Universal Credit claims could cost government as much as the benefits it replaced, watchdog finds

DWP must do more to support vulnerable claimants, NAO says in latest report
Photo: Chris Young/PA Wire/PA Images

By Kate Forrester

10 Jul 2020

Universal Credit may end up costing the government as much to distribute as the benefits system it replaced, the National Audit Office has found.

The NAO said while the Department for Work and Pensions had reduced the cost of processing each claim from £699 in June 2018 to £301 in February this year, the figure remains £173 over the amount set out in the business case for the system.

Universal Credit replaced the six main "legacy" benefits, with ministers claiming it would create a more streamlined system that made it easier for people to find work.

But it has been beset with problems, including late payments and criticisms over an initial five-week waiting period for first payments, leaving claimants with cashflow problems and debts. 

The NAO's report concluded that "significant improvement" had been made in the proportion of claimants receiving their first payment on time.

But the spending watchdog said the actual number of people being paid late had increased, due to the coronavirus crisis leading to more Universal Credit claims. 

It also said DWP needed to do more to support vulnerable claimants, including disabled people and those who do not speak English as a first language, to ensure they understood what was being asked of them by assessors. 

The department was also deemed to have made "poor progress" in stamping out fraudlent claims and errors, with more than £1 in every £10 paid incorrectly.

NAO head Gareth Davies said: “The DWP deserves credit for improving its processes so that 90% of claimants are now getting their first Universal Credit payment on time. However, it is concerning that vulnerable people and those with complex claims may struggle with their Universal Credit claim and face financial difficulties.

“The DWP needs to improve its understanding of vulnerable claimants and how best to support them to ensure that no one is slipping through the net. This is only going to become more important as the economic upheaval caused by Covid-19 continues.”

The watchdog said it had not yet made any assessment of the cost impact of the pandemic on the full rollout of Universal Credit – but that it had already been revised from £3.2bn to £4.6bn.

The Work and Pensions Committee of MPs is carrying out an inquiry into Universal Credit and the delays on first payments. It is set to hear evidence from welfare minister Will Quince next week.

Its chair, Stephen Timms, said the "hard-hitting" report from the NAO "confirmed the select committee’s concern that that the five week wait for the first payment causes ‘financial hardship and debt".

The Labour MP added: "It provides further evidence that the initial planning assumptions for Universal Credit were naive. We now know UC will cost an extra £1.4bn to the public purse.  

"It will take more than twice as long to roll out as originally planned.  Far from reducing fraud and error, Universal Credit is driving historic record high levels – more than £1 in every £10 paid through UC is incorrect.

"DWP has done well to increase payments made on time. Its frontline staff have borne the brunt of that effort, with worrying signs of increased stress and absence from work."

But Timms said "hundreds of thousands" of people continue to be paid late each year.

A DWP spokesperson said: “Universal Credit is delivering in these unprecedented times, with more than 2.5 million new claims processed since mid-March and over one million advances paid to those in urgent need within days. Nobody has to wait five weeks for payment.

“As the report shows, significant improvement has been made in the proportion of Universal Credit claimants receiving their first payment on time and in full, currently around 90%.

“We’ve also increased the standard allowance by up to £1,040 a year, as part of a package of welfare measures worth over £6.5 billion to support the most vulnerable.”

Kate Forrester is senior reporter for CSW's sister title PoliticsHome, where this story first appeared.

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