Real-time system required to match employers’ payments to employees’ bank accounts has 25% failure rate
The scale of the threat to the coalition’s universal credit scheme (UC) has been revealed by figures showing that the IT system required to match employers and banks’ records is failing 25% of the time.
Fears that the centrepiece of government welfare reform will not be ready have led to repeated negative Treasury briefings about the problems facing the Department of Work and Pensions.
Labour released the figures as a riposte to claims by the work and pensions secretary, Iain Duncan Smith, that Labour oversaw the creation of a tax credit system that allowed fraud and error to mushroom.
It was the latest salvo in a bitter political battle on welfare ahead of this month’s vote on whether benefits should rise at only 1% for the next three years. Labour has all but vowed to vote for a rise in line with inflation.
The shadow work and pensions secretary, Liam Byrne, and his deputy, Stephen Timms, have fought a campaign to prove that the complex technology necessary for UC is not ready, and that the system will not create the promised incentives to work. Duncan Smith has virtually staked his political reputation on delivering the system on time and on budget.
Labour’s latest blast pointed to an admission by the Treasury secretary, David Gauke, that the system underpinning UC failed for over a quarter of pilot cases in November.
Labour said Gauke’s answers to a parliamentary question showed that in half a million cases that month, the IT system could not match wage payment records correctly, and claimed that Revenue & Customs “will have to decide to make universal credit payments on the basis of incomplete, or plain wrong, information”.
Timms said: “Universal credit is now in real danger of arriving in universal chaos. This scheme is supposed to launch this year, but the RTI [real-time information] system is getting more than a quarter of transactions wrong. This scheme is now in danger of an IT meltdown. If ministers don’t urgently act to fix this soon millions of families’ tax credits will be put at risk.”
The RTI system was developed to enable universal credit payments to be made on a monthly basis taking into account actual income. When an employee receives their monthly wage, both the employer and the employee’s bank must let HMRC know how much the employee has been paid. Both the employer and the bank use a hashtag that identifies the employee. But on the basis of figures supplied, this is not happening on a sufficiently regular basis.
Gauke, in an answer to a parliamentary question tabled by Timms, revealed that in 526,608 cases in November, the hash identifiers in RTI pilots did not match – more than a quarter of all cases. In June more payments were unmatched than matched.
Ruth Owen, HMRC’s head of RTI, had recently told the Treasury select committee that the hash matches have 95% accuracy.
The requirement for real-time information is the biggest change to the pay-as-you-earn tax system since it was introduced in 1944 and will represent a significant payroll challenge to many employers. Already accountancy magazines are full of employers’ complaints about the cost and complexity of the scheme.