Universal Credit: the anatomy of a government failure

Despite years of wasted money, political turmoil, Whitehall infighting, failed IT and departmental chaos, universal credit is being claimed by less than 4,000 individuals in the UK. What went wrong with the government's flagship welfare reform?

A striking public sector worker marches in protest through central London in 2012. Photo: Getty
A striking public sector worker marches in protest through central London in 2012. Photo: Getty

Universal Credit was supposed to solve all of this country’s welfare problems. And yet, just four years after coming to power, the government’s flagship benefits reform programme is in serious trouble. It’s difficult to say quite how much trouble (which is part of the problem) but we know enough for some people to suggest that the project, at least as we know it, may end up having to be scrapped.

It all started so well. The idea of merging six working-age benefits into one, which was first announced by Iain Duncan Smith at the Conservative party conference in 2010, has enjoyed cross-party support from the start. The logic of trying to simplify the system is undeniable, with claimants currently navigating a maze of more than 30 benefits.

It is widely acknowledged that the existing benefits landscape discourages work on low incomes, as every penny earned is lost through reduced benefits. The system is too complex, expensive and increasingly unaffordable. The need for reform is clear.

From the start, Universal Credit has been something of a personal crusade for the Work and Pensions Secretary, Iain Duncan Smith.  After being deposed as Conservative Party leader in 2003, he founded the Centre for Social Justice, the think tank which first proposed the concept of a “universal credit” in a report in 2009. It is said that IDS’s ambition to overhaul the welfare state had its origin in a visit to Easterhouse in Glasgow in 2002, where his missionary zeal was ignited by the deprivation he saw.

When the Conservatives and Liberal Democrats formed a government in the wake of the 2010 election, Duncan Smith was appointed to run the Department for Work & Pensions (DWP), giving him the opportunity to make his plans for Universal Credit a reality.

Fast forward to the present and the programme is in turmoil. Millions of pounds have been wasted on unworkable IT, the project has been run by different five people since mid-2012, and it is surrounded by a deeply secretive culture. It is the subject of virtually open warfare across Whitehall.

In February, the DWP said that 3,610 people had signed up to receive Universal Credit as of November 2013. The benefit is currently available in just 10 jobcentres in the UK, and only single people claiming for one of the six benefits (Jobseeker’s Allowance) it incorporates are eligible to claim. Had it launched nationally for new claimants in October 2013 as originally planned, hundreds of thousands would have been using the new system.

 

Where did it all go so wrong?

Some believe that the programme was flawed from the start.

When setting up the policy, the DWP said it would use an “agile” method for development on the programme. This means the software would be built piece by piece, making the project responsive to users' needs and able to change during testing. It would then be released in stages. This technique is supposed to avoid the problem where an entire system is built and released, and then the problems are uncovered. 

However, experts say that the project was never truly agile in the first place. This was due to the way contracts with fixed features were set up with major IT suppliers such as  IBM, Accenture, Atos and Hewlett-Packard, and the requirements for a “big bang” launch in October 2013 (a deadline which, of course, it missed).

Despite the government’s claim in its July 2010 green paper “21st Century Welfare” that the IT changes necessary for Universal Credit would not “constitute a major IT project”, experts view the programme so far as one of the biggest IT projects undertaken by government for decades. It is billed by the government itself as the most radical change to the welfare system since the 1940s.

The National Audit Office’s September 2013 report was a searing indictment of the programme. The spending watchdog accused the DWP of having a “good news” culture, a lack of transparency, inadequate financial controls on the project and, perhaps most damagingly, a lack of any detailed plan. It is clear that the programme had significant issues right from day one.

In November last year, the Public Accounts Committee added its voice to the growing criticism of Universal Credit, saying that it expects much of the £425m spent on the programme by that point to be written off. The report cast doubt on current timetables, targets and budgets and said that the DWP should offer a range of options for how to proceed on the programme to ministers, the Cabinet Office and the Treasury.

I spoke to Mark Foden, an expert in technology-related change in government who has advised a number of Whitehall departments. He explained that “many of the significant problems we have had with large government IT projects – Universal Credit included – stem from the issue that government has not properly grasped the implications of complexity”.

He continued: “In relatively ordered, well-understood situations – building a tunnel, running a sports event or even setting up a large computer network – it is possible to make big, long-term plans and be reasonably certain of achieving them. We generally do a great job of this kind of thing.

“But Universal Credit not this kind of thing. Where there is complexity, and particularly where outcomes depend on significant change in human behaviour, approaches based on the traditional ‘construction’ mindset work poorly. In these situations it's critical to proceed  incrementally. This means, at each step, learning what leads to useful outcomes – in the case of Universal Credit, changes in the behaviour of claimants (and not whether the technology functions) – and then adapting the entire approach to suit. This often leads to doing things that just could not be envisaged at the outset. In traditional programmes with big promises and a fixed end date, it is impossible to work this way.

