• 21% of people claiming legacy benefits have not transferred to Universal Credit after receiving notice to switch, and have had their legacy benefits stopped. Almost all of these people had been receiving Tax Credits.
  • Implementing Universal Credit will cost £900 million more and take at least six years longer than the Department for Work & Pensions planned in 2018. Most of the increase in cost happened before 2020.
  • There is evidence that some people on Universal Credit are more likely to be in work than people on the old legacy benefits at least in the short term.

One in five people on Tax Credits who were invited to move to Universal Credit (UC) did not then claim UC and had their benefits stopped, according to a new report by the National Audit Office (NAO).

The coalition government proposed UC in 2010 to replace six means-tested benefits for working-age households.1 DWP estimates that once fully implemented, UC will achieve £10.4 billion of net benefits a year, mainly through increasing employment.

DWP has a clear plan to move around 900,000 households claiming legacy benefits to UC by December 2024, starting with Tax Credit claimants, and it is on track to do this. DWP initially assumed that, overall, 3% of households claiming legacy benefits would not move to UC after receiving a migration notice.

By the end of December 2023, DWP had sent nearly 350,000 migration notices advising legacy benefit claimants they need to apply for UC if they want to continue receiving financial support. At this point, DWP had closed nearly 150,000 of these migration cases, with more than one in five (over 31,000) closed cases resulting in the claimant having their legacy benefits stopped and not moving to UC.2

In November 2023, DWP revised its migration plans as it found during its testing that take-up of UC by Tax Credit claimants was lower than for claimants of other legacy benefits. DWP now assumes that 26% of households claiming only Tax Credits will not switch to UC, with 4% of other legacy claimants not moving either.

DWP does not fully understand why some people on legacy benefits do not claim UC.3 It is monitoring the proportion of people who do not claim after receiving a migration notice and considers that the non-claim rate is not a cause for concern as it has received few complaints. However, DWP lacks data to be sure that people are claiming the benefits they are entitled to.

DWP expects implementing UC to cost £900 million more, and to be completed at least six years later, than it planned in its 2018 business case.4 The most significant delay to full implementation has resulted from the government’s decision at Autumn Statement 2022 to delay the move of income-related Employment and Support Allowance (ESA) claimants to UC until 2028 to make savings.

DWP estimates that 51% of ESA claimants, who are likely to include some of the more vulnerable claimants due to switch, would have been better off on UC by £130 a month on average.5 The delay in moving ESA claimants is expected to save £1 billion in benefit payments.

DWP has some evidence that UC is having a sustained positive impact on the jobs market.6 Its studies show that people on UC are more likely to be in work six months after making their claim than people on legacy benefits. But DWP’s evaluations have considered only the short-term impact of UC on the labour market.

During the COVID-19 pandemic the number of people claiming UC grew rapidly, more than doubling from 2.9 million in February 2020 to 6.0 million in 2020-21. DWP was able to meet this sudden increase in demand, providing prompt support to those in need, although there was an increase in fraud and error.7

At December 2023, across Great Britain, 6.3 million people were claiming UC.

The NAO recommends DWP enhances its evidence base on how effectively UC is working; continues to develop a better understanding of why some legacy benefit claimants do not claim UC; and takes prompt action to address barriers to claiming where necessary.

“DWP is on track to move legacy benefit claimants to Universal Credit. But it needs to be sure people who have not switched to Universal Credit are receiving the benefits to which they are entitled.

“Work to evaluate the impact of Universal Credit on the labour market shows some positive impact. However, DWP cannot demonstrate it is achieving the scale of the benefits set out in the programme’s business case."

“The Department needs to continue to develop its assessment of the impact to provide assurance on value for money and secure the best results when Universal Credit is fully implemented.”

Gareth Davies, head of the NAO

Read the full report

Progress in implementing Universal Credit

Notes for editors

  1. The six benefits UC will replace are: Working Tax Credit, Child Tax Credit, Housing Benefit, Income Support, income-based Jobseeker’s Allowance and income-related Employment and Support Allowance (ESA). Together, the six benefits replaced by UC are known as legacy benefits.
  2. By the end of December 2023, DWP had sent 346,550 migration notices. Of the 148,700 closed cases, 31,500 (21%) resulted in the household having their legacy benefit stopped without moving to UC.
  3. In 2022, DWP commissioned Ipsos to conduct qualitative research with 30 claimants to understand their experiences and why some had not claimed UC. It identified real and perceived barriers to claiming UC, including where people believed that the migration notice did not apply to them, that they would not be eligible for UC due to a recent change in circumstances, or that they would be moved automatically.
  4. In 2020, the NAO reported that DWP had forecast it would cost £2,850 million to implement UC, an increase of £834 million (41%) in cash terms compared with the 2018 full business case. DWP’s latest estimate, made in December 2023, is that implementation will cost £2,928 million, a further increase of £78 million (an additional 4% compared with the business case estimate). The cost rises are mainly due to inflation, new measures to address fraud and error, and extensions to the programme’s timetable.
  5. DWP estimated that 41% of ESA claimants would be worse off on UC, by around £217 a month on average. In practice, DWP would have topped up the income of these claimants under its transitional protection arrangements which ensure that claimants are not worse off at the point of moving to UC.
  6. DWP’s recent evaluation covering single claimants without children, based on data from 2018, found that new UC claimants were two percentage points more likely to get a job at any point in the six months after starting their claim than new Jobseeker’s Allowance claimants. In February 2024, DWP completed a further evaluation, also based on data from early 2018, which found single parents were five percentage points more likely to have been in work within six months of making a new UC claim compared with being on legacy benefits.
  7. DWP accepted that the increased volume of UC claims and the relaxing of some controls during the COVID-19 pandemic would lead to an increase in fraud and error. The proportion of UC overpaid by DWP was rising before the COVID-19 pandemic, from 5.5% (£90 million) in 2016-17 to 9.4% (£1.7 billion) in 2019-20. During the pandemic, the amount of UC overpaid rose to 14.7% (£5.9 billion) in 2021-22. The level of overpayments fell back in 2022-23, to 12.8% (£5.5 billion), but remains significantly above pre-pandemic levels. DWP’s spring 2023 forecast suggested it would take until at least 2027-28 to reduce UC overpayments to below pre-pandemic levels, with the overpayment rate expected to have fallen to 9.3% by then.

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