Universal Credit: more IT uncertainties

By Tony Collins

Shortly after IDS was in the House of Commons yesterday defending his handling of the Universal Credit project – taking an all is well approach – the National Audit Office issued a report that drew attention to the scheme’s uncertainties, write-offs on IT so far of £41.3m, and the five-year depreciation of a further £91m spend on IT that may not be used after the migration from legacy, or transitional, UC systems to in a new “digital” solution.

The legacy Universal Credit  IT infrastructure is a blend of existing DWP IT and technology adapted to UC.

The DWP had originally expected to depreciate the £91m over 15 years but, suggests the NAO, the legacy Universal Credit IT infrastructure may be of little use after 2017/2018.   

Says the NAO:

“…  the underlying issue [is] that the Department has spent £91.0 million on assets that will only support a limited service for 5 years, with clear consequences for public value.”

On what the NAO report calls the “longer-term programme uncertainties” it says that the “overall cost of developing assets to support Universal Credit is subject to considerable uncertainty”.

It adds:

“The Department acknowledges  … that there is uncertainty over the useful economic life of the existing Universal Credit software pending the development of the alternative digital solution and uncertainty over whether Universal Credit claimants will be able to migrate from the current IT infrastructure to the new digital solution by December 2017.”

The NAO’s report on the DWP’s 2012/2013 accounts also notes the uncertainties with the new digital solution. Says the NAO:

“At this early stage in its development, there are uncertainties over the exact nature of the digital solution, and in particular:

– How it will work;

– When it will be ready;

– How much it will cost; and

– Who will do the work to develop and build it.

A Ministerial Oversight Group has approved a spend of between £25m and £32m on the new digital UC solution up to November 2014. DWP officials and suppliers plan to build a core digital service that will deliver to 100 people by then, after which it will assess the results of that work and consider whether to extend the service to increasing numbers.

The NAO suggests that some of the money spent on the new digital solution may also end up being written off.  Says its report:

“As the Department develops the digital solution, so it will start to recognise some of the costs incurred as assets. Without clear and effective management, in the future the Department may also find it needs to impair some of these new digital assets.”

At a hearing of the Work and Pensions Committee on Monday Iain Duncan Smith depicted the write-off of £40m on UC software code so far as normal for any large organisation in the private or public sector that embarks on a major software-based programme.  IDS said that private sector organisations typically write off a third of the money spent on software on a large project. About £120m has been spent on writing UC software code so far.

Amyas Morse, head of the NAO,refers in his report to the “considerable sums that the Department is proposing to invest in a programme where there are significant levels of technical, cost and timetable uncertainty”.

He adds:

“I reiterate both the conclusion and recommendations from my report in September. The Department has to date not achieved value for the money it has incurred in the development of Universal Credit, and to do so in future it will need to learn the lessons of past failures …”

In a short debate on UC in the House of Commons yesterday Rachel Reeves, Shadow Work and Pensions secretary, suggested Iain Duncan Smith was in denial about being in denial.  She put points to him he did not answer directly.

She said that IDS had told the House of Commons on 5 September 2013 that UC will be delivered in time and on budget. On 14 October IDS made the same claim. Reeves said:

“How on earth can this be on time when in November 2011 he [IDS] said:  ‘All new applications for existing benefits and credits will be entirely phased out by April 2014.’

“We have now learned that this milestone will only be reached in 2016. Will the secretary of state confirm that this is a delay of 2 years? … How can the secretary of state say that Universal Credit will be on budget when even by his own admission £40.1m is being written off on IT [software code]? What budget heading was that under?”

Reeves said IDS also revealed on Monday that another £90m will be written off by 2018. She added:

“ …The underlying problem is surely that the secretary of state has not resolved key policy decisions before spending hundreds of millions of pounds on an IT system… the secretary of state is in denial. Doubtless he’ll deny he is in denial….

IDS replied:

“ I said all along and I repeat: this programme essentially [jeers] is going to be on time. By 2017 some 6.5m people will be on the programme receiving benefits.”

He added that UC will roll out without damaging a single person. “The waste we inherited was the waste of people who didn’t listen, rushed programmes and implementing them badly.”

Dame Anne Begg, chair of the Work and Pensions Committee, said that IDS promised UC would be digital by default. “It isn’t,” she said.

“He promised that all new claims would be on UC by May 2014. They won’t…  So why should anyone believe him when he says that delivery of UC is now on track?”

IDS replied: “The proof of this will be as we roll it out…”

Comment

IDS is doing what he has to do: defend the UC project at all costs; and the NAO is doing what it needs to do: highlight the uncertainties and wasted spending.  If IDS admits to his doubts and concerns the opposition will jump on him. At least he is not being kept in the dark any longer by his senior civil servants.  He has his own reliable information – via Howard Shiplee – and from the NAO.  In 2011 he commissioned his own independent “red team” review which led to the pilot Pathfinder projects.

But the uncertainties highlighted by the NAO’s report today could be said to tacitly confirm that the transfer of all relevant claimants to UC project is unlikely to be complete before 2019/2020 at the earliest.  That’s probably not something anyone in government could own up to before the 2015 general election.

And even his advisers may not tell IDS that big government IT projects can be defined by the exceptions. IDS told MPs yesterday that Pathfinder projects indicated that 90% of people are claiming universal credit online and 78% are confident about their ability to budget with monthly payments. That’s 10% who don’t claim online and 22% who may not be able to manage with monthly payments. Will the high number of exceptions prove a show-stopper?

There’s a long way to go before officials and ministers can have confidence in UC IT. But, unlike the NPfIT which had little support in the NHS, most of those involved in the UC project want it work. That could make all the difference.