“The problem is not in plans, people or methods; it’s in mindset. Trying to build things that really need to be grown just won’t work; no matter how you manage them.”

 

The “reset”

The DWP claims that it has made major strides in dealing with these problems. This took the form of carrying out a “reset”, or  implementation review, of Universal Credit, a process which finished at the end of last year, according to Iain Duncan Smith.

Although (as with most aspects of the programme), the details are unclear, the reset involved the complete suspension of the governance board and the appointment of Howard Shiplee, formerly construction director for the London 2012 Olympics, to lead the programme from mid-May 2013.

As part of the reset, the DWP worked closely with the Government Digital Service (GDS), a Cabinet Office unit tasked with transforming government online services. They are most well-known for setting up the government’s unified web portal GOV.UK (which won an award for Design of the Year in April 2013).

A “digital solution” is now being developed for Universal Credit, led by initial work from the GDS. It is unclear what this solution looks like, though we know that it is “still many months away from a system that can handle more than 100 people”, according to DWP permanent secretary Robert Devereux, speaking during a work and pensions select committee session in February. It is understood that the digital solution, once fully developed and live, will replace the existing systems – at what cost, we do not know.

In an article in the Telegraph in September 2013, Shiplee said: “There is no doubt there have been missteps along the way. But we’ve put that right.”

However, in a recent appearance in front of a House of Commons select committee, MPs expressed their lack of confidence that the programme has really been fixed, with chairman Dame Anne Begg MP saying to Iain Duncan Smith: “I am not convinced by your argument that you have sorted it out.”

Earlier in the session, she castigated the minister for not informing the committee about the reset at a session in 2013, despite being aware of it at the time. Another MP accused the department of “smoke and mirrors” and “obfuscation” over the project.

Somewhat surprisingly, as it stands Universal Credit is yet to even be signed off by the Treasury, the process where the Chancellors department agrees to future spending on the project once it has seen the department’s business case. The DWP refuses to say when it expects this to take place, hinting at a fraught and complicated relationship between the two departments.

 

Warfare in Whitehall

While many have been involved with the debacle of Universal Credit, one person has nailed his colours so firmly to the mast that if the project fails, he must surely go down with it. Increasingly, fingers are pointing at Iain Duncan Smith.

The work and pensions secretary has had a number of unedifying appearances in front of select committees in September and December 2013, and most recently in February 2014, where he has seemed to neither fully comprehend what has gone wrong on the programme, or what needs to be done to fix it.

It is understood that there are tensions between Iain Duncan Smith and the Chancellor, George Osborne, who ultimately signs off on all spending on the programme through the Treasury.

Insiders believe Osborne does not rate IDS as an intellectual heavyweight, with journalist Matthew D’Ancona quoting him as having told his allies: “You see Iain giving presentations . . . and realise he’s just not clever enough.”

A minister close to the chancellor was quoted at the end of last year saying: “There are some ministers who improve in office and others, like IDS, who show they are just not up to it.”

Similarly, Cabinet Office Minister Francis Maude, who has worked closely with Iain Duncan Smith and DWP officials on the programme, has declined to publicly back Universal Credit on a number of occasions.

Speaking to BBC Radio 4 in January, Maude was asked how confident he was that the solution now being put in place for the programme will work. “I hope it will work,” he said. When pushed, he added: “Well no one knows with these things . . . the way we do things is very much now more ‘build something quickly, test it, prove it, test it with users’, and so you can’t have certainty about any of these outcomes.”

It is understood that Iain Duncan Smith himself – or at least his aides – has himself been a source of negative briefings as well as recipient, with attempts made at the end of last year to pin at least some of the blame for the problems with Universal Credit on DWP permanent secretary Robert Devereux. 

After weeks of hostile briefings to the media, Sir Jeremy Heywood, the country’s most senior civil servant, intervened directly, expressing his concern over the “concerted political briefing campaign” to the prime minister David Cameron. This perhaps gave rise to Iain Duncan Smith’s statement in November 2013 that he had “every confidence” with the team implementing Universal Credit, “and that team includes Robert Devereux”.

Unsurprisingly, during committee sessions, there is a palpable air of tension between Iain Duncan Smith and his permanent secretary. You even get the impression that they are barely on speaking terms – hardly conducive to closely working together on a project.

 

Losses

So how much is this all going to cost us? The official DWP line is that, of the £312m spent on Universal Credit so far, £40.1m will be written off, a figure which a spokesperson says "should be balanced against the overall economic benefit of £35bn that Universal Credit will ultimately bring”. It is unclear precisely how this figure has been calculated or what length of time period it applies to.

In January, news reports said that there were just three DWP staff working on the enhanced digital system, which is due to be used for the national rollout in 2017, with 50 IT staff working on the programme as a whole. How many are working on the programme within the various contractors is not clear.

It is difficult to hazard a guess regarding the current bill of total losses on the programme. The Public Accounts Committee says £425m had been spent as of November last year, the majority of which it expects to be wasted.

