Tagged: Universal Credit

Changing Universal Credit (again)

There are two days left for the consultation about limiting Tax Credits and Universal Credit to two children.  I’m not making a submission.  This is not a consultation about the policy, but about what exceptions should be made, including multiple births and the children of rape.  It’s a depressing process, which illustrates a general problem: if governments create stupid rules they then have even more problems to stop the anomalies  from spiralling out of control.

I’ve some sympathy for a comment made from the IFS in their work on the Autumn Statement, which included a change in the UC taper rate but maintained the swingeing cuts in the work allowance.  Stuart Adam pointed out that to date there have been four changes in the work allowance, one to childcare support and now one to the withdrawal rate.  It’s exceedingly difficult to know what the effect of cumulative small changes to Universal Credit will be, and maybe they shouldn’t be done unless we do.

 

 

Universal Credit is not back on track

A report by Nicholas Timmins for the Institute of Government suggests that Universal Credit has recovered from its initial disasters and is now on the road to recovery.  He has been told, and seems to accept, that the DWP and the Treasury have finally got a grip and sorted out the basic mistakes, and something like Universal Credit will be established.

Timmins’ report is largely based on interviews with senior politicians and civil servants.  The report is basically a chronological account of how the policy developed, how it went wrong and what’s been done subsequently to get it right.  But he would have done well to seek out some other perspectives.  The failures in design are fundamental – and because critical analysis through the usual channels was suspended, they have still not been adequately considered.  Amongst the many failures of Universal Credit,

  • all the primary objectives – such as simplification, work incentives, reducing in-work poverty, smoothing transitions and cutting back on fraud and error – have been fatally compromised
  • there is no effective system for coordinating and pooling all the information required in one place – the new system has come to rely primarily  on returns from claimants about changes
  • the system relies on accurate information from claimants, and people cannot answer questions they do not know the answer to.  No computer system can go faster than the information that goes into it
  • the marginal rate of deduction is much higher than intended
  • the cuts in work allowances remove any incentive for most claimants to remain in contact with the system if they find work
  • the system makes  complex demands of people, (for example, those relating to security, agreements by couples and job search) which are almost impossible to police.

The administrative failures of Universal Credit largely reflect a cavalier disregard for any practical experience derived from the benefits it is supposed to replace.   Even if everything had been done well, the scheme would have foundered; it was trying to do the wrong things in the wrong way.  There is little indication that the present implementation has done more than re-christen existing benefits with some tweaks in the rules, and as things stand many of those tweaks (such as rules on rent, reporting and conditionality) are not working too well.

A ‘minor’ glitch in Universal Credit

DWP apologises for inconvenienceThe Register reports a small glitch in the Universal Credit scheme.  Access to the online system was closed for more than 24 hours after an upgrade went wrong.  A DWP spokesperson described this as a ‘minor issue’.

When the Royal Bank of Scotland crashed access to cash for its customers with a botched upgrade in 2012, it led to a flurry of political statements, consideration by the Treasury Select Committee, the intervention of the regulator and fines for banks.  I might have asked, rhetorically, if there was any prospect of treating the DWP in a similar way, but we all know there isn’t.

Fraud and error in Universal Credit

Universal Credit was supposed, through some process I can’t claim to understand, to reduce fraud and error in the benefit system.  According to the Business Case, there were supposed to be reduced overpayments worth £14 billion over twelve years, or £1.16 billion per annum.    I commented in 2012, and again last December, that I found this claim implausible: Universal Credit doesn’t do anything about most of the circumstances which lead to fraud and error, but it does add layers of complexity to make confusion and mistakes more likely.  Now we have the first figures from the DWP on fraud and error in Universal Credit.  Universal Credit was overpaid by 7.3%, compared to 5.0% of JSA (the nearest comparable benefit) and 5.2% of Housing Benefit.  It was underpaid by 2.6%, while JSA was underpaid by 0.8%. The system makes more mistakes in both directions.  The DWP points to the complexity of managing some claims – but that, of course, is the point.

