 million households by 2017 is clearly an extreme one.

Our report recommended that, given the small number of people currently claiming UC, the Government should consider whether it would be a better use of taxpayers’ money to abandon further development of the existing system and focus solely on the end-state solution. The Government said in answer to a recent parliamentary question—although this was not set out in their response to our report—that the enhanced digital service will be integrated with the existing UC service where

“it is both practical and operationally sensible”—[Hansard, 30 June 2014; Vol. 583, c. 434W.]

Again, I am not sure what that means, so perhaps the Minister can translate those vague phrases into something more meaningful and detailed when she responds.