23.Local authorities report that they face additional administrative burdens as a result of the introduction of Universal Credit, the costs for which are not fully covered by additional funding that the Department provides. For example, Leicester City Council told us that in the three weeks since Universal Credit full service rolled out, it had a caseload of 1,200, which was double what it expected, and which requires support migrating from Housing Benefit. It reported that three jobcentres all went live at the same time, requiring about £250,000 additional support in terms of housing officers to support those moving over to Universal Credit. Leicester City Council commented that it had been a shock to them how quickly private landlords had become nervous about the impact of Universal Credit, particularly the delay in rent payments. Newcastle City Council reported that it had spent nearly £0.75 million on support for Universal Credit. Leicester City Council commented that it was also providing additional digital support in the community and supporting the adult education service, particularly around digital and language skills.
24.Leicester City Council raised two specific issues in relation to moving claimants from housing benefit to Universal Credit. The first related to administrative requirements, in which they had seen an increase of 3,000 person-hours required to manually check and process paperwork in just three weeks. The second was its ability to recover overpaid housing benefit and the difficulties it has faced in placing ‘attachments’ onto Universal Credit claims. Leicester City Council explained that it had £4.5 million of attachments to benefits, and that once an individual or household moves to Universal Credit it becomes nearly impossible to recover the amount owed.
25.Newcastle and Leicester City Councils told us they had each set aside over £4 million to cover the costs of Universal Credit moving to their areas. This is to cover the expected shortfalls in rent and council tax collection. Newcastle City Council, which has been on Universal Credit full service for over a year, reported a significant rise in rent arrears, which had increased from £1 million to £2.1 million. It also told us it has written-off £0.5 million of Council Tax for claimants in hardship, and had made hardship payments of £50,000.
26.Other organisations that support claimants, such as Citizens Advice and foodbanks, have seen a substantial increase in demand for their services in areas that have introduced Universal Credit. The National Audit Office reported that demand for advisory services had increased significantly and that providers were concerned that the current level of support would not be sustainable as the rollout continued. For example, Citizen’s Advice says it has seen approximately 12% of all Universal Credit claimants.
27.In response to questions about the additional cost burdens on local authorities of Universal Credit the Department explained that the picture was “complex”, and argued that costs were falling away from local authorities as its housing benefit caseload reduced. This is reflected in the reduction of housing benefit grants that local authorities receive from the Department. However, local authorities stated that they had not seen an equivalent decline in their workloads. For example, Leicester reported that its housing benefit grant had halved since 2013–14 but it had so far seen only an 8% reduction in caseload. The Department acknowledged that there were transitional costs associated with welfare reform but that this is why discretionary housing payments are made available. When asked about the future provision of costs for local authorities, the Department told us that the largest provision is for the potential for exits from local authorities as the caseload on housing benefit reduced. However, caseloads and workloads have not reduced as quickly as the Department expected.
28.The Department confirmed it would consider paying local authorities for any additional costs of implementing Universal Credit if they can prove that costs are greater in comparison to legacy systems. Nevertheless, as it had not set itself a baseline against which to assess the impact of Universal Credit, the Department accepted that it was taking something of a “wet-finger in the air” approach to estimating these costs.
29.The Department expects that Universal Credit will lead to £8 billion of benefits a year by getting more people into work, reducing fraud and error and reducing the cost of administering the benefits system. Close to two thirds (£5 billion) of these benefits are based on the Department achieving its objective of getting an additional 200,000 people into work and from people working more hours.
30.The Department’s estimate of how many people will enter work because of Universal Credit has fallen over time–in 2011 it expected to reduce workless households by 300,000, but this was revised downwards to 250,000 in 2014 before the latest reduction to 200,000. It is now apparent, however, that this figure is purely hypothetical. The Department admitted that it will not be able to measure whether it has achieved this objective, and confirmed that it cannot measure the number of additional jobs in the economy as a result of Universal Credit. It argued that ‘just because you can’t measure something it doesn’t mean it doesn’t exist’. We questioned the Department on why it had repeatedly paraded this figure as a definite outcome of Universal Credit. The Department told us that the 200,000 is a conservative estimate based on evidence, such as studies that have looked at previous changes to tapers on tax and benefits in the UK.
