Fresh questions over the cost, timetable and viability of universal credit, the centrepiece of the first wave of the government's welfare reforms, emerged on Monday as David Cameron unveiled 17 further reforms aimed at lopping £10bn off the welfare budget.
The prime minister's second tranche of reforms go far wider than expected and are designed to give political momentum to the government.
But senior sources in the government and the opposition suggested on Monday that universal credit was now over budget and running late – raising questions about the implementation of the wider reforms.
Universal credit, which combines tax credits and benefits in one programme for the first time, was intended to simplify the welfare system and save money. Yet one government source said the Treasury was now reconciled to the programme costing money, rather than making savings.
The work and pensions secretary, Iain Duncan Smith, denied the claims in the Commons, but government sources said the Treasury was increasingly alarmed at the slow progress of universal credit, which was due to be introduced over a phased timetable beginning in 2013 and straddling the next general election.
The shadow work and pensions secretary, Liam Byrne, claimed the programme was now starting on a pilot basis in seven regions in October 2013 for new claimants, but would not be available for all new claimants until mid-2014.
Full introduction of universal credit covering all existing claimants will not be complete until 2017, raising questions about why Cameron is proposing a new series of controversial reforms, many of which are likely to impact on the design of universal credit.
Duncan Smith denied the package marked the end of compassionate conservatism. He said: "There's no kindness or compassion in saying to someone 'we don't really care whether you work, we don't care what happens to you, have as many children as you like, make yourself unavailable for work'. That's not compassionate."
The prime minister's spokesman initially confirmed that ministers were looking at regional benefit levels. He said: "We are looking at whether public sector pay could be more responsive to local pay rates and that is something to look at for benefits, too." The same principles apply, it's about local labour markets." But as the day wore on the plans were dropped amid concerns about the impact on northern Tory MPs.
Cameron acknowledged his Lib Dem colleagues would not agree with all his ideas, but claimed: "There are elements here that all politicians, no matter what party they are in, have got to think about."
The Lib Dems were adamant they were not going to co-operate with any of the package. Jenny Willott, an assistant government whip and Cardiff Central MP, said she had serious concerns, especially on removing housing benefit from under 25s. A Lib Dem spokesman said: "It is not coalition policy and nor is it going to be."
Downing Street sources said there was an element of pitch rolling – preparing public opinion for future reforms.
But Byrne claimed: "The [existing] programme is £100m over budget and over six months behind schedule before a single claim had been made."
He pointed out that Labour had been forced to make a freedom of information request to press the Department of Work and Pensions (DWP) to publish the business case for universal credit, the internal assessment of the costs and savings expected from the scheme.
Byrne also pointed to a recent DWP written answer conceding: "Detailed planning is still at an early stage, and the timetable and sequence for transition may change as a result."
He said: "Once upon a time we were told universal credit and the Work Programme were the final words in welfare reform. Now David Cameron is making an entirely new plan. The reason why is simple. Chaos at DWP is stalling the government's reforms and, with the economy back in recession, the welfare bill is going through the roof."
Duncan Smith dismissed the data given by Byrne: "Universal credit is on time, on budget and it's so typical of him – he knows that universal credit is a programme that we introduce over four years. He needs to go and check his figures again."
Cameron said his speech, at Bluewater shopping centre in Kent, was designed to spark a debate rather than set out specific policy reforms. He proposed removing housing benefit from under 25s, restricting benefits from families with three children or more, linking benefits to average earnings, as opposed to inflation, time-limiting some benefits, restricting access to benefits for school leavers, and increasing the proportion of benefits paid in kind as opposed to cash.
Ministers will publish proposals on Tuesday encouraging councils to reshape council house waiting lists so priority is given to those in work or with a local connection.
Cameron explicitly excluded pensioners from his plans, at least until after 2015, saying he made promises at the last election on issues such as the winter fuel allowance, free bus passes and TV licences.
His commitment came as fresh research was published showing the economic gap between young and old had widened significantly over the past four years.
A UK study by the Intergenerational Foundation thinktank reveals young people have experienced a worsening of conditions since 2008, with the gulf between under-30s and their older counterparts widening by 6% to 7% a year, rather than an average of 2% a year in 2000-2008.
Over the past decade, the report's headline measure suggests the intergenerational gap was 28% wider in 2010 than it was a decade before, fuelled by a number of factors including the level of youth unemployment, housing costs, stagnant salaries and substantial increases to the cost of university education.
