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The Public Accounts Committee publishes its 30th Report on Universal Credit: early progress.

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

“Universal Credit is the DWP’s single biggest programme and enjoys cross-party support, yet its implementation has been extraordinarily poor.

“The failure to develop a comprehensive plan has led to extensive delay and the waste of a yet to be determined amount of public money. £425 million has been spent so far on the programme. It is likely that much of this, including at least £140 million worth of IT assets, will now have to be written off.

“The management of the programme has been alarmingly weak. From the outset, the Department has failed to grasp the nature and enormity of the task; failed to monitor and challenge progress regularly; and, when problems arose, failed to intervene promptly. Lack of day-to-day control meant early warning signs were missed, with senior managers becoming aware of problems only through ad hoc reviews.

“Pressure to deliver a programme of this magnitude within such an ambitious timescale created a fortress culture where only good news was reported and problems were denied.  Because they had no overall view of what was going on and no system to monitor progress, the Department’s Universal Credit team became isolated and defensive.

“We believe strongly that meeting any specific timetable from now on is less important than delivering the programme successfully.

 “There has been a shocking absence of control over suppliers, with the Department failing to implement the most basic procedures for monitoring and authorising expenditure. In some cases multi-million pound orders were approved by secretarial staff. Individual payments could not even be linked to particular pieces of work that had been delivered.

“The pilot programme is not a proper pilot. Its scope is limited to only the simplest new claims of people who are single, have no dependants and would otherwise be seeking Jobseeker’s Allowance.

“It lacks the security components needed to prevent fraudulent claims and protect individuals’ personal information.

“It does not deal with the key issues that Universal Credit must address: the volume of claims; their complexity; change in claimants’ circumstances; and the need for claimants to meet conditions for continuing entitlement to benefit. The Department needs a revised pilot that is capable of properly informing the full roll-out of Universal Credit. 

“The programme will not hit its current target of enrolling 184,000 claimants by April 2014. The Department will have to speed up the later stages of the programme if it is to meet the 2017 completion date but that will pose new risks.

“The Department needs to focus on the long-term successful implementation of Universal Credit. It should evaluate what benefit it can derive from the existing IT but must not throw good money after bad by introducing a short-term fix that does not stand the test of time.”

Margaret Hodge was speaking as the Committee published its 30th Report of this Session which examined progress in delivering Universal Credit and the problems there have been in implementing the programme. The Committee had taken evidence from the Department for Work and Pensions (the Department), the Cabinet Office’s Major Projects Authority and HM Treasury.

The Department has stated that Universal Credit will simplify the benefits system by consolidating six means-tested working-age benefits into a single system intended to encourage claimants to start work or earn more.  The Department expects to spend £2.4 billion up to April 2023 on implementing Universal Credit, and by April 2013 it had spent £425 million, mostly on IT development (£303 million).  In February 2013 the Department ‘reset’ the programme following a Major Projects Authority review which expressed serious concerns about the programme lacking detailed plans. 

It is highly likely that a substantial part of the expenditure on IT development will have to be written off. Since then the Department has been working to address these concerns, but has yet to submit revised plans for approval by ministers, HM Treasury and the Cabinet Office.

Management of the Universal Credit programme has been extraordinarily poor.  Oversight has been characterised by a failure to understand properly the nature and enormity of the task, a failure to monitor and challenge progress regularly, and a failure to intervene promptly when problems arose. 

Senior managers only became aware of problems through ad hoc reviews, mostly conducted by external reviewers, as inadequate management information and reporting arrangements had not alerted them that things were amiss. Given its huge importance to the Department, the Accounting Officer and his team should have been more alert to identifying and acting on early warning signs that things were going wrong with the programme.

Recommendations

Recommendation: The Department should ensure that new governance arrangements provide robust oversight of progress and that these arrangements are agreed by the Major Projects Authority. Responsibilities for programme management and different levels of assurance should be set out clearly, with appropriate engagement of officials at the most senior level within the Department for Work & Pensions and the Cabinet Office.

The lack of oversight allowed the Department’s Universal Credit team to become isolated and defensive, undermining its ability to recognise the size of the problems the programme faced and to be candid when reporting progress.  The programme’s ambitious timescale and protected resources created the inevitable risk of a fortress culture developing. This risk should have been mitigated by robust management information and stronger monitoring by senior staff within the department which might have given clear and early insights into progress.  Risk was not well managed and the divergence between planned and actual progress could and should have been spotted and acted upon earlier. The Department only reported good news and denied the problems that had emerged. The risk of a similarly blinkered culture remains as the Department will be working to tight timescales to get the programme back on track.

Recommendation: The Department must ensure it has comprehensive, relevant and clear information to assess progress. Progress must be monitored at the most senior levels within the department and it is essential that staff feel able to raise at an early stage concerns if they identify difficulties.

