NAO hints at Universal Credit IT write-offs that top £200 million

The government may have to write off more than  £200 million invested in IT for Universal Credit, a report by the National Audit Office (NAO) out today suggests.

The Department for Work and Pensions (DWP) has invested £344 million in IT assets for Universal Credit so far. Of that sum, just £125 million worth of assets are currently being used in the live service, according to the auditor.

That means £219 million, or 64 percent, of IT assets developed for Universal Credit so far are not being used.

In an effort to pre-empt the NAO's criticism, work and pensions minister Iain Duncan Smith announced yesterday that Universal Credit is being expanded to take claims from families as well as individuals and couples, but only in six jobcentres in the North West of England.

For now, the new benefit, which aims to merge six benefits into one single monthly payment, will only be available to couples with children and lone parents in six jobcentres, with the remaining pilot sites to open it to families ‘early next year’, the DWP explained.

The department is working on two systems for Universal Credit simultaneously – one that underpins the current rollout to pilot sites, and an ‘end-state’ digital solution which will replace the original system in 2017.

The NAO said the department is currently “finalising which live service systems it will reuse”.

However it warns that a number of them will be unable to integrate with the new digital service. For example, £61 million spent on systems to support interviews and work services will have to be written off.

New digital service delayed

The enhanced digital service is due to start being tested in a limited postcode area in Sutton, Surrey, by the end of this year, according to the DWP. It will test the full scope of Universal Credit for all claimant types.

The digital service has been delayed by six months by “recruitment and capacity problems”, according to the NAO. The DWP digital team “had 59 contingent labour hires in post” as of the end of October, 11 fewer than the total of 70 needed, the report said.

The troubled benefit reform project is on its seventh boss since its launch in 2012, after its work services director Neil Couling took over leadership of the project in September.

Universal Credit “depends heavily on manual intervention and will only handle a small number of claims”, according to the auditor. If delayed by another six months, the “net present value of the programme reduces by £2.3 billion due to lost societal benefits”, the report warned.

Manual processes

The department had problems with systems accuracy after an IT release, and had to reintroduce manual checks of all payments until it resolved the issues, the NAO said.

The report backs up claims made by a jobcentre whistleblower in a Channel 4 Dispatches investigation last month. He said Universal Credit IT is unable to handle complicated cases and so they have to be done manually. At the time the DWP insisted that there was “absolutely no evidence that cases cannot be dealt with”.

The DWP has three further major IT releases planned for the coming year, which it hopes will increase automation of the process, according to the spending watchdog.

However it added: “If further problems occur, the department will need to control the pace of roll-out.”

Margaret Hodge: expect £500 million write off

Public Accounts Committee chair Margaret Hodge MP said the ‘twin track’ approach of developing two systems concurrently will cost “hundreds of millions more than if the Department had simply waited for its digital IT service to be ready”.

She added: “Now the Department is throwing good money after bad by introducing a short-term fix with no adequate plan for delivery, insufficient skills and unclear milestones to measure progress against. The transfer of all claimants on to Universal Credit will not now be completed until after the end of 2019.”

Last month, Hodge claimed the next governmentwill have to write off over £500 million invested in ICT for Universal Credit.

In a BBC Radio 4 programme, she said: “I believe, though I haven’t got officials to admit to this, that after the general election we will probably be writing off in excess of half a billion pounds on investment in IT that has failed to deliver.”

The Department for Work and Pensions (DWP) dismissed the claim as “nothing but speculation” when contacted by ComputerworldUK.

Copyright © 2014 IDG Communications, Inc.

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