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The universal credit is the government's next big train wreck

Welfare reform could go so massively wrong, even the intelligence services are worried.

Work and Pensions Secretary Iain Duncan Smith "has a thin skin". Photograph: Getty Images.

Even if the process for awarding the West Coast rail franchise was bungled by civil servants, it is politically disastrous for the government for a number of reasons. First, voters don’t want to hear politicians blaming their officials, even when the blame is deserved. Second, if ministers seize on the episode as an opportunity to accelerate civil service reform – as they surely will – the long-standing Cold War between Whitehall and the government will heat up, with inevitable leaks, briefings and other mischief that can destabilise an administration.

Third, David Cameron’s governing philosophy is famously obscure and coalition with the Lib Dems curtails his room for policy manoeuvre, so demonstrating the ability to competently implement existing policy is vital for the Prime Minister’s prospects at the next election.

When asked about the plan for recovering public support, senior figures in both coalition parties these days talk about “delivery” – showing that the government is actually getting on with the business of repairing the national finances and sorting out “Labour’s mess”. It is all about rolling up the sleeves and looking like a professional administration, hired by the electorate to do a tough old job. (Check out how often Cameron is photographed with his sleeves literally rolled up.) Labour, by contrast, can then be depicted as deranged fantasists, avoiding tough choices and banging on about weird abstractions instead of talking practical sense, rolling up their sle… you get the idea.

So it looks bad when the “delivery phase” doesn’t deliver and the competence file gets corrupted. Right now, Downing Street should be thinking very hard about what the next part of the programme to unravel will be and taking some pre-emptive measures. There are two obvious candidates.

First, the election of police commissioners. Hardly anyone knows this is happening although the votes are due to be held in England and Wales on 15 November. Turnout will be dismal and, by all accounts, the calibre of candidates is low. This was supposed to be a flagship reform, a great democratisation, a ballot box incarnation of "the big society". It looks like being a bunch of single-issue council seat by-elections.

Second, the universal credit (UC). This is a big one – the epic reconfiguration of the benefits system with a view to making work more lucrative than claiming welfare is due to be rolled out from October next year. Hardly anyone in Whitehall thinks this will happen. It is a vast project that requires complex IT systems, the effective commissioning of which is not an area where the civil service has famously distinguished itself in the past. One particular cause of concern is a plan to introduce “real time” data transfer from employers to the department for work and pensions - via HMRC – so that changes in someone’s work and pay status can filter through automatically to their benefit payments.

This experiment in massive inter-departmental exchange  of highly sensitive private data combined with payments worth billions of pounds has the potential to go spectacularly wrong. I understand from a well-placed source that the intelligence services are taking a close interest in the administration of universal credit because they fear it will compromise national cyber-security. Well-organised criminal hackers (or indeed other foreign intelligence agencies) could break into the system to commit colossal fraud or otherwise sabotage government business.

Separately, those who witness  the administration of the welfare system on the ground – whether in job centres or through citizens’ advice bureaux – are reporting a steep rise in cases of misallocations, errors and general bungling that means some very vulnerable people aren’t getting the money they need. The question being asked with increasing urgency (but still mostly in private) by pretty much everyone involved in welfare policy is this: if the DWP can’t seem to administer the existing benefits system properly, how on earth are they going to manage the switch to UC?

It doesn’t help that Iain Duncan Smith, the Secretary of State responsible for the whole thing, has a thin skin. Officials, charities and advisors from other departments report a culture of prickly denial at the top of the DWP. To hear the way “stakeholders” tell it, if you suggest there are problems with the UC implementation, it is inferred that you do not believe in IDS and, as an enemy of the project, are frozen out. If this is true there is serious trouble ahead.

One remarkable feature of both the police commissioners and universal credit policy accidents waiting to happen is that no-one seems to know who in Number 10 is supposed to be across these things. One of the most frequent complaints from Tories about the Downing Street operation is that there aren’t enough people with really sound political antennae keeping a strategic eye on other departments. Too much, it is said, is being done by civil servants who work on practical measures but don’t keep their ears to the ground for the sound of an incoming stampede of bad headlines.  

Maybe the current turmoil in the Department of Transport could never have been foreseen. Some storms do appear from nowhere. But some can be detected by radar long before they hit the shore. There is a hurricane gathering over the DWP and when the wind picks up and the bad news starts raining down, Cameron should be prepared.