Is the Universal Credit roll-out costing £190,000 per claimant?
"The DWP has not fared much better in establishing the new Universal Credit... which was supposed to get the benefits bill down by incentivising work is costing a staggering £190,000 per claimant at the moment."
Labour's Chris Leslie's speech on 'zero-based budgeting' at the Social Market Foundation caught the eye of the Prime Minister at PMQs this afternoon as he claimed that it meant Labour would be unable to match his government's spending plans.
The Shadow Chief Secretary to the Treasury on the other hand suggested that it would give his party the opportunity to cut down on 'waste' in government, highlighting the cost of providing Universal Credit to welfare claimants.
The calculation made by Mr Leslie is as follows: according to a Parliamentary answer given by Employment Minister Esther McVey, the government spent 5% of the £2 billion set aside for the introduction of Universal Credit in 2011/12, a further 16% in 2012/13, and it expects to pay out £192 million in 2013/14. Taken together, this means that £612 million will have been spent on the scheme by the end of this financial year.
According to the Department for Work and Pensions, by the end of November 2013 3,200 were being paid Universal Credit. If the £612 million spent on Universal Credit so far was shared between these people, then £191,250 would have been paid out for each claimant.
The first problem with this analysis is that the dates don't quite match up: we won't know until later this year how many people will be claiming Universal Credit by the end of March, the period covered by the government's cost estimates.
But there is potentially a more serious flaw: the £612 million that will have been spent on the Universal Credit roll-out by April includes many long-term contracts and costs that will continue to be in operation in years to come, when the government expects the number of Universal Credit claimants to be much higher.
As the National Audit Office found when it investigated the value for money offered by Universal Credit last year, over 70% of the money spent by government on the scheme to the end of the last financial year had been on contracts for the design and build of the IT systems needed to implement it. These start-up costs aren't specifically associated with providing payments to the 3,200 people currently claiming, but rather the several million claimants the government eventually expects to claim.
The Work and Pensions Secretary Iain Duncan Smith suggests an alternative calculation:
"In truth, the operational running costs of the pathfinder, which is what we are running at the moment, are some £6 million, which equates to £200 per claim."
These figures don't match any we've seen published and we're hoping that the DWP is able to track them down. However they don't appear to include the costs of delays in the pathfinder programme roll-out, which the National Audit Office placed at £61 million.
While on a strict reading it isn't inaccurate for Chris Leslie to claim that Universal Credit is costing £190,000 per claimant "at the moment", this snapshot calculation doesn't account for the fact that many of the costs of getting the reform off the ground are front-loaded, while the roll-out to welfare claimants is at a relatively early stage.
Those hoping for an accurate picture of whether its implementation is more efficient on a per-claimant basis than its predecessors might therefore have to wait a little longer for an answer.