The DWP summary pleads that the difference between UC and JSA is ‘not statistically significant”, and that in any case UC and JSA are not directly equivalent.  True enough, but Universal Credit was supposed to cut fraud and error by somewhere between a third and a half of all overpayments.   If UC was supposed to save a third but is actually costing nearly fifty per cent more, the level of fraud and error is running at more than double what was expected.  If it was supposed to save half, it’s three times what it should be.

The Universal Credit Story: third instalment

The documents released to John Slater are now available on the  FoI website, What do they know.  Be warned that the Programme Risk files (numbered 3-6 in this list) are massive, so I’ve uploaded a smaller version here (one file of 6Mb instead of four totalling over 25Mb).

  1. Issues Log http://files.whatdotheyknow.com/request/…
  2. Milestone Plan http://files.whatdotheyknow.com/request/…
  3. UC Programme Risk Part 1 http://files.whatdotheyknow.com/request/…
  4. UC Programme Risk Part 2 http://files.whatdotheyknow.com/request/…
  5. UC Programme Risk Part 3 http://files.whatdotheyknow.com/request/…
  6. UC Programme Risk Part 4 http://files.whatdotheyknow.com/request/…

Last week, I outlined two rather different accounts that have been given of what went wrong.  The first suggested that the project was going according to plan when the Cabinet Office intervened and blew everything out of the water.  The second was that the DWP were aware of a series of problems, but those problems were not admitted to publicly and they were not satisfactorily addressed.  Looking at the papers in more detail, I’m inclined to a third, quite different conclusion.  The milestones laid out in the documents were largely met – but they were woefully inadequate to deal with a scheme of this complexity.  The issues which were recognised within the DWP  – such as the problems of potential fraud, identity checking or the low morale of staff – don’t begin to plumb the depths of the practical problems that the scheme needed to overcome.   I complained in 2011 that the scheme was half-baked.  It was worse than I thought.

I’m going to pick out a small point as an illustration.  The scheme aimed to pilot the use of RTI – real time information – from employers.  There is a minor risk noted, that

“Employers may not be ready to take part in the RTI main Migration (from April 2013).  The Comms activity to target the mass market may not reach some employers.  Employers may not have the relevant new software in place.”

In retrospect, this may seem thin – but it wasn’t good enough then, either.  The review team made three basic mistakes.  The first problem concerns the impossibility of partial implementation.  It would be possible to see how the scheme worked only if all employers relevant to a claim were included in the scheme – because partial information could not be enough.    The second problem was the belief that the systems would be in place to back up the processing of information – they weren’t – and that the agency’s main task would be chasing laggards and improving communications.

Beyond those two, however, there was a deeper problem,  intrinsic to the design.  We know from public statements that the design team was working on the assumption that claimants followed predictable pathways.  They took it for granted that  people would be moving between worklessness and stable, single employment.   However, people on low incomes, working in a ‘flexible’ labour market, have to be expected to move between states, often covering several employers, including some who may not be cooperative or explicit about what is happening.  Many people’s incomes go up or down rapidly and unpredictably.  The whole point of this scheme was supposed to be that it would offer claimants a personalised, seamless experience in real time.  To do that, there had to be  a system that followed the employee, not the employer.   It seems from these papers that they hadn’t even started to think about how that could be done.  As far as I can tell, long after the reset and redesign, they still haven’t grasped the nettle – currently, everything depends on the individual claimant reporting changes as they happen.   There has been no point during this process when the systems in place have promised to be minimally capable of operating as intended.

 

The Universal Credit Story: second instalment

The first of the documents requested, the Project Assessment Review,  is now available at the Campaign for Change website.  This was prepared in November 2011, a year after the initial announcement of the policy.  This was still done at a very early stage.  The tribunal decision contains a brief summary of the progress, which puts this in context.

The review rates the project at ‘Amber Red’, and asks for a further review to take place in March/April 2012.  The key issues I’d pick out are these:

  •  … the Programme  is a  little behind where  it needs  to be.
  • Dependencies do not appear to be being consistently formally managed.
  • … the Programme  still  feels  very IT focused and does not seem to have embraced fully the transformational nature of the business change at all levels.

