The current system of Local Housing Allowance looks set to continue until at least 2017 for the majority of landlords and tenants in most of the country, after major delays to the roll-out of Universal Credit.
Universal Credit should be rolled out to all new benefits claimants from October.
Instead, the controversial reform will be extended to just six new jobcentres.
The delay, blamed by ministers on poor IT, has led to claims that Universal Credit is a white elephant.
Universal Credit wraps up benefits and tax credits into one package, and includes housing benefit – or the rent payable to landlords.
The idea behind Universal Credit is that recipients get all the money in one monthly amount, giving them the responsibility to manage their own finances – including passing the rent money on to landlords.
The Government says that the IT system behind Universal Credit does work, but is lagging technical advances and that a better system could “potentially be built”. It has also emerged that some 6,000 new computers will have to be installed, so that claimants can access online services from local jobcentres.
Works and pