White Paper on Universal Credit

Written Evidence Submitted by VocaLink


1. VocaLink is pleased to make a short submission on the government’s proposed Universal Credit. As requested by the Committee, this submission focuses on an aspect of the government’s proposals which requires continuing development, and one in which VocaLink has particular and highly relevant expertise.

About VocaLink

2. Having pioneered electronic payments for over four decades, many of the world’s top banks and their customers, including the UK Government, rely on VocaLink to meet their transaction needs. Our platforms process over 90 million transactions on a peak day, including 98% of benefit payments, and connect the world’s busiest ATM network of over 60,000 ATMs.

3. We provide the central infrastructure for Bacs and the UK Faster Payments service and process payments throughout the Single Euro Payments Area (SEPA). Our services operate on ‘never fail’ technology which ensures total reliability and availability, 24 hours a day. 

Key points

4. The White Paper notes (Chapter 4, para. 15 – "How Universal Credit will be calculated and paid") that DWP "intend[s] to use HM Revenue & Customs proposed real-time information system to identify earnings and to calculate the net Universal Credit payment...This means that those recipients who receive earnings through Pay As You Earn will not need to inform us for payment purposes if the amount of their earnings change[s]."

5. Since the publication of the White Paper on the Universal Credit, HMRC have published a further consultation document on PAYE reform, which confirmed that in principle Ministers have decided to adopt a system of collecting real-time information on employees’ earnings (RTI). The document defines RTI in the following terms: "RTI will collect information about tax and other deductions automatically each time employers run their payroll. This information will be submitted automatically to HMRC at the same time the employees are paid. Where employers pay their employees via Bacs, the RTI data will form part of the Bacs submission." (Improving the Operation of PAYE: Collecting Real – Time Information: Executive Summary, 1.3)

6. The HMRC document also notes (1.10): "RTI is a key component in the Department of Work and Pensions’ (DWP) plans for the introduction of Universal Credits from 2013. DWP will use RTI to award and adjust Universal Credit to take account of employment and pension income. To support DWP’s plans, RTI will be introduced from Spring 2012."

7. The Committee may therefore wish to take into account in its inquiry into the Universal Credit that, according to DWP itself, the introduction of the Universal Credit is intended to be delivered on the back of the successful and timely development of the PAYE RTI system. This is because the collection of earnings information in real-time offers the first opportunity to make use of accurate and up-to-date data about a claimant’s income at the time that a decision is made about a claim. The Committee will be only too aware that what has bedevilled the payment of benefits (and collection of taxes) in recent years has been the timelag in the collection of information about a citizen’s circumstances.

8. DWP also believes that the introduction of the Universal Credit, based on RTI, should lead to a significant reduction in the losses suffered to fraudsters. The White Paper notes that "misreporting [of earnings] can be deliberate and fraudulent, and that "the real-time earnings system presents us with a real opportunity to reduce misreported earnings by giving us timely and accurate information on most people’s earnings, rather than relying on cumbersome paper-based self-reporting" (Chapter 5, paras. 7 and 8).

9. It does therefore appear to VocaLink to be essential, from the viewpoint of developing the Universal Credit on the timetable envisaged, that DWP should engage with HMRC:

· to ensure that PAYE Reform remains on track to be delivered in time to underpin the Universal Credit

· to ensure that the interface between DWP’s and HMRC’s systems enables DWP to make efficient and effective use of RTI

· to ensure that PAYE Reform is taken forward in such a way that it can straightforwardly both achieve the aspirations of HMRC to improve the functioning of PAYE and meet the requirements of DWP in respect of the Universal Credit

· to ensure the underlying payment infrastructure operated by VocaLink is utilized in the most efficient and cost effective way in supporting both DWP and HMRC in delivering their respective welfare and tax reforms.

December 2010