Risks still remain for Universal Credit as the Department for Work and Pensions (DWP) continues its twin-track gradual roll-out of live and digital services.
The troubled Universal Credit programme is due to begin testing its digital service with a small number of claimants in Sutton today (26 November), but a progress update from the National Audit Office (NAO) concluded that there was no contingency plan and rolling out Universal Credit's live services could cost £2.8bn.
DWP expects significant cost savings from its digital delivery, but the NAO report noted that if the digital service – which is in its infancy and has already been delayed by six months – fails, there is no contingency plan and DWP has not evaluated whether it could use the live service instead.
The NAO estimated that using the live service systems without further investment could cost £2.8bn more in staff costs over the lifetime of the programme.
A troubled IT project
The troubles with Universal Credit began in 2013, when reports that the early IT development for the project was beset by problems.
After the NAO’s first report, the Universal Credit project was “reset”, in favour of a new “twin-track” approach. In this method, the existing IT system would support the gradual roll-out of the new benefits system, until a new “end-state” digital system was ready to replace it and the programme became live in 2017.
Universal Credit facts and figures
- 17,850 claimants on Universal Credit in October 2014
- 500,000 claimants planned to be on Universal Credit by 2016
- 7 million claimants planned to be on Universal Credit by December 2016
Operational roll-out of live service:
- April 2013: DWP started taking new claims for single jobseekers
- June 2014: the department started taking some new claims for jobseeking couples and singles who are also claiming housing benefits; expanding to around 100 jobcentres by the end of 2014
- November 2014: the department starts taking some new claims for families with children
- February 2015: the department starts to expand nationwide new claims for single jobseekers, reaching all 700 jobcentre areas by March 2016
- £267m: net present value of the expanded national roll-out of simple cases in 2015 and 2016, as estimated by the department
- £149m: additional administrative cost to government of the expanded national roll-out of simple cases in 2015 and 2016 as estimated by the department
Delivery of digital service:
- November 2015: DWP's planned date for testing its digital service at scale before nationwide adoption
- May 2016: the department's planned start for rolling out its new digital service to claimants nationwide; it expects no new claims to legacy benefits by December 2017
- December 2019: the department's planned date for completing the transfer of 93% of claimants to Universal Credit
- £20.7bn: net present value of introducing Universal Credit in the department's autumn 2014 business case
Source: National Audit Office
Prior to the reset in spring 2014, DWP spent £303m with large IT suppliers on the live service system, of which £40m was written off in November 2013 following an impairment review. By the time the welfare programme is fully rolled out, DWP will have scrapped at least £130m of IT development work.
Further IT investment in the live service up until 31 October 2014 stacks up at £41m, putting the total spent to date at £344m. According to the NAO, the department also plans to spend a further £24m on IT, as well as £97m on maintaining systems to deliver the nationwide roll-out.
But DWP believes the most effective way to deliver Universal Credit at scale is to develop a new digital service, designed around user needs and behaviour, which enables claimants to use online channels. It plans to develop this digital service for £105m, having spent £8m so far.
A spokesperson for the NAO said: “Our recommendation is that when you start rolling out and expanding this service to more people, you actually need some degree of confidence that the digital service is going to be ready, because otherwise you could get into this world where you have a lot of people running on this less efficient [live] system.
“We've seen a lot of IT problems in the past, and one of the things the agile development approach DWP started using, and is still using, on the digital service is meant to address this issue of these projects continuing at ad infinitum and then not working. So, to some extent, it's better to have caught these things earlier. If DWP manages to deliver the digital service now, it will be roughly within the budget it originally had,” said the spokesperson.
“The hard bit is still to come,” he added, referring to the digital service going into public testing as of today.
He also noted that the six-month delay to the digital service had been due to difficulties in recruiting “digital experts” to design the systems and get the components to work together.
“They do have a team up in the north now,” he said. “We didn't go and check everyone's individual qualifications, but they have a team who are working, but they have some vacancies,” he added.
Value for money
The NAO concluded that it was too early to determine whether DWP would achieve value for money from Universal Credit.
While the NAO determined that the department had reduced risk by extending the transfer period, it said it was becoming increasingly unlikely that DWP would be able to transfer one million tax credit claimants onto Universal Credit by April 2016 without significant operational risks.
“DWP has reset Universal Credit on a sounder basis, but at a significant cost, by extending the time for implementation and choosing a more expensive approach,” said Amyas Morse, head of the National Audit Office.
“It is now vital that the department quickly establishes clear goals for delivering the programme, in terms of cost, time and functionality, against which it can be held to account,” Morse added.
According to a DWP spokesman, as part of the government’s long-term economic plan, Universal Credit simplifies the welfare system to make work pay, and the accelerated roll-out of benefits payments to single people means that by spring 2015 one in three of the country’s jobcentres will be taking claims for the new benefit.
“The NAO report recognises that we are reducing risks and making progress,” he added. “In terms of value for money, when fully in place the economy will benefit by £7bn each year and is set to make three million families £177 a month better off, on average.”
More on Universal Credit
- Universal Credit uptake slows to lowest since infancy
- The IT risks facing Universal Credit
- Universal Credit digital system reaches key milestone as DWP delays roll-out
- NAO confirms plan to review Universal Credit again this year
- Why Universal Credit IT concerns mean the project needs to be paused
- Why agile development failed for Universal Credit
- DWP should scrap existing Universal Credit IT, say MPs
Meanwhile, the chair of the Public Accounts Committee, Margaret Hodge MP, said DWP is still not getting it right with Universal Credit.
“The department’s unacceptably poor management of this programme has wasted time and taxpayers’ money, with a staggering £600m spent in four years just to get to the first stage of business case sign-off,” she said.
“Now the department is throwing good money after bad by introducing a short-term fix with no adequate plan for delivery, insufficient skills and unclear milestones to measure progress against,” Hodge added.
“The transfer of all claimants to Universal Credit will not now be completed until after the end of 2019,” she said. “Given its track record, the department needs to get its act together quickly if it is to deliver a system that vulnerable benefit claimants can rely on.”