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Universal Credit to simplify benefits

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12th Nov 2010
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The Department of Work and Pensions this week set out plans for a new Universal Credit system to replace the basket of benefits and credits currently in operation.

In detailed proposals released on Thrusday 11 November, the DWP claimed the Universal Credit would radically simplify the benefits system, deliver the government’s promise to “make work pay” and combat poverty.

Under the current arrangements, the benefits trap is compounded by the complexity of different benefits schemes for those out of work and the Tax Credits and housing benefits that are available for those who are working. “Taking a low-paid job means people running a large risk as Tax Credits are calculated and Housing Benefit adjusted over weeks and sometimes months,” the DWP paper argued. “We know that many are simply not prepared to take that risk and remain trapped on benefits for many years as a result.”

The Universal Credit would replace existing state payments including Working Tax Credit, Child Tax Credit, Housing Benefit, Income Support, income-based Jobseeker’s Allowance and the income-related Employment and Support Allowance.

Work and pensions secretary Ian Duncan explained that the new Universal Credit would not require a huge investment in new technology. Instead, credits for those in work would be calculated by drawing real-time information from an upgraded version of HMRC’s National Payments System (NPS), which would apply an “appropriate taper” to employees’ gross payments to calculate the net Universal Credit payment due.
 
The DWP paper estimated the new IT required for Universal Credit is on a similar scale to the Employment and Support Allowance which was “successfully delivered on time and within budget”. According to PublicTechnology.net, a written Parliamentary answer in March acknowledged the project was a big factor in DWP 32.7% IT budget increase to £330m in 2008-09.
 
In the recent Spending Review £2bn was set aside for the DWP to implement of the Universal Credit. Against this, the proposals explain that the unfied approach would improve take up and save an estimated £500m a year administering benefits.

The Universal Credit would also help fight fraud, the report claimed. Some £5.2bn a year is wrongly paid out as a result of fraud and error, the DWP noted and more than £1.3bn is underpaid.

The timetable will be tight, with introductory legislation planned for January to be followed by a phased approach starting as early as 2013, followed by the gradual closure of existing benefits and Tax Credits claims and their transfer to the new system by the end of 2017.

The DWP’s timetable and commitment to proceed with the Universal Credit sheds new light on HMRC’s plans for real-time information. The consultation that took place over the summer appears to have been an academic exercise as the government has clearly decided to proceed whatever responses it received. The DWP’s executive summary of its proposals mentions that HMRC will be consulting further on this topic.

A quick review of HMRC’s own business plan for 2011-15 (153kb PDF), meanwhile, confirms that work has already begun on a high level specification for the new “RTI” system and that consultation will be taking place this month on the detailed proposals. The infrastructure is already in place, the plan states and following testing between April and November 2011, the real-time information system is scheduled to go live in April 2012 to be ready to synch in with the Universal Credit plan.

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