A week before the review, Iain Duncan Smith was declaring:  “The programme is on track and on time for implementing from 2013.”  He later told Parliament, on 5th September 2013:

In the summer of 2012—or rather, before that, in early 2012—I instigated an independent review because I was concerned that the leadership of the programme was not focusing in the way that it needed to on delivering the programme as it had been originally set out. The internal report showed me quite categorically that my concerns were right: the leadership was struggling, a culture of good news was prevailing and intervention was required.

That is consistent with what we read here, but not with the repeated public assurances that the programme was on time and in budget.

What went wrong with Universal Credit?

I was on holiday last week when the DWP apparently ‘released’ documents requested by John Slater under the Freedom of Information Act concerning the situation prior to the “reset” of the Universal Credit scheme.  I’ve been trying to get access to the released documents, and will amend this entry when I do, but at present I’m faced  with two apparently inconsistent stories about what happened.  The version from the released papers has been reported by Natalie Bloomer in these terms:

The Department for Work and Pensions (DWP) was aware of problems with the cost and implementation of Universal Credit despite publicly saying the project was “on track and on budget” … In February 2012, an internal register recorded concerns about a lack of effective checks and balances which could lead to the project not being fit for purpose.

Computer Weekly has reported this in similar terms.  However, a very different story was reported by Mark Ballard in Computer Weekly last year.

Universal Credit was doing fine and right on time as the Department for Work and Pensions began rolling out its IT system in April 2012 … in November 2012, DWP major programmes director Steve Dover told Computer Weekly he had finished his work overseeing the design and delivery of Universal Credit. Everything had gone according to plan, on budget and on-schedule. … But then Cabinet Office, led by public sector reformer Francis Maude, produced its Digital Strategy for the wholesale automation of public sector work. Within three months, Cabinet Office had taken over Universal Credit, torn up its plans and even scrapped the software DWP had produced to run Universal Credit. … That didn’t stop DWP being blamed for the delay though, and Universal Credit getting flack for being the sort of failure people had been taught to expect from public computer projects.

Could these accounts both be true?  They could, because it’s possible for two different agencies to take very different views of the adequacy and operational viability of a system in development.  It was obvious enough, for example, that one of the holes in the system (checking people’s identity) couldn’t possibly be done adequately through computer based checks during the initial application, and that’s the sort of thing that would reasonably have raised alarm bells in the Cabinet Office.  I won’t be able to say more on that until I get to see the documents in more detail.

The PAC criticises Universal Credit (again)

The Public Accounts Committee has published a short, critical comment on the roll-out of Universal Credit.  They remark that

  • delays in the process mean that the system cannot be delivering the intended benefits
  • for the same reason, the business case cannot be up to date
  • “The programme’s lack of clear and specific milestones creates uncertainty for
    claimants, advisers, and local authorities, and makes it difficult for Parliament
    and  taxpayers  to  hold  the  Department  to  account.”
  • further delays may increase costs, and
  • the DWP has mis-reported the apparent benefits from its evaluation.

I made most of the same points on this blog in November and December  last year.

Rather more publicity has been given to an IFS report which notes cuts to the scheme while accepting that it maintains incentives.  One of the authors comments, “the potential gains from simplifying the working-age benefit system remain mostly intact. ”  I think that’s mistaken, in two ways.  First, the scheme still suffers from a fierce p0verty trap, or ‘marginal rate of deduction’; the failure to take into account council tax or national insurance contributions flawed the design from the outset.  Second, the cuts that are due to come in in April will mean that Universal Credit will no longer be available to many single people or couples working on the minimum wage.  That will mean that it’s pointless to keep oneself registered for UC after getting a job.  The scheme was initially supposed to be paid to people both in and out of work, so that people could move seamlessly between the states.  That is no longer true.

