Government attempts to set up its flagship Universal Credit scheme have not achieved "value for money" and have already wasted £34 million, according to a damning report by the National Audit Office (NAO).

ITV News Political Correspondent Libby Weiner reports:

The NAO said the project championed by Work and Pensions Secretary Iain Duncan Smith had been beset by "weak management, ineffective control and poor governance".

The auditors found that the IT system that was being used to process the benefit claims could not identify potentially fraudulent ones, leading to a possible delay in its delivery by 2017.

Universal Credit is due to replace six separate means-tested benefits. The Department for Work and Pensions has estimated it would save £38 billion in administration, fraud and error costs by 2023.

The department's plans for Universal Credit were driven by an ambitious timescale, and this led to the adoption of a systems development approach new to the department. The relatively high risk trajectory was not, however, matched by an appropriate management approach. Instead, the programme suffered from weak management, ineffective control and poor governance. Universal Credit could well go on to achieve considerable benefits if the department learns from these early setbacks and puts realistic plans and strong discipline in place for its future roll-out.

The report concluded:

  • The DWP "took risks" in order to meet ambitious targets

  • Scheme has not achieved value for money with at least £34m of the £425m spent so far having been "written off"

  • Timescale for national roll out is no longer feasible without increasing risks

  • Programme has suffered from "weak management, ineffective control and poor governance"

  • Current IT system for processing claims has "limited functionality"

Public Accounts Committee chairwoman Margaret Hodge has said that today's report shows that the Department for Work and Pensions has embarked on a scheme "with little idea as to how it was actually going to work".

Confusion and poor management at the highest levels have already resulted in delays and at least £34 million wasted on developing IT. If the department doesn't get its act together, we could be on course for yet another catastrophic government IT failure. This damning indictment from the NAO [National Audit Office] gives me no confidence that we will see the £38 billion of predicted benefits between 2010-11 and 2022-23. Vulnerable benefit claimants need a secure system they can rely on.

Iain Duncan Smith defended the scheme saying the problems highlighted in a report by the National Audit Office over the Government's flagship Universal Credit project were "historic" and he had intervened to sort them out.

We took the earliest action, I brought in outside people. I lost faith in the ability of civil servants to be able to manage this programme, so brought in people from outside to ensure that this programme could be delivered within the scope of how it was planned and make sure that it was delivered within budget. That is our belief today.