The audit watchdog warns that universal credit may also cost more to administer than the previous system of benefits it replaces, with current running costs at £699 per claim, against an ambition of £173 per claim by 2024-25.

NAO reports ‘significant doubt’ about the main benefits which DWP is claiming. The department expects universal credit eventually to deliver £8bn of net benefits a year, but this depends on some unproven assumptions, the watchdog says.

DWP now expects that an additional 200,000 people will move into work because of universal credit, that it will save £99m a year in administering benefits, and will reduce fraud and error by £1.3bn a year. NAO’s report states: ‘These benefits remain theoretical.’

In addition, the roll-out has been considerably slower than was initially intended. It was due to complete in October 2017, but after a number of problems, eight years later only around 10% of the final expected caseload are currently claiming universal credit.

Late payment

The report highlights issues with payments to claimants. In 2017, around one quarter (113,000) of new claims were not paid in full on time. Late payments were delayed on average by four weeks, but from January to October 2017, 40% of those affected by late payments waited in total around 11 weeks or more, and 20% waited almost five months. Despite improvements in payment timeliness, in March 2018 21% of new claimants did not receive their full entitlement on time with 13% receiving no payment on time.

DWP does not anticipate payment timeliness to improve significantly in 2018. On this basis, the NAO estimates that between 270,000 and 338,000 new claimants will not be paid in full at the end of their first assessment period throughout 2018. Those with more complex cases are more likely to be paid late.

DWP says it believes it will never achieve 100% payment timeliness because it needs by law to verify the claimants’ eligibility. Part of the difficulty stems from claimant verification processes, with the NAO stating the department significantly overestimated the number of claimants that would be able to confirm their identity online with only 38% (compared with its expected 90%) doing so.

DWP expected most claimants would have enough money to cope over the initial waiting period after their claim is submitted (previously six weeks, now five). In reality, nearly 60% of new claimants (around 56,000 a month) receive a universal credit advance to help them manage before receiving their first payment.

Increases in rent arrears since the introduction of universal credit in an area, which claimants can often take up to a year to repay, have been reported by local authorities, housing associations and landlords.

In three of the four areas the NAO visited and for which data was available, the use of foodbanks increased more rapidly after universal credit full service was rolled out to the area. This agrees with the Trussell Trust’s report showing upsurges of 30% in foodbank use in the six months after universal credit rolls out to an area, compared to 12% in non-universal credit areas.

Local organisations which support claimants and assist in the administration of the benefit have reported incurring additional costs. DWP says it has told local authorities it will pay them for additional costs associated with administering universal credit if they provide evidence of the expenses, but it places the burden of proof on the local authorities, uses its discretion on assessing claims and has not sought to systematically collect data on wider costs. It will therefore have no means to assess the full monetary impact that universal credit is having.

Keep on keeping on

Despite the changes and the difficulties in showing value for money, it would be so complex and costly to return to legacy benefits at this stage that the NAO believes there is no practical alternative but to continue with universal credit.

It cautions, however, that DWP must now ensure that the programme does not expand before business-as-usual operations can deal with higher claimant volumes, and must learn from the experiences of claimants and third parties, as well as the insights it has gained from the roll-out so far.

Amyas Morse, NAO head, said: ‘The department has kept pushing the universal credit rollout forward through a series of problems. We recognise both its determination and commitment, and that there is really no practical choice but to keep on keeping on with the rollout.

‘We don’t think DWP has shown the same commitment to listening and responding to the hardship faced by claimants.

‘We think the larger claims for universal credit, such as boosted employment, are unlikely to be demonstrable at any point in future. Nor for that matter will value for money.’

NAO report Rolling out Universal Credit is here.

Report by Pat Sweet