The DWP has admitted that beyond the £40m in losses, a further £91m is being “written down” over a five-year period, a plan described by the National Audit Office as a “major change in accounting treatment”.

Senior civil servants pitch the current total losses between £161m to almost the entire amount spent so far (which ranges from £312m to almost £700m depending on who you ask, and Labour says equates to just over £190,000 per claimant). During a Public Accounts Committee session in September, DWP finance director Mike Driver said £161m was his “best assessment” of likely total losses, while the Major Projects Authority director Dr Norma Wood said that much of the £303m invested in IT by that point was “not fit for purpose”.

While potential losses of over £500m are not insignificant, this initial estimate can be compared to the money wasted on the National Programme for IT, an initiative started in 2005 to set up a single electronic care record for NHS patients which would link hospital and GPS data and provide NHS staff with access to patients’ records. This project, seen as the biggest IT disaster of the last two decades, was scrapped in 2011, but not before inflicting an (ongoing) cost of more than £10bn on the taxpayer.

And as ever with Universal Credit, the lack of transparency surrounding the programme means we are unlikely to get an accurate picture of losses for some years.

 

Will it work?

So will the programme work one day? Tony Collins, an investigative journalist who has written extensively about IT projects, predicts that it will - but not as originally forecast, and it will cost more and take much longer than envisaged.

He says: “From what I know in the context of the reasons for some past IT-related failures, I’d say that Universal Credit is in a worse position than some big programmes because it started, and continued, without senior management having any clear idea how it would work.”

However, Collins remains optimistic. He continues: “I think it’ll follow the path of the previous computerisation of welfare benefits called Operational Strategy.

“It took 10 years and cost three times the expected amount but eventually it worked. It was more disjointed than intended – a variety of separate systems. I think it likely Universal Credit will work but perhaps not much before 2020, and I would not be surprised if it ends up partly face to face rather than fully online because of security.”

Chairman of the Public Accounts Committee Margaret Hodge is more sceptical. She tells me: “The DWP seems to have embarked on this crucial project, expected to cost the taxpayer some £2.4 billion, with little idea as to how it was actually going to work.

“Confusion and poor management at the highest levels have already resulted in delays and at least £34m wasted on developing IT. If the department doesn’t get its act together, we could be on course for yet another catastrophic government IT failure.”

As it stands, Labour refuses to be drawn into confirming whether or not they will scrap the project if they win the general election next year, saying only that they support the principle of Universal Credit while continuing to criticise the problems with its implementation.

Shadow work and pensions minister Rachel Reeves told me: “What we have seen so far is a huge waste of millions of pounds of taxpayers’ money and endless delays to the project.”

She added: “Labour is looking very closely at the detail of Universal Credit including the structure of payments, work incentives, and the detail of how it is rolled out across the country and to different groups of claimants. Once this work is complete we will be in a position to set out further detail.

“Ministers have repeatedly refused to listen to reports that Universal Credit was falling behind schedule, with Iain Duncan Smith insisting time and again that Universal Credit was ‘on time and on budget’. The National Audit Office warned of a ‘good news culture’ within the department, and it’s clear that Iain Duncan Smith and David Cameron need to take personal responsibility for the spiralling waste, huge delays and errors that have plagued Universal Credit. It seems that two parallel IT schemes are now being delivered, with no clear plan for the roll out of Universal Credit.

“Millions of taxpayers’ money has been wasted. And only a handful are now claiming Universal Credit despite ministers promising a million by April 2014. Francis Maude, Tory Minister for the Cabinet Office, was right to say the roll out of Universal Credit was, ‘lamentable’. Ministers need to urgently get a grip of their flagship welfare reform.”

 

What now?

Regarding the programme’s future, there are a number of possibilities. The general election next May will be an important factor. While expressing support for the idea of Universal Credit, Labour has consistently criticised its implementation, and is yet to say whether or not a Labour government would scrap it.

With over a year to go until the election, the party is probably still making up its mind. However, signs point to a distinct lack of enthusiasm, even more so now that Rachel Reeves is the shadow work and pensions minister. She is believed to be even less enthusiastic about the project than her predecessor Liam Byrne was.

Alternatively, the Conservatives could win a majority, or form another coalition with the Liberal Democrats, which would most likely mean Iain Duncan Smith remaining in post. But even then Universal Credit could become unviable due to its poor implementation.

The DWP says that the new benefit will continue to be rolled out across the country, with expansion to new claims from couples and families in existing jobcentres scheduled for this summer. More coverage in the north-west will follow by the end of this year, they say, with the roll-out gradually increasing in scope and scale over the next two years.

However, given the inaccuracy of past predictions and continuing reluctance to be transparent, it is hard to have much faith in the department’s plans.

One fact remains: despite all the money wasted, the political turmoil, Whitehall infighting, failed IT and departmental chaos described above, the benefit is being claimed by less than 4,000 individuals in the UK.

The remaining 5.4 million people currently claiming working age benefits continue to do so in precisely the same way as they did five years ago.