The work and pensions secretary, Iain Duncan Smith, has used the cover of the autumn statement to announce that he is to miss his deadline of getting all existing and new benefit claimants on to universal credit (UC) by 2017.

He has also confirmed he is having to entirely rework the IT system at substantial cost because the original IT failed to meet the needs of claimants.

In a political humiliation for Duncan Smith, the minister has had to admit that at least 700,000 claimants will not be on UC by the end of 2017.

The reforms have been billed as one of the biggest changes to the welfare state since its inception, but have been bedevilled by repeated IT failures and delays, as well as a reluctance by ministers to admit the postponements.

Given the failure by the Department for Work and Pensions (DWP) to meet previous deadlines, this new timetable is bound to be viewed with scepticism.

The scale of the setback suggests a new government may have to take a cool look at whether the scheme should go ahead. There has been a bitter blame game within the department and across Whitehall.

DWP officials were not able to give a cost for introducing new IT systems, but said the issue was likely to be discussed when Duncan Smith appeared in front of the work and pensions select committee next Monday.

They said the existing IT system was not able to help claimants properly if their circumstances changed after they had made their initial online claim.

The new benefit, which brings together six benefits and tax credits into one, started with a small pilot in the Greater Manchester area, but has only looked at the simplest claims of single people making a claim for jobseeker's allowance for the first time.

The DWP said: "As announced in July, the department has been working in conjunction with the Government Digital Services to explore an enhanced IT system for universal credit that uses the latest in technological advances. Today ministers confirm that this system has proved viable and the department will further develop this work with a view to rolling it out once testing is complete."

In its latest timetable the DWP said the number of jobcentres using UC would grow to 10 by spring 2014.

"From there, the rollout will expand beyond the existing single claimant group, to new claims from couples and families in all of these areas. By the end of next year, universal credit will start also to expand to cover more of the north-west. Universal credit will therefore expand in scope and scale over the next two years."

Current plans will see new claims to existing benefits closed during 2016. This will mean that all new benefit claimants across the country will claim UC instead of benefits such as jobseeker's allowance or housing benefit.

Meanwhile, most of the existing benefit claimants will be moved over to UC during 2016 and 2017.

Decisions on the later stages of the UC rollout will also be informed by the completion of the new IT system and these decisions will determine the final details for how people move to the new benefit.

Duncan Smith said: "This is a once-in-a-generation reform. And we're going to get it right by bringing it in carefully and responsibly.

"Our approach will ensure that while we continue to enhance the IT for universal credit, we will learn from and expand the existing service, so that we fully understand how people interact with it, and how we can best support them.

"Early indications show that people are positive about the new benefit, and my department is working hard to ensure this good progress continues."

In a further sign of the continued uncertainty, the DWP states: "The overriding priority throughout will be continued safe and smooth delivery and, as recommended by the public accounts committee in their recent report on universal credit, this will take precedence over meeting specific timings."

Angela Eagle, shadow leader of the Commons, condemned the work and pensions secretary's "contemptible" decision to slip out news about delays to UC on the day of the autumn statement.

Speaking in parliament, she called on Duncan Smith to make a statement to MPs at the earliest opportunity.

Rachel Reeves MP, the shadow work and pensions secretary, said: "On the morning of the autumn statement this is yet another shambolic announcement from this out-of-touch government.

"Iain Duncan Smith has today admitted what everyone has known for months – that universal credit is massively behind schedule. But just a couple of weeks ago he was telling parliament the government would 'roll out universal credit on the plan and programme already set out'.

"It's clear that David Cameron and Iain Duncan Smith have completely failed to get to grips with their flagship welfare reform and millions of pounds of taxpayers' money have been written off as a result."