Changing the Universal Credit Work Allowance

In the New Statesman, Emily Thonberrry MP bemoaned the effect of cuts on Universal Credit’.

“For all the flaws in its implementation, Universal Credit was actually a perfectly good idea, at least in theory. By bringing a number of benefits and tax credits together into a single monthly payment, which was available to those in work as well as out and would be gradually withdrawn as earnings increased, the government was working to the fundamental principle that work should always pay – and be seen to pay. … It is becoming increasingly clear that cutting tax credits and cutting Universal Credit is effectively the same thing. They hit the same families in the same way – the only difference is in the timing.”

I’ve commented often enough about the deficiencies of Universal Credit, which was never a ‘perfectly good idea’.  The second part is more interesting.   The ‘work allowance’ is not quite the same as an earnings disregard.  There is an amount that Universal Credit claimants can claim before they start to lose income (£111 per month for single people  and couples – that’s most current claimants – rising to £734 for a single parent who doesn’t rent).  Then there is a gradual loss of benefit, without a clearly defined upper limit.

From April 2016, the government intends to change that range from zero to £394.  Most existing claimants will start at zero; unless they rent, their Universal Credit will probably have disappeared by the time they work half-time on a minimum wage (£7.20 an hour from April).  I’ve always been sceptical about claims that there is no ‘incentive’ to work – people who say it usually don’t understand how low current benefits are.  What the change will remove is any incentive to stay in contact with Universal Credit or Jobcentre Plus, because the benefit will be withdrawn so sharply once someone gets part time work.  That undermines the idea that people will move seamlessly between states.

How sound is the case for Universal Credit?

Following my FoI request and a conversation with someone who ought to know, I’ve been doing a little chasing about the Business Case.  I’ve been told that there isn’t likely to be much difference between the (unpublished) Outline Business Case and the Strategic Outline case.  That wasn’t published last year, but the National Audit Office listed the main claims:

UC Business Case

Some of these figures are difficult to interpret, and that’s not just because the rollout of UC has been much slower than anticipated.

  • Line 4, listing an increase in benefits spending, reflects the potential costs of improved earnings disregards but is subject to change:  unemployment has been lower than expected, coverage has been reduced and benefit rates and tapers are under review.
  • Line 6, the gain to governments from increased unemployment, is unclear.  The initial returns from early cohorts do suggest a marginal  increase in employment – 3%, rather than the 8% that the government is claiming – but it’s not clear that there will be a commensurate return to the government, either through taxation or through benefit foregone.  The same issues reflect on line 9, wider gains from increased unemployment.
  • Line 8, Distributional benefits (non-cash), represents most of the supposed gain from UC – indeed, the Business Case hangs on it.  This has not been explained directly, but last March the Treasury published a distributional analysis accompanying the Budget, including this chart:
  • UC Distributional EffectWhile I’m happy to agree that a 3% increase in the income of people in the bottom tenth would have positive social effects,  I can’t quite see how this will yield a distributional benefit of £15-30 billion over twelve years.

The most obvious questions relate to line 5, Reduced overpayments.  This is supposed to account for £14 billion over twelve years, or £1.16 billion per annum.  The net total loss for all DWP benefits (including Housing Benefit) through error and fraud has recently been given as £2.1 billion a year.  Even if we use the gross figures, before recovery of overpayments, the total overpayments for all the benefits being incorporated into Universal Credit is £1.4 billion. Net overpayments for Tax Credits came, on the most recent figures I have, to just over £1.5 billion.  So it looks as though the Business Case is claiming that net overpayments will be reduced by something between a third and a half.

We know rather a lot about overpayments, because there are detailed estimates of how they happen.  The main reasons for overpayment are  confusion about employment and earnings, household composition and capital holdings.   Even if Universal Credit deals with the first of these, there is nothing it can do about the other two.  Nor, when we get down to detail, is UC going to be able to resolve lots of the smaller problems, such as people becoming hard to trace, residency rules or resolving whether people are really entitled.  The assumption that Universal Credit will make these issues disappear looks like wishful thinking.