COMMONS

Universal Credit: progress update report

25 February 2015

The Department must set out clearly what it has really gained from its spending so far, including from the piloting of the programme, and from the investment in live service IT systems according to the Public Accounts Committee's report published today, 25 February.

Chair's comments

"The Department for Work and Pensions has spent £700 million on Universal Credit since the programme began in 2010. However, very little progress has been achieved on the front line. Fewer than 18,000 people were claiming Universal Credit by October 2014, out of around seven million expected in the longer term – just 0.3% of the eligible population.

We hope the Department’s expectation that this number will rise significantly by February 2016 proves to be accurate.

As the Department has justified this spending on the promise of benefits in the future – such as from higher employment - rather than on the actual delivery of benefits to date, we simply cannot judge the value for money of this expenditure at this stage.

The IT infrastructure for Universal Credit continues to be of particular concern. The Department has spent £344 million with suppliers developing its 'live' service systems for claimants who have straightforward initial claims which do not involve all 6 benefits, yet it expects to re-use just £34 million worth of this IT in the longer term.

The live systems are technically limited and expensive to operate because they require manual intervention. The Department is developing and testing a new digital service, which it intends will deliver Universal Credit to all types of claimant in the long term.

In the meantime it has adopted a 'twin-track approach' – running the two separate systems in parallel. This is complicated and expensive. The Department believes this will bring forward the anticipated benefits of the programme but it must ensure it does not allow the mixed, two-track approach to continue for longer than is required.

Both the Department and HM Treasury now regard the live service as the programme’s de facto contingency, even though the Major Projects Authority told us last year that it doubted those systems were capable of handling the full range of claimants.

The Department 'reset' the programme in early 2013 following a Major Projects Authority review which expressed serious concerns about the programme lacking detailed plans, and it has now put Universal Credit on a sounder footing. Since the reset, however, the Department has already fallen a further six months behind schedule for developing the digital service.

The Office for Budget Responsibility already assumes a further six month delay to the digital service in its independent estimates, and the Major Projects Authority recently gave the programme an amber-red rating.

The Department must set out clearly what it has really gained from its spending so far, including from the piloting of the programme, and from the investment in live service IT systems.

Spending on the programme so far has been approved by the Treasury through a series of funding requests for specific activities. Over a year after the re-set, the Treasury has now signed off the 'strategic business case', the first of three stages in developing a full business case for the programme. The Treasury must ensure that the Department continues to identify and critically assess a range of realistic options for delivering Universal Credit.

We were disappointed that the Department chose to fight a protracted legal battle to prevent the publication of its programme milestones schedules against which it could be held to account publicly, although it appears to have become more open and improved its governance of the programme recently.

The Department should set out publicly its current milestones for what it expects to achieve at different points in the programme, and clearly explain any future changes to the scope, cost and timings of these."

Margaret Hodge was speaking as the Committee published its 42nd Report of this Session which – on the basis of evidence from Robert Devereux, Permanent Secretary, Department for Work & Pensions, Neil Couling, Director General, Universal Credit Programme, Department for Work & Pensions and Sharon White, Second Permanent Secretary, HM Treasury – examined Universal Credit: Progress Update.

The Department for Work & Pensions has spent £700 million on Universal Credit since the programme began in 2010. Very little progress has been achieved on the front line with fewer than 18,000 people claiming it by October 2014, although the Department expects this to rise significantly by February 2016. The Department 'reset' the programme in early 2013 following a Major Projects Authority review which expressed serious concerns about the programme lacking detailed plans, and it has now put Universal Credit on a sounder footing.

HM Treasury has approved the 'strategic outline business case', the first of three stages in developing a full business case for the programme. The Department has adopted a "twin track" approach which it expects will bring forward the anticipated benefits of the programme compared to waiting until the long term systems are ready and which should allow the Department to implement a contingency plan at later date. The twin-track approach is complicated, as the Department is running two separate systems in parallel. In the short term, the Department is using IT systems developed before the reset to accept simple claims in an increasing number of locations. At the same time, it is developing and testing a new digital service, which it intends will deliver Universal Credit to all types of claimant in the long term. Since the reset, the Department has already fallen a further six months behind schedule for developing the digital service.

The Department for Work & Pensions (the Department) is introducing Universal Credit to replace six means-tested benefits for working-age households. By the end of October 2014, the Department had spent £700 million on Universal Credit, and it expects to have invested £1.7 billion on the programme by 2022-23. The Department now anticipates there will be seven million people claiming Universal Credit by December 2019. The Department struggled with the early development of Universal Credit, and in February 2013 the programme was 'reset' to allow the Department to develop clearer plans. In November 2013, the Department adopted a twin-track approach to delivering Universal Credit.

