Universal Credit and fraud and error: progress review Contents

1Universal Credit

1.In December 2015 we took evidence from the Department for Work & Pensions (the Department) and HM Treasury to discuss progress in implementing Universal Credit. We published our report in February 2016.1 We acknowledged that Universal Credit had stabilised and made progress since the previous Committee first reported on Universal Credit in 2013, but that there remained a long way to go. We made five recommendations to the Department, which focused on increasing transparency in progress and the impacts of the programme. The Department’s Treasury Minute response to our recommendations showed that it was still unwilling to put sufficient information on Universal Credit in the public domain.2 We therefore recalled the Department for Work & Pensions to give further evidence in July 2016.

Delays in implementation

2.The Department started to roll out its “full service” version of Universal Credit to jobcentres in May 2016. It is rolling out at a rate of five centres a month and the Department had planned to scale up to 50 centres a month from February 2017. But on 20 July 2016, just hours before we took oral evidence on this inquiry, the new Secretary of State for Work and Pensions released a written ministerial statement, outlining a further delay to the roll out of the programme.3 The statement outlined a slower roll-out of the Department’s full service systems, which would continue to roll-out to only five centres a month until June 2017, before increasing the speed of the roll-out. The Department now envisages that the full service will be available in every jobcentre by September 2018 rather than June 2018, and that the roll-out of Universal Credit will now be complete by March 2022, 12 months later than previously announced and four and a half years after October 2017, the planned completion date at the start of the programme.4

3.The Department attributed the delay in roll-out to scope changes following policies announced in the Summer Budget 2015. These include removing eligibility for housing elements from 18 to 21 year olds, reducing the “limited capability for work” element to zero and restricting the number of children that Universal Credit will pay for to a maximum of two.5 These policy changes were announced in July 2015; well before our last evidence session in December 2015, and before the Department submitted its Outline Business Case to HM Treasury for approval in September 2015.6 The Department has therefore had a long time already to consider how to apply the policy changes to its systems, and actually had 21 months in total to implement the changes before they come into force in April 2017.7

4.The Department for Work & Pensions denied that it was attributing wider operational problems to changes in policy, and told us that a recent internal review of the Universal Credit programme concluded that it would have been on track to deliver 50 jobcentres in February 2017, if the Department did not have its issue of new scope to deal with.8 The Department told us that this new timetable should be feasible if no further policy changes are announced.9 Universal Credit has often been described as simplifying the benefit system. But these new delays suggest that the systems underpinning Universal Credit’s design are not adaptable to changes in policy or entitlement, raising questions about the promised flexibility of the new systems.10

5.In our last report on Universal Credit we set out how the milestones for Universal Credit had changed since the C&AG’s report of November 2014.11 In Table 1 we have set out how these latest timetable changes compare to previously announced milestones. In December 2015, the Office for Budget Responsibility forecast a six month delay to the start of managed migration (the point at which all remaining legacy benefit claimants will start moving over to Universal Credit) and the Department’s latest timetable extends even further.12

Table 1: Universal Credit Milestones

Situation at the time of the C&AG’s November 2014 report13

Department’s memorandum and oral evidence, December 201514

Ministerial statement, 20 July 201615



Change (compared to C&AG’s November 2014 report)


Change (compared to memorandum December 2015)

Complete nationwide roll-out of live service by April 2016

Complete nationwide roll-out of live service by April 2016

No change

Milestone completed

Begin nationwide roll-out of digital service in May 2016

Begin nationwide roll-out of digital service in May 2016

No change

Milestone completed

Complete nationwide roll-out of digital service in December 2017

Complete nationwide roll-out of digital service in June 2018

6 month delay

Complete nationwide roll-out of digital service in September 2018

A further 3 month delay

Begin managed migration of Jobseeker’s Allowance, Housing Benefit and Income Support claimants in January 2018

Begin managed migration of Jobseeker’s Allowance, Housing Benefit and Income Support claimants ‘in 2018’

6 month delay16

(Built in contingency between October 2018 and July 2019) Begin managed migration of existing benefit claims in July 2019

A further 13 month delay

Complete managed migration of Jobseeker’s Allowance, Housing Benefit and Income Support claimants in December 2019, with no fixed plans for the remaining 555,000 tax credits and employment and support allowance claimants

The ‘bulk’ of migration will be complete by 2019, but plans also bring an additional 800,000 tax credits and employment and support allowance claimants by 2020–21.

Unclear how this has changed. ‘Bulk’ is not defined, and it is not clear whether migration times have changed for different benefit types.

The managed migration of existing benefit claims will start in July 2019 and complete in March 2022.

