Report from NAO finds that programme may end up costing more than the systems it replaced

Credit: Chris Young/PA Wire/PA Images

Universal Credit may end up costing the government as much to distribute as the benefits system it replaced, according to a report from the National Audit Office that also called for work on the benefit’s digital systems to be made a priority.

The NAO said while the Department for Work and Pensions had reduced the cost of processing each claim from £699 in June 2018 to £301 in February this year, the figure remains £173 over the amount set out in the business case for the system.

Universal Credit replaced the six main “legacy” benefits, with ministers claiming it would create a more streamlined system that made it easier for people to find work.

But it has been beset with problems, including late payments and criticisms over an initial five-week waiting period for first payments, leaving claimants with cashflow problems and debts. 

The IT systems underpinning the programme have also faced difficulties over the years, and concerns have frequently been raised that the implementation of a “digital by default” process disadvantages those who lack the necessary skills, confidence, or access to IT.

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The NAO concluded that Universal Credit’s digital systems need to improve how data is recorded on vulnerable users or those that have difficulty accessing the services. 

One of the report’s recommendations calls for the DWP to “prioritise improvements to the Universal Credit digital system to help front-line staff identify and support claimants who need more help”.

While the NAO said that “significant improvement” had been made in the proportion of claimants receiving their first payment on time, it also found that the overall number of people being paid late has increased, due to the coronavirus crisis leading to more Universal Credit claims. 

It added that the DWP needed to do more to support vulnerable claimants, including disabled people and those who do not speak English as a first language, to ensure they understood what was being asked of them by assessors.

The department was also deemed to have made “poor progress” in stamping out fraudulent claims and errors, with more than £1 in every £10 paid incorrectly.

NAO head Gareth Davies said: “The DWP deserves credit for improving its processes so that 90% of claimants are now getting their first Universal Credit payment on time. However, it is concerning that vulnerable people and those with complex claims may struggle with their Universal Credit claim and face financial difficulties. The DWP needs to improve its understanding of vulnerable claimants and how best to support them to ensure that no one is slipping through the net. This is only going to become more important as the economic upheaval caused by Covid-19 continues.”

The watchdog said it had not yet made any assessment of the cost impact of the pandemic on the full rollout of Universal Credit – but that it had already been revised from £3.2bn to £4.6bn.

This included an additional £834m in costs related to “establishing the new benefit and its digital infrastructure”.

A DWP spokesperson said: “Universal Credit is delivering in these unprecedented times, with more than 2.5 million new claims processed since mid-March and over one million advances paid to those in urgent need within days. Nobody has to wait five weeks for payment. As the report shows, significant improvement has been made in the proportion of Universal Credit claimants receiving their first payment on time and in full, currently around 90%. We’ve also increased the standard allowance by up to £1,040 a year, as part of a package of welfare measures worth over £6.5 billion to support the most vulnerable.”