Revealed: the dodgy data undermining Universal Credit

Spectator

18 hours ago

As Sir Keir Starmer offers concessions to 126 rebels to water down his welfare reform bill, a scandal that undermines the entire Universal Credit system goes ignored. The Spectator has seen figures revealing that the HMRC data feed which powers Universal Credit payments to low-paid workers may be so error-strewn that as many as one in four claimants has been underpaid, overpaid or not paid at all.
When Universal Credit was introduced 11 years ago to modernise benefits, it required a robust data system to drive it. HMRC's answer was the 'Real Time Information' (RTI) system – hailed at the time as the most significant overhaul of the tax system since PAYE's introduction in 1944. Employers were required to report payroll information every time they paid staff, enabling near real-time benefit calculations. The system was later used to support the Covid furlough scheme.
But problems surfaced almost immediately. Financial penalties that were triggered automatically to ensure employers reported earnings records accurately and on time were abandoned after just one use in 2014, almost as soon as the data stream was turned on. A senior official at HMRC said at the time: 'We haven't been able to target them [400,000 automated compliance messages to employers] as sharply as we hoped and they went to people who had complied.' In hindsight, some insiders draw comparisons to the Post Office's Horizon scandal.
The implications of flawed RTI data are vast. FTSE 100 companies have seen tax liabilities misstated by millions because what they owe in tax is also calculated using RTI. Businesses have lost faith in the integrity of the figures. This same stream underpins tax assessments for 30 million people and Universal Credit payments for 23 million. Yet the data is routinely late, inaccurate, or missing. The fallout? Missed tax receipts, unpaid benefits – and in the most severe cases, people wrongly accused of fraud.
In 2023, I reported that, while the government claimed the RTI error rate was under 1 per cent, figures I obtained showed a monthly error rate closer to 5 per cent. One in 20 Universal Credit claims for working households, it turns out, may be wrongly calculated every month – a figure the government strongly disputes. More recent Freedom of Information requests suggest an error rate as high as 8 per cent, or 2.5 million incorrect records monthly.
The benefits bill is unsustainably high and reform is clearly needed
These reports in The Spectator led to the shop workers union USDAW including questions about Universal Credit payments in its annual survey to thousands of members. I have now obtained the results. Of those surveyed, some 1,265 said they claimed Universal Credit. Some 23 per cent admitted they had had issues with their UC claims because the details of their households' total pay were wrong at DWP or had an incorrect date shown. That suggests that almost one in four in-work UC claimants have been made a victim of this error that stems from the RTI system. Nearly 29 per cent of those who had experienced an error ended up in financial hardship as a result. Some 22 per cent said they'd experienced issues but not been able to get a satisfactory response from the DWP.
The USDAW survey, which is the first of its kind to ask in-work UC claimants if they've experienced errors stemming from RTI, reveals that even the error rate of 4-8 per cent I've previously reported on could be a considerable underestimate. The survey responders are all USDAW members so tend to be people working in lower-paid private-sector roles. It's not possible to say for certain that they are all UC claimants, but their membership suggests these are the type of people likely to be in the in-work claimant population governed by RTI.
A common issue raised was the misreporting of pay dates for supermarket workers paid every four weeks. The RTI system often logs two payments in a single calendar month, triggering a drop in benefit entitlement. These are not isolated glitches; they point to a systemic failure.
A government spokesman said: 'In the vast majority of cases using Real Time Information supplied by employers is an efficient and accurate method of calculating Universal Credit payments – and less than 1 per cent of cases do not match.
'If a claimant wishes to dispute the earnings information we have used, they can submit evidence to us, and we will look into the case and make any necessary changes.'
The benefits bill is unsustainably high and reform is clearly needed. But if Starmer is now open to concessions, this is his opportunity to go beyond cash savings. He should instruct Welfare Secretary Liz Kendall to review the reliability of the RTI system underpinning Universal Credit. At its core, the principle that work should pay is absolutely right. But it only holds water if the systems ensuring that promise are accurate, transparent and fair.
Because too many claimants are being failed by the very mechanism meant to support them. If Starmer wants to reform welfare, he must start by fixing the machinery behind it before another Horizon-style scandal hits the headlines.