Media playback is unsupported on your device Media caption Mr Duncan Smith said the rollout of universal credit would be delivered "within budget and within the timescale"

The government's flagship welfare reform has been badly managed, is "overambitious" and poor value for money, the spending watchdog has said.

The National Audit Office said risks were taken with universal credit to hit targets, IT systems had "limited functionality" and an unfamiliar project management approach was used.

A national rollout of the new benefit has been delayed following IT glitches.

Work and Pensions Secretary Iain Duncan Smith said these had now been fixed.

Under the universal credit plans, six key means-tested benefits - jobseeker's allowance, employment support allowance, housing benefit, working tax credit, income support and child tax credit - are to be combined into a single payment which ministers say will ensure that claimants are always better off in work and also reduce fraud.

'Early setbacks'

The transformation requires the merging of complex computer systems in benefits offices, HM Revenue and Customs and local councils - which the government insists can be done.

All new claimants were supposed to receive the universal credit from next month as part of a phased implementation plan but this has been delayed following a number of pilots earlier this year.

Media playback is unsupported on your device Media caption Liam Byrne: "Iain Duncan Smith has lost control of the programme and lost control of the department"

Instead, new claimants at six "hub job centres" in England, Wales and Scotland will receive the new benefit from October.

The watchdog's report identified "early setbacks", and said: "At this early stage of the universal credit programme the department has not achieved value for money.

"These problems represent a significant setback to universal credit and raise wider concerns about the department's ability to deal with weak programme management, over-optimistic timescales, and a lack of openness about progress."

The report said there was still potential for universal credit to bring about "considerable benefits" if the department put "realistic plans and strong discipline in place".

The setbacks the watchdog identified included:

Officials were "unable to explain" the reasoning behind the timescales or their feasibility

There were no "adequate measures" of progress

Computer systems lack the function to identify potentially fraudulent claims, relying instead on manual checks

£34m investment in IT systems was written off

The Department for Work and Pensions (DWP) lacked IT expertise and senior leadership

Delays to the rollout would reduce the expected benefits of reform

Expenditure on IT systems has accounted for more than 70% of the £425m spent to date but the report suggested officials did not yet know whether the infrastructure in place would support a national rollout.

Analysis It was the language of a minister on the defensive. A report from an organisation, without a political axe to grind, has ripped into his flagship project and so a round of broadcast interviews beckoned for Iain Duncan Smith. Here is how a few of his sentences began: "I fully accept that the problem was..." The Department has "wrestled with issues and difficulties." "What went wrong with the Universal Credit team..." Then followed a similar set of hostile questions from MPs in the Commons, and then the inevitable question to the prime minister's Official Spokesman from reporters about whether Downing Street has full confidence in the scheme and the minister. The answer was yes, but the question reveals what is at stake. Universal credit is a reform so big it has been a passion for Mr Duncan Smith for a decade. It's a reform so major it would be arguably the biggest shake-up of the welfare state since it was set up. And so it's a reform so big that if it was to fail it would leave not just Mr Duncan Smith, but the government as a whole, in a real mess.

While steps were taken at the end of 2012 to get to grips with some of the problems, the watchdog said the "underlying issues" had not been addressed.

Amyas Morse, the head of the National Audit Office, said the "relatively high risk trajectory" was met by "weak management, ineffective control and poor governance".

The BBC has learned that the overspend on the the governments flagship welfare reform programme could rise further, as £162m has been invested on new hardware and software, in addition to the £34m on IT systems.

But Mr Duncan Smith told the BBC: "This will be delivered within budget and within the timescale."

He said the pilot scheme, which has begun with 1,000 people in the Manchester area, was "demonstrating that the IT we put forward for this actually works".

But his Labour shadow Liam Byrne, who supports universal credit in principle, accused Mr Duncan Smith of misleading MPs and the public about the state of the new system.

"It is now quite clear that Iain Duncan Smith has lost all control of his department and, frankly, he has now lost control of the truth," he said.

"This is a damning report. It shows they started work without knowing what they were doing, millions in IT spend has been written off and there are no counter-fraud measures worth their name.

"We want to know how he has left Parliament with the impression that everything is on track when the NAO says actually there are major problems.

"Mr Duncan Smith is saying one thing to Parliament and his officials are confirming something entirely different with the nation's auditors."

'Culture of secrecy'

Mr Byrne clashed with his Conservative opposite number in the Commons, telling him: "You must apologise to the House and you must now convene cross-party talks to get this project back on track. The quiet man must not become the cover-up man."

ORIGINAL TIMETABLE From October 2013 to April 2014 about half a million new claimants were due to receive universal credit instead of jobseeker's allowance, employment support allowance, income support, housing benefit, working tax credit and child tax credit.

At the same time, another half a million existing claimants and their families were due to be transferred to the new credit when their family circumstances changed significantly - for instance if they got a job or had another child.

From April 2014 a further 3.5 million claimants and their families were due to move to universal credit.

And from the end of 2015 to the end of 2017 a further three million people are due to be moved over, focusing on housing benefit claimants

But Mr Duncan Smith said he had identified the same problems with universal credit as the NAO after launching an independent review of the project last summer and they had now been fixed by bringing in management from outside the civil service.

He blamed the problems on a lack of "professionalism" and a "culture of secrecy" among the team of civil servants originally in charge of the programme.

Former Labour welfare reform minister Frank Field said the NAO report "spelled the beginning of the political end for the universal credit dream" and urged the government to "pull the plug on it".

The project suffered a tragic setback earlier this year when Philip Langsdale, the DWP's chief information officer, died four months after taking over responsibility for it.

The man drafted in over the summer to take over the running of universal credit admitted there had been "missteps".

"It's clear to me there were examples of poor project management in the past, a lack of transparency where the focus was too much on what was going well and not enough on what wasn't and with suppliers not managed as they should have been," Howard Shiplee told the Daily Telegraph - while claiming things had been "put right".

"I'm not in the business of making excuses, and I think it's always important to acknowledge in any project where things may have gone wrong in order to ensure we learn as we go forward," the former London 2012 executive added.