It is extremely disappointing that the litany of problems in the Universal Credit Programme were often hidden by a culture prevalent in the Department which promoted only the telling of “good news”. For example, officials were aware that a critical report highlighting many of these issues had been discussed internally for months. Indeed, there are real doubts over when officials became aware of these problems and it is difficult to conceive, based on the evidence we were presented with, that officials within the Department did not know of them before July 2012.  This is a hugely important project which requires strong, consistent and unified leadership and management. This is essential to drive uncontroversial policy to successful implementation.

There has been a shocking absence of control over suppliers with the Department neglecting to implement basic procedures for monitoring and authorising expenditure. We saw evidence that purchase orders with a total value of £8.7 million were approved by a personal assistant to the Programme Director. In another case, two purchase orders, one for £22.6 million and one for £1.1 million, were approved by a personal assistant to the Programme Director whose delegated financial authority at the time of approvals was only £10 million. When the Department made individual payments to suppliers these could not be linked to particular pieces of work that had been delivered.  Some of the IT assets that have been delivered cannot be used in the programme and so must be written-off; whilst initial estimates suggest the write-offs could amount to at least £140 million, we heard evidence that the precise extent is as yet unknown because the Department’s impairment review is not yet complete, relying so far on supplier self-assessment.

Recommendation: The Department must: complete its own impairment review as a matter of urgency; implement suitable payment controls; and demonstrate that it is getting value for money through future negotiations with suppliers.

The pilot programme is inadequate as it does not deal with the key issues that Universal Credit must address: the volume of claims; their complexity; change in claimants’ circumstances; the need for claimants to meet conditions for continuing entitlement to benefit; and the security of information to prevent fraud.  The scope of Pathfinder is much narrower than originally planned.  It is now restricted to only the simplest new claims of people who are single, have no dependants and would otherwise be seeking Jobseeker’s Allowance. The Pathfinder does not deal with most claimants’ circumstances or examine how the behaviour of different types of claimant might change with the introduction of Universal Credit.  Pathfinder also includes limited IT functionality, with staff having to enter some information manually, and it lacks the identity assurance and anti-fraud components that the full system will need. While Pathfinder will provide some useful information, we are sceptical that it will adequately inform the full roll-out of Universal Credit.

Recommendation: The Department should evaluate what benefit it can derive from the existing Pathfinder programme and ensure it introduces a revised pilot programme to help prepare for the full implementation of the policy.

We are not yet convinced that the Department is in a position to present revised plans for approval by ministers, the Cabinet Office and HM Treasury that resolve the problems of developing a secure system that can accommodate large numbers of claimants who have complex and changing circumstances and who will be expected to fulfil certain conditions.  When the Department presents its revised plans to these decision makers, it must clearly set out how it will: protect Universal Credit against fraud risks; establish the scope of secure online operations; determine how to confirm claimant identity; monitor whether the claimant fulfils the conditions of entitlement, and handle all the complexities and changes in circumstances for claimants.  Universal Credit will not meet its current target of enrolling 184,000 claimants by April 2014, and the Department will need to accelerate the later stages of the programme if it still plans to meet a 2017 completion date which creates yet further risks. We believe that meeting any specific timetable is less important than delivering the programme successfully. There is still the potential for Universal Credit to deliver significant benefits, but there is no clarity yet on the amount of savings it will achieve.

Recommendation: The Department’s revised plans should set out:

• A range of deliverable options to present to ministers, the Cabinet Office and HM Treasury detailing the services, processes and systems for Universal Credit
• A clear strategy for IT development, demonstrating the best way forward for the programme and an accurate review of current investment which will not be needed in the long-term.
• Realistic ambitions on timescales and the amount that can be delivered online, and the impact of these on the costs and benefits of the new system.  While we recognise that timetables might need to be flexible, the Department should set out the milestones against which it can be held to account, such as: when each affected benefit will be replaced by Universal Credit; the migration of claimants onto the new system; and the availability of key services online.
• The budget for the remainder of the programme and the net benefits it expects will be delivered, explaining how these have changed compared to previous plans.

It is important that HM Treasury and the Major Projects Authority have clear criteria against which to examine the Department’s revised plans. Both the Treasury and Major Projects Authority described to us the general principles they would expect the revised plans to address—such as affordability and the delivery of value for money—which could apply to any project.  Given the scale of Universal Credit and the difficulties so far, we would expect Treasury and the Major Projects Authority to ‘raise the bar’ in order to give confidence that the programme can be brought back on track.

Recommendation: HM Treasury and the Cabinet Office should outline the specific criteria they expect the Department to address in its revised plans for Universal Credit. In the light of the failures experienced by this programme, we recommend that the Major Projects Authority is given stronger powers to monitor and intervene.