The financial impact on councils of introducing universal credit is being met by “insufficient” funding from central government, according to National Audit Office research.
Changes to the way benefits are administered may cost three times more than was originally pitched and may ultimately cost more than the system it has replaced. The NAO said universal credit will probably cost £699 per claim by 2024-25 instead of the £173 originally set out in the Department for Work & Pensions’ full business case - a 304% increase.
The NAO also reports the DWP cannot prove the new benefits system will motivate more people into work.
The DWP has reportedly told the NAO that it will pay local authorities for any additional costs connected to Universal Credit, but that this must first be supported by “evidence of the expenses”. Additional burdens include increased administration for processing housing benefit stop notices, and increases in rent arrears.
The NAO’s ‘Rolling out universal credit’ report said: “The department places the burden of proof on the local authorities, and 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.”
The NAO also found that 113,000 payments on new claims were paid late in the previous financial year. The Trussell Trust, the UK’s biggest food bank network, reported in November that food-bank usage increased by an average of 30% in areas where late-payments were most common.
One of the main reasons behind the increased costs is a reportedly unreasonable expectation of workload from the programme’s architects. The DWP originally planned to make efficiencies by increasing each case manager’s number of active cases to 919. The actual average caseload for each case manager is currently 154.
“The department estimates that if universal credit achieves only 90% of the intended efficiencies during the implementation period, it will cost an additional £1.2bn to run between 2018-19 and 2024-25,” the NAO’s report said.
Responding to the report, Society of Local Authority Chief Executives & Senior Managers president Jo Miller said the NAO’s finding made “grim reading that regrettably does not come as a surprise” to officers. Ms Miller expressed her concerns about universal credit in an article for LGC in 2015.
She said today that councils had “repeatedly warned” implementing the system would be “so complex that it could have devastating impacts on vulnerable people” if the government failed to learn from users and local authorities.
“It gives us no satisfaction our warnings have come to pass,” said Ms Miller, but added “it is not too late” for the government to work closer with “local partners” to address issues.
Nick Forbes (Lab), senior vice chair of the Local Government Association, said: “While councils support the principle of universal credit to incentivise work and increase income from employment, concerns remain about funding reductions for the programme, the impact of the ongoing freeze to working age benefits and shortfall in funding to councils to support claimants with additional needs.
“The government needs to restore funding to councils for local welfare assistance schemes so they can provide the local safety net to help those struggling to cope with welfare reforms, including the roll out of universal credit.”
When Universal Credit was first introduced in 2010, previous work and pensions minister Ian Duncan Smith said the changes would “reduce administrative costs by more than half a billion pounds a year”, and “reduce levels of fraud and error by £1 billion a year”.
Meg Hillier (Lab), chair of the Public Accounts Committee, said: “The government’s introduction of universal credit has been one long catalogue of delay with huge impact on people’s lives.
“After eight years’ work and £1.3bn spent on the project, not even 10% of claimants have transferred. Many who have moved are suffering hardship but DWP does not accept it is at fault.”
A DWP spokesman said it is “building a benefit system fit for the 21st century” and added there is “evidence showing universal credit claimants getting into work faster and staying in work longer”. They added: “Universal credit is good value for money and is forecast to realise a return on investment of £34bn over ten years against a cost of £2bn, with 200,000 more people in work. Furthermore 83% of claimants are satisfied with the service and the majority agree that it ‘financially motivates’ them to work.
“As the NAO acknowledges, we have made significant improvements to universal credit as part of our ‘listen and learn’ approach to its rollout, and it’s on track to be in all jobcentres nationally by the end of 2018.”