Benefits reform trial scaled back

Universal Credit represents a major shake up of benefit payments

The government is to scale back some of its plans to test a radical new reform to the welfare system.

Ministers planned to allow people to claim the new Universal Credit in four areas of north-west England from April.

But it has emerged that three of the pilots will not start until July.

The government said this would allow "safe and controlled" testing but Labour said the Universal Credit was "on the edge of disaster" because IT systems needed for it were not ready.

'Late and over-budget'

Universal Credit is intended to be the biggest shake up of the welfare system for a generation.

It will merge several earnings-related benefits and tax credits into one single payment, and is designed to be simpler, cheaper and a greater incentive to work.

But the scheme is so complicated that the Department for Work and Pensions (DWP) decided to test it in four areas in the North West next month before making it available nationally in October.

However, the department now says this pilot programme will start only in one area in April - Ashton-under-Lyne.

The other three job centres - in Wigan, Warrington and Oldham - will not start handing out Universal Credit until July.

A DWP spokesperson said there was no delay and the gradual testing was designed to make sure that the scheme was ready for everyone later this year.

"Our plan has always been to test Universal Credit in a safe and controlled way during Pathfinder to ensure we get it right for the start of the national rollout in October."

But Labour said this showed the scheme was in crisis and that the information technology needed for it was not ready.

Shadow work and pensions secretary Liam Byrne said: "This is yet another embarrassing setback for Universal Credit.

"The scheme is already late and over-budget and in spite of earlier promises ministers have admitted that they have no idea when out of work claimants will move over to Universal Credit.

"The truth is the IT for Universal Credit appears to be nowhere near ready.

"This scheme is now on the edge of disaster. Ministers must admit this project is in crisis and start to fix it now - before millions of families' tax credits are put at risk."

'Giant jelly'

Universal Credit calculations depend on salary data from HMRC's new PAYE Real Time Information system.

Mr Byrne said obligations for small firms to provide PAYE data on or before each employee payment had recently been delayed from April until October.

Anne Begg, Labour MP for Aberdeen South and a member of the work and pensions select committee, told BBC Radio 4's Today programme on Friday she could see both sides in delaying the scheme.

"Part of me is is pleased about this as I'd rather the government got the design correct than they went ahead and people with very little money got no money and the whole thing didn't deliver for them and the other part wonders whether there are serious design flaws presenting themselves.

"The welfare system is like a giant jelly in that if you press down and try and make a change in one area, something else that you may not be expecting pops up.

"We do need to look at the kind of welfare system we want in the 21st Century and how we would design it but we can't do this if we're constantly watching the cost all of the time."

Conservative MP Peter Lilley and former Social Security Secretary, said Iain Duncan Smith was very wise to pilot the scheme first.

"The very point of pilots is to find mistakes, problems and issues and deal with them," he told BBC Radio 4.

Mr Lilley said the the Universal Credit system would address the "legitimate fear" that people have that if they do get a job which proves to be temporary then it's very hard to return to benefits.

"This is one of the biggest disincentives to people taking a job and working."