31.The Department’s inability to prove the number of jobs in the economy as a result of Universal Credit, alongside questions over the realisation of its other benefits casts doubt on whether Universal Credit will ever prove to be value for money. It is far from clear that Universal Credit will cost less to administer than existing benefits. Planned efficiency savings are uncertain and are in any case negated by both the extra costs of providing the benefit system to those that are in work and by costs to local organisations. Universal Credit currently costs £699 per claim, which is more than the target unit cost that the Department set itself when accelerating the rollout in October 2017, and four times as much as it intends when the systems are fully developed. The Department does not yet know whether it is achieving its objective of reducing fraud and error.
32.The number of claimants on Universal Credit is set to increase from around 1 million (as of 14 June 2018) to 8.5 million people when fully implemented. Currently, people move to Universal Credit by either making a new claim, or transferring from an existing benefit if their circumstances change and Universal Credit has been rolled out where they live. We heard from the Department that it expects the number of new claims each month to increase more rapidly from now on. This will result in added pressure on staff, as the number of claimants that each work coach and case manager will be dealing with will increase significantly. Given this increase in caseloads, Citizen’s Advice questioned whether the Department will have sufficient capacity to provide adequate support to claimants. In addition, Universal Credit IT systems are not as automated as the Department had expected at this stage, meaning many processes must still be carried out manually.
33.The Department expects that four million people currently claiming legacy benefits, will not experience a change in circumstance, and will instead move to Universal Credit through ‘managed migration’. The Department acknowledged that this will be the most challenging part of the programme, and told us it is looking to minimise the chances that things will go wrong. The Department anticipates that the most difficult part of the migration will be ensuring a claimant makes a new claim for Universal Credit before their old benefit is ‘switched off’. It acknowledged that there is a risk of claimants losing financial cover over this period, noting that claimants have not always responded as it anticipated in the past. When we asked the Department what its worries were around this, it told us one of its biggest concerns is that “media noise [of Universal Credit] is making people quite fearful” and it “needs people to respond positively” to an approach from the Department.
34.The Department’s official start date for managed migration is July 2019, although during the evidence session the Department said that this will only begin in earnest in 2020, once it has a year’s worth of testing at low volume. The Department gave us scant detail of how this process will work in practice, saying it was “deliberately not showing too much of [its] hand on this at the moment”, because it still needs to engage with stakeholders about the best way of tackling the challenge. It told us that at most it could move 100,000 claimants to Universal Credit each month, and explained that it would ‘struggle’ with more than this; indeed, it does not want it to be at 100,000, as even this may stress the organisation and limit its flexibility.
53 Q 194; , para 2.36 and Figure 17
54 Qq 2–4
55 Qq 7, 26
56 Q 26, 27
57 Q 4. An ‘attachment’ is an option for local authorities by which money owed is deducted automatically from an individual’s Universal Credit claim to pay back historically overpaid housing benefit. When an individual moves from housing benefit to Universal Credit any prior attachments are cancelled.
58 Q 6
59 Qq 22, 25
60 Qq 6, 7
61 , para 2.29
62 Citizens Advice ()
63 Q 189
64 , para 2.37
65 Q 26
66 Qq 191, 197
67 Q 26
68 Q 201
69 Q 204; This Committee has previously reported on the impact of new burdens being placed on local authorities, with the risk that unfunded pressures on local authorities make it more difficult for them to fulfil their duties and increase pressure on council tax: see Committee of Public Accounts, Care Act first-phase reforms and local government new burdens, HC 412, Session 2015–16, December 2015
70 , para 15
71 , para 3.6
72 Q 138
73 Q 132
74 Qq 131, 137
75 , paras 15, 3.19
76 ; , key facts
77 , para 1.20
78 Q 255
79 , key facts
80 Citizen’s advice (), page 12
81 , para 1.15
82 , para 1.25
83 Q 144
84 Q 224
85 Q 225
86 Q 220; , para 1.22
87 Q 219
Published: 26 October 2018