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Universal Credit costs will not be revealed until after general election

The government will not reveal the full cost of its troubled Universal Credit system until after the general election in May 2015

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Mark Ballard
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Published: 27 Jan 2015 16:55

The government will not reveal the full cost of its troubled Universal Credit system until after the general election in May 2015, Computer Weekly has learned.

The last time it calculated an official cost estimate for the whole project, in 2012, it was £12.85bn. But while the cost is said to have since burgeoned, with the project now running two years behind its original schedule and with problems having complicated its development, the government has not updated the official estimate for more than two years.

The Department for Work and Pensions (DWP), which leads development of Universal Credit, and the Cabinet Office, which has responsibility for project oversight, have concealed the revised cost estimate since tearing up plans for the computer system in 2013 after two years of development – a process they called a "reset". 

They kept the number secret even after they finished re-scoping the project in September 2014, excluding it from the latest National Audit Office (NAO) review of Universal Credit in November that year.

The NAO report said Universal Credit would cost more because DWP had taken a "twin-track approach" to its redesign, in which it would proceed with both the old and new designs simultaneously to insure against failure. But publication of the actual cost increase will be withheld until after the general election on 7 May 2015.

Read more about Universal Credit

A DWP spokeswoman said the department would publish its whole-life cost estimate for Universal Credit in the next Cabinet Office Major Projects Authority (MPA) annual report in June 2015. She said the DWP was not prepared to release the number sooner.

DWP and other departments submit budget figures and progress updates for major projects to the MPA every September. But the Cabinet Office body does not publish the submissions until nine months later. 

This routine, established in 2012, would coincidentally conceal the final reckoning of the coalition government's performance running major projects until after the general election. Both coalition parties campaigned in the 2010 election against what they portrayed as the then-Labour government's failure to manage large projects – particularly IT projects.

The DWP spokeswoman said the most recent total cost for Universal Credit was the one it submitted to the MPA in September 2012. "The next published figure will be in the MPA report this year," she said. 

The cost estimate had not been updated since 2012 because the MPA had given the programme a "reset" rating in 2013, instead of the usual red/amber/green progress rating, added the DWP spokeswoman.

"There wasn't the lifetime cost for the programme because we were given the reset rating from MPA. But since then we've got a clear plan for how to roll it out. So future MPA reports will give the lifetime cost of the programme," she said.

Total costs

In November 2014, secretary of state for work and pensions Iain Duncan Smith said the DWP had cut the cost of Universal Credit from £2.4bn to £1.8bn – but this does not refer to the whole-life cost. 

The department has often cited the "investment cost" of Universal Credit as its total cost, though the £1.8bn figure only accounts for development of its core system. With Universal Credit being phased in simultaneously with the existing £70bn social security system to avoid any “big bang” breakdown, and with its development proceeding also with old designs still in use after its two-year rethink, the total cost is much higher officially.

According to Cabinet Office guidance, the whole-life cost of a major project includes all costs until its delivery. DWP's annual report in July 2012 said Universal Credit's whole-life cost would be £13.85bn to 2017. A month later, its submission to the MPA said it would be £12.85bn. It stood by this number when the MPA published it in June 2013, though DWP and the Cabinet Office had already begun redrawing their development plans.

Universal Credit – timescales

Operational roll-out of live service:

  • April 2013: DWP started taking new claims for single jobseekers
  • June 2014: the department started taking some new claims for jobseeking couples and singles who are also claiming housing benefits – expanding to around 100 jobcentres by the end of 2014
  • November 2014: the department starts taking some new claims for families with children
  • February 2015: the department starts to expand nationwide, reaching all 700 jobcentre areas by March 2016
  • £267m: net present value of the expanded national roll-out of simple cases in 2015 and 2016, as estimated by the department
  • £149m: additional administrative cost to government of the expanded national roll-out of simple cases in 2015 and 2016 as estimated by the department

Delivery of digital service:

  • November 2015: DWP's planned date for testing its digital service at scale before nationwide adoption
  • May 2016: the department's planned start for rolling out its new digital service to claimants nationwide – it expects no new claims to legacy benefits by December 2017
  • December 2019: the department's planned date for completing the transfer of 93% of claimants to Universal Credit
  • £20.7bn: net present value of introducing Universal Credit in the department's autumn 2014 business case

Source: National Audit Office

DWP withheld the whole-life cost from its MPA submission three months later, in September 2013. It said it would update the whole-life cost estimate to reflect the redesign at a later date, though the statement wasn't published until nine months later, when the MPA published its 2012-2013 annual report in May 2014. 

DWP omitted the whole-life cost from its 2013-2014 annual report and accounts, published on 26 June 2014. The total costs of major projects featured in a transparency section of its 2012-2013 report. But the section was not included in the 2013-2014 report.

DWP finally submitted a summary of its revised plans for Treasury approval in September 2014. Treasury approved them the same month. DWP declined to confirm if it had submitted the final cost estimates on schedule in September 2014 as well, or whether it was still formulating the total cost for the MPA's June 2015 report. The NAO said in November 2014 the department was still filling in the detail.

The detailed Universal Credit business case will be finalised and signed off in stages, said the DWP spokeswoman, just as it was being developed in stages. 

This had been stipulated by the coalition government's IT strategy, with plans and project estimates being revised as it progressed. Its gradual introduction means that Universal Credit will start delivering results even while it is being developed. 

Though the revised project is not scheduled for completion until 2019, it is operating partially in 100 of 700 job centres, and 40,000 people have applied for Universal Credit benefits. The system had originally been scheduled to serve a million people by April 2014.

Cost savings

The DWP spokeswoman said Universal Credit's whole project cost was rendered insignificant by the benefits from its staged introduction. It would deliver cost savings even while being developed. So, she said, its "total net operating cost" would be neutral. 

The spokeswoman was unable, however, to say how the net operating cost related to the total £13bn project cost. DWP was unable to provide a breakdown of whole-life costs. The Cabinet Office would not say what costs it stipulated for inclusion in whole-cost estimates.

"The department’s recent Universal Credit at Work publication makes clear that beyond investment, the total net operating cost to the end of the business case period is neutral, when taking into account savings," said the DWP spokeswoman.

"The figure from the annual accounts looks at the gross cost rather than any savings it makes, such as the economic benefits to society," she said of the earlier £13bn estimate. "It's not a figure that represents the cost-benefits to Universal Credit. It doesn't take into account any of the benefits."

The NAO said in November 2014 the "net present value" of Universal Credit in the department’s Autumn 2014 business case was £20.7bn.

"The department estimates that the twin-track approach yields a higher net present value overall by bringing forward the benefits of the programme. The department’s estimates of net present value are driven by societal benefits," said the NAO.

The NAO also cited £20.9bn as the "net saving". And in a breakdown of DWP-supplied costs (see appendix), it said the net present value was £14.5bn.

The NAO omitted the total project cost from its November 2014 report, Universal Credit Progress Update. Whole-life cost had featured significantly in its 2013 report on Universal Credit

An NAO spokeswoman said it had not included the whole cost this time because neither the Cabinet Office nor DWP supplied it, and the NAO had not asked.

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