A further 12 month delay17

Expected benefits

6.In our last report we commented that the Department’s contingency plan for Universal Credit, should problems arise, was to adjust how fast and how far it rolls out the service. We recommended that the Department should set out publicly its proposed contingencies and an assessment of the impact of these on costs and services to claimants.18 The Department rejected this recommendation, stating that it had developed a number of contingencies beyond delaying the introduction of the service and that it builds contingency into its delivery plan.19 Until the ministerial statement in July 2016, the Department had not specified any contingency plans publicly.20 Albeit somewhat late, the Department has now changed its mind and accepted recommendations made by the previous Committee in February 2015 and by us in February 2016 concerning the need for better contingency planning and to set out its plans in this area.21

7.Up to June 2016 the Department for Work & Pensions had spent £1.16 billion on implementing Universal Credit since the policy was announced in 2010. The majority of this (£936 million) is one-off investment costs.22 In the first business case in 2012 the Department outlined one-off costs of £2.4 billion, reducing to £1.7 billion by the time the strategic outline business case was presented in September 2014.23 Under 300,000 households were claiming Universal Credit by July 2016, around 5% of the expected caseload of between 6 and 7 million long term.24 Given the slower roll out of the full service it will be some time before the number of claimants begins to increase significantly.

8.This slower take up of Universal Credit is likely to affect the point at which the Department will start to reap the rewards of its endeavours. In 2014 the Department estimated that a six-month delay in the implementation of Universal Credit reduced the net present value of the programme by £2.3 billion, including a £58 million increase in administrative costs. A year’s delay (which is currently the case) would reduce the net present value by £4.8 billion.25 The Department argued that its safe way of implementing Universal Credit was the only way of doing it and was the reason that the Major Projects Authority (now the Infrastructure and Projects Authority) had rated the programme as amber, which the Department considered was “quite extraordinary” for a project of this size.26

9.Despite the timetable shift and its own calculations of lost benefits, the Department for Work & Pensions continues to expect total benefits from the introduction of the Universal Credit of around £20 billion. But the Department has not updated its business case since the version that it submitted to Treasury in September 2015, despite significant changes to the design and implementation of Universal Credit since then. The Department has never set out how these changes affect the expected benefits. The Department told us that, while it had not updated the business case, it used it as the baseline against which to assess and track progress and that it took corrective action when required. It also told us that it takes four months to update a business case, but that it does have a series of ready-reckoners which allows it to “check progress against certain values”.27 We would therefore expect that the Department should be able to quickly model changes to policy and implementation timetables and to update costs and benefits accordingly.

10.The Institute of Fiscal Studies has estimated that around 3.2 million people will be worse off as a result of the switch to Universal Credit, with around 2.2 million people seeing an increase in their benefit entitlement.28 When asked, the Department was not able to provide its own estimate of the ‘winners and losers’ from Universal Credit. It quoted the IFS analysis, but told us that the IFS analysis did not take account of the changes in people’s behaviour that the Department expects as a result of incentives built into the new system. The Department told us it had produced some estimates itself around 2010–11, but had not updated them since.29 We have seen before how expected behavioural changes may not materialise in practice, for example as we reported in July 2016 on the Department of Energy and Climate Change’s implementation of the Green Deal.30

Ability to scale up

11.The Department has a significant way to go before its systems will be ready to scale up Universal Credit significantly. The Department told us that only 20–25% of claims in the new full service are paid automatically, and that it needs to be at 60% or 70% before it can increase the volume of claims significantly.31 Combined with the problems the Department faces in incorporating new policy measures, this indicates there are still significant issues for the Department to address with its systems before it can start to increase the pace of the Universal Credit full service roll out. The National Audit Office estimated in 2014 that the Department would save £610 million a year though automated processes, but this suggests it will take some time before such savings can be achieved, with reliance on costly and inefficient manual interventions in the meantime.32

12.We received written evidence from the Public and Commercial Services Union (PCS) on behalf of Department for Work & Pensions staff. It described the Department’s “test and learn” approach as ‘broken’. The PCS considered that the elements of the test and learn approach, which is supposed to allow staff to test the systems and feed back their views and ideas for improvements, were no longer feasible. The PCS argued that time pressures have resulted in an inability of front-facing staff to assist in ironing out any problems with Universal Credit full service, as fewer staff are able to report what is going wrong or what could be improved though the Department’s Continuous Improvement and Learning programme. The PCS also raised concerns over inadequate training opportunities for staff to familiarise themselves with the updates to the system.33 The Department told us that now the full service was available at 18 out of its 700 jobcentres, it was not able to run these internal learning processes ‘at volume’.34

