New monthly universal credit scheme to go ahead, says IDS

Critics claim benefits shake-up will cause hardship for those on the lowest incomes

One of the biggest attempted reforms of Britain's welfare system will go ahead according to the Government's timetable despite a host of warnings about what could go wrong, the Work and Pensions Secretary, Iain Duncan Smith, insisted yesterday.

Mr Duncan Smith is introducing a system called universal credit, which he insists will be much simpler to operate and understand than the myriad benefits that it replaces.

Giving evidence to the Commons Work and Pension Committee yesterday, he brushed aside warnings that moving to a system of monthly payments will cause hardship for those on the lowest incomes, who fear that the money will run out before the month is up.

Anne Begg, who chairs the committee, warned: "There is huge concern about monthly payments. There are going to be people who don't manage their monthly payments. What arrangements are going to be in place for those people?"

Mr Duncan Smith insisted that paying benefits weekly or fortnightly made it harder for people who find jobs to adjust to the world at work now that the majority of employers pay monthly. The "weekly pay packet" at the factory gate is a thing of the past, he said.

The universal credit will replace jobseeker's allowance, tax credits, income support, employment and support allowance – formerly known as incapacity benefit – and housing benefits with a single payment.

There have also been fears that the Government will be unable to get an IT system in place in time for the system to work effectively. The computer "bridge" linking the Work and Pensions Department to Revenue and Customs (HMRC) has not yet been tested. But Mr Duncan Smith and Lord Freud, a junior minister in the Work and Pensions Department, insisted that pilot schemes in which employers were linked by computers to HMRC so that they could send information about the payroll down the line had gone "remarkably smoothly".

"It's literally pressing one extra button. You do the payroll then you press one extra button to send it over to HMRC," Lord Freud said.

Another common fear is that the Government's drive to get claimants to go online will disadvantage those who cannot or do not want to use the internet.

The Government's target is that 50 per cent of claims will be made online by 2013. Mr Duncan Smith said he was confident it could be met. He claimed that 30 per cent of claimants are already "willing and able" to use the web, and another 33 per cent are "willing" but "require some support".

That left over a third who are either "not literate" in the use of computers or "resistant" but "trusted intermediaries" – relatives, or social services staff – to access the system for them.

Universal credit: How it will work

Universal credit is a new single payment for people on low incomes or who are out of work which is due to replace tax credits, income support, housing benefit and jobseeker's allowance. It is due be rolled out from next year.

The Government says it will be simpler to administer and will encourage people to get into work by removing the disincentives inherent in the current system.

At present, someone moving off benefits and into work might only be 10 per cent better off but under the new system they would be at least 35 per cent better off. But there are worries that it could penalise families whose circumstances change.