The Department has sought to learn from the live running of Universal Credit by expanding the current 'live service' for claimants who have straightforward initial claims which do not involve all 6 benefits. Live service was launched in April 2013, using IT systems developed before the reset. However by October 2014 there were only 17,850 people claiming Universal Credit. The Department has started developing a new 'digital service', capable of delivering the full scope of Universal Credit to all claimant types. The Department began testing the digital service through a limited trial in Sutton in November 2014, and it intends to start using the service nationwide from May 2016.

Conclusions and Recommendations

The Department has now spent £700 million on Universal Credit. The Department has justified spending large amounts of money on Universal Credit on the promise of benefits in the future, such as from higher employment, rather than on the actual delivery of benefits to date. However, we cannot at this stage judge the value for money of this expenditure. With just 17,850 claimants receiving Universal Credit in October 2014, out of around seven million expected in the longer term, the Department has only rolled it out to around 0.3% of the eligible population. The Department has spent £344 million with suppliers developing its live service systems, which are technically limited and expensive to operate because they require manual intervention. It expects to re-use just £34 million of these systems when it launches the digital service.

Recommendation: The Department must set out clearly what it has really gained from its spending so far, including from the piloting of the programme, and from the investment in live service IT systems.

The Department has become more open and improved its governance of Universal Credit, but it has further to go. This is reflected in greater senior leadership team involvement in the programme, and survey results which show that over two thirds of staff now feel that senior management encourages challenge and welcomes suggestions. We were disappointed that the Department chose to fight a protracted legal case to prevent the publication of its programme milestones schedules against which it could be held to account publicly.

Recommendation: The Department should set out publicly its current milestones for what it expects to achieve at different points in the programme, and clearly explain any future changes to the scope, cost and timings of these.

HM Treasury has approved the 'strategic outline business case', the first of three stages in developing a full business case for the programme, but the business case process and actual delivery of Universal Credit are out of kilter. Following the reset, the Department took well over a year to produce an adequate first stage 'strategic outline business case' that HM Treasury was willing to sign off. As a result, most of the Department’s spending on the programme so far has been approved by HM Treasury through a series of funding requests for specific activities, while the overall picture of the programme was still being developed and firmed up. 

Recommendation: HM Treasury must ensure that the Department continues to identify and critically assess a range of realistic options for delivering Universal Credit, and implements those which it selects.

The Department’s twin-track approach is complicated and expensive, but is probably the correct course of action. The Department has justified adopting the twin-track approach, rather than the cheaper option of waiting for the digital service to be developed, because it expects this will bring forward anticipated benefits from the programme.

During the next 18 months, the Department plans to expand the scale of the programme significantly by: providing Universal Credit to 500,000 mainly single people nationwide; continuing pilots with couples and families in the North West of England; trying to scale up its new digital service; and continuing to run legacy systems for existing benefits. Managing this process, including the rapid recruitment and training of staff, will be a significant challenge, and the Department has already faced a rapid turnover of senior responsible owners. The Department is confident in its plans, however it has only recently started testing the digital service. The Office for Budget Responsibility assumes a further six month delay to the digital service in its independent estimates, and the Major Projects Authority recently gave the programme an amber-red rating.

Recommendation: The Department must ensure it does not allow the mixed approach to continue for longer that is required.

Both the Department and HM Treasury now regard live service as the programme’s de facto contingency, even though the Major Projects Authority told us last year that it doubted those systems were scalable to handle the full range of claimants. The Department believes that live service could be a viable alternative option if the digital service fails. Obviously, this would require yet more investment in live service systems, and the Department has not carried out detailed analysis of the potential cost of this, or whether problems previously identified with those systems, including security concerns, could be overcome.

HM Treasury’s support for the Department’s twin-track approach is in part because this provides the programme with some contingency, but it has expressed concerns about the value for money of further investment in live service systems.

Recommendation: The Department must establish more robust and costed contingency plans for how it would handle further delays in the digital service, including a thorough examination of whether it would be practical and affordable to use the current live service for this role.

The Department needs to reflect on how it will tackle the potential problems of paying the housing benefit element of Universal Credit directly to claimants. Some landlords and claimants have struggled with rent arrears when housing costs have been incorporated into single payments made directly to claimants. The Direct Payment Demonstration Project evaluation found that tenants paid 95.5% of all rent owed, compared to 99.1% of those not on direct payment.

The Department plans to mitigate the risk of increased arrears by drawing on the findings from the Project and its earlier experiences of introducing direct payments to claimants living in the private rented sector. The Department is also facing additional costs and complications because of proposals to allow different rules for residents in Scotland eligible for the housing-related elements of Universal Credit. The Department said that it would need to make difficult changes to its systems to accommodate this, but that it did not know who was going to fund this work.

Recommendation: We refer this issue to the Communities and Local Government Committee and ask their successors in the new Parliament to review whether paying the housing benefit element of Universal Credit directly to claimants is working.

Further information

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