Services for claimants

13.The unions USDAW and Unison have raised concerns about inflexibility in the Universal Credit payment systems which may cause hardship for some claimants.35 The Universal Credit assessment takes place monthly, but an in-work claimant’s pay may follow a different pattern (for example four-weekly pay). The Universal Credit system cannot adapt to the possibility of receiving more than one payment within the assessment period and an individual’s benefit reduces accordingly. The Department for Work & Pensions told us that it was aware of these problems and had been working with employers to encourage them to change to a monthly payment cycle.36 The Department also informed us that there were similar issues with housing payments where they occur on a four-week cycle. The Department agreed to look into its approach in this area and look at what advice was available to jobcentre staff to support people with non-monthly pay arrangements.37

14.The Department expects people who are in work that earn less than the equivalent of 35 hours per week at the minimum wage to look to work or earn more. This “in-work conditionality” regime is still at a very early stage of development and the Department is undertaking a national trial to see what the best ways are of intervening. Approximately 40% of the current Universal Credit caseload are in work (approximately 112,000 claimants) and are moving into the trial.38 But longer term, the majority of households likely to fall within these requirements will be the 4.4 million families currently in receipt of tax credits, who are not used to such conditions being attached to their entitlement.39 These requirements may lead to families being ‘sanctioned’, or facing a financial penalty, if they cannot demonstrate that they have been looking to increase earnings during their assessment month. The Department stressed to us that the idea of this is to encourage people to work more hours and increase their earnings, not to be a system of punishment, but the Department must be sensitive to individual families’ circumstances (for example varying shift patterns and overtime requests) if the system is to prove effective. The Work and Pensions Select Committee has looked into this area in depth and we will also continue to take an interest in this area as plans develop and in work claimant numbers increase.40

1 Committee of Public Accounts, Universal Credit: Progress update, Nineteenth Report of the Session 2015–16, HC 601, 3 February 2016

3 Written Ministerial Statement, 20 July 2016, HCWS96

4 Committee of Public Accounts, Universal Credit: Early progress, thirtieth report of the Session 2013–14, HC 619, 7 November 2013

5 Committee of Public Accounts, Oral evidence: Universal Credit: progress review, HC 489, Qq 13, 16

6 Committee of Public Accounts, Universal Credit: Progress update, Nineteenth Report of the Session 2015–16, HC 601, February 2016

7 HM Treasury, Summer Budget 2015, HC 264, July 2015

8 HC 489, Qq 65, 68–70

9 HC 489, Q 37

10 Written ministerial statement, 10 July 2013

11 Committee of Public Accounts, Universal Credit: Progress update, Nineteenth Report of the Session 2015–16, HC 601, February 2016,

12 Office for Budget Responsibility, Economic and Fiscal Outlook, December 2013.
Most claimants of legacy benefits are expected to move onto Universal Credit through natural change in circumstances, such as change of address, living arrangements or change in working hours or employment. The remaining claimants of legacy benefits who do move through a change of circumstances will be ‘managed migrated’ to Universal Credit from July 2019

13 Comptroller & Auditor General, Universal Credit: Progress Update, Session 2014–25, HC 786, November 2014

14 Memorandum, paragraphs 1–5

15 Written Ministerial Statement, 20 July 2016, HCWS96

16 Written Ministerial Statement, 10 December, HCWS377, ‘The full Universal Credit service will be rolled out nationally for all types of claimants from May 2016, completing in June 2018. At this point we will start to move the people receiving legacy benefits to Universal Credit. This carefully managed process will finish by early 2021’.

17 Committee of Public Accounts, Universal Credit: Progress update, Nineteenth Report of the Session 2015–16, HC 601, February 2016

18 Committee of Public Accounts, Universal Credit: Progress update, Nineteenth Report of Session 2015–16, HC 601, February 2016

20 Written Ministerial Statement, 20 July 2016, HCWS96

21 HC 489, Qq18, 39

23 Comptroller & Auditor General, Universal Credit: Progress Update, Session 2014–25, HC 786, November 2014, HC 489 Q 30,

24 HC 489, 71

25 C&AG’s report, paragraph 2.17

26 HC 489, Q 46

27 HC 489, Qq 48, 50

28 HC 489, Q 58

29 HC 489, 59

31 HC 489, 23

32 C&AG’s report, paragraph 2.10

33 HC 489, Q 25; PCS Union, UCR0003, July 2016

34 HC 489, 27

36 HC 489, 79

37 HC 489, Q 83

38 HC 489, 87

39 Comptroller and Auditor General, HM Revenue & Customs 2015–16 Accounts: Report by the Comptroller and Auditor General, Session 2015–16, July 2016

40 HC 489, 88; Work and Pensions Select Committee, In-Work progression in Universal Credit, Tenth report of Session 2015–16, HC 549, March 2016

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3 November 2016