By James Kirkup, Political Correspondent

Universal Credit, the brainchild of Iain Duncan Smith, the Work and Pensions Secretary, is the centrepiece of the Government’s welfare reform agenda Photo: Joshua Pulman / Alamy

There is “a very real danger” that the Government’s welfare reform could fail because of a lack of skilled staff, an internal Whitehall review has found.

A team of commercial experts working for the Treasury and Cabinet Office highlighted a number of risks, problems and uncertainties around the plan to create a new Universal Credit welfare system by 2013.

Universal Credit is due to replace benefits including Income Support, Jobseeker’s Allowance, Employment and Support Allowance, Housing Benefit, and tax credits.

Ministers say the radical change will simplify the welfare system, better encourage claimants to seek work and cut down on fraud and error.

Because of the scale of the changes involved, the development of the new system is being overseen by the Major Projects Authority, a central team of procurement experts.

The Daily Telegraph has seen a copy of MPA’s initial report on Universal Credit, completed earlier this year. The 14-page report is marked PROTECT to indicate a sensitive internal document.

It says that plans to shrink and reorganise the Department for Work and Pensions could jeopardise welfare reform.

“There is a very real danger that due to a number of factors, including restructuring, headcount reductions, and uncertainty about the delivery model, the department may lose some of the expertise that it will need in order to deliver Universal Credit successfully,” it says.

The MPA felt that this risk was being “managed at this stage”. But the report concluded that in future, “this risk will need more focus.”

The report was written in March. Subsequent MPA assessments are said to have raised greater worries about the implementation of the new system.

The Daily Telegraph yesterday revealed that the welfare reform project has risen to the top of the Treasury’s warning list of major public sector projects at risk of delay and overspend.

Universal Credit will run on a major new IT system jointly developed by the DWP and HM Revenue and Customs, which is due to be ready by April 2013.

Independent experts have said that timetable is ambitious, and the MPA warned that the plan is based on “unproven” management techniques.

The DWP says it is using “Agile” management for the new IT system, meaning it is being developed piecemeal as ministers make decisions about the detail of Universal Credit.

The MPA report says that the plan offers many advantages over traditional project-management approaches, but also warns of risks.

“There are other risks which derive from trying new approaches: the Agile methodology offers much promise but it is unproven on this scale and scope,” it says.

Overall, the MPA’s “Starting Gate” assessment is that DWP and HMRC are able to deliver Universal Credit.

The foundations for a delivery Programme are in place – clear policy objectives, a coherent strategy, Ministerial and top management support, financial and human resources – with no obvious gaps,” it says.

The DWP said suggestions that Universal Credit is in trouble are “completely untrue and utterly without foundation.”

A DWP spokesman said: “Universal Credit is running to time and to budget. There has not been and is not any question about the DWP’s ability to deliver the required programmes that will support Universal Credit when it starts in 2013.

“Even though the department is restructuring, it’s ridiculous to suggest that we would take people away from a major project such as Universal Credit – in fact we have strengthened it in recent months.”

The Telegraph