Will the real-time wages information feed from HMRC work?

We at Universal-Credit.org say “no”.

This system might be theoretically achievable, but not within a realistic timescale.

IT experts are saying that it would be one of the most complex projects any Government has ever attempted. Projects far simpler than this have gone way over budget and been plagued by massive delays.

As a layman, I can see that a project that requires the cooperation of the DWP, the HMRC, and millions of employers around the country is bound to be difficult.

So, what are the Government’s options? There appear to be three possible courses of action:

1. Abandon Universal Credit, or

2. Delay the introduction of Universal Credit by several years to allow the IT to be built, or

3. Re-design Universal Credit so that it delivers its objectives without the need for a real-time information feed from the HMRC.

We at Universal-Credit.org imagine that faced with these choices, the Government would be most interested in number 3. So,

How could Universal Credit be re-designed so that it delivers its objectives without the need for a real-time information feed from the HMRC?

Let us start answering this question by asking another. Why is the Government so keen on a real-time information feed from the HMRC in the first place?

Obviously, it would be a great thing to have. It would allow the customer’s benefit to be changed to reflect fluctuations in earnings automatically. This would be quick, it would reduce overpayments, and it would only need a handful of DWP staff to oversee this automated process.

Conversely, we have managed to run the Welfare State without such a system for 62 years: if pushed, we could carry on doing so.

I think it is the current farcical arrangements for Tax Credits which makes the real-time feed so essential in the Government’s eyes. Just in case you need reminding, Tax Credit is that system that pays you last year’s benefit this year, plus or minus adjustments to correct the fact that you started off this year being paid on the basis of the year before last year. Or something like that. In other words, a pig’s ear of a benefit that has brought the reputation of in-work benefits into disrepute.

But a real-time information feed from the HMRC is an expensive sledgehammer with which to crack this unpleasant nut. Bear-in-mind that a lot of Universal Credit customers will be outside the scope of the automated PAYE scheme anyway. They will be working cash-in-hand, or for small employers who do not have computerised payroll systems, or self-employed. The ideal, salaried, BACS-paid employee that would fit in well with the real-time system may not be someone who needs to claim Universal Credit.

I propose a simple, low-tech solution. My favourite benefit of all time was Family Income Supplement (eventually re-branded as Family Credit). It was a simple, fixed award for 6 months, based on the customer’s income at the start of those 6 months.

Sure, you had to wait until the end of the 6 months to get your benefit to reflect any changes, but it seemed to work. Customers knew where they stood with it. They were able to budget. It was reliable. There were order books with slips in them, so the customer could visualize benefit, and see how many weeks were left before they had to re-apply.

From the Government’s angle, no changes of circumstances needed to be processed between the awards, which was a real plus for work planners.

Indeed, fixed period awards were suggested in the 2009 Government Consultation Paper, Supporting people into work: the next stage of Housing Benefit reform. Regrettably, in my view, this concept has not been brought forward into the Universal Credit. I think it would be a really simple, low tech way of delivering a benefit that worked. If taken in conjunction with Jim Arnold’s suggestions also on this website (click here for his paper), Universal Credit could be introduced cheaply and quickly.

Dave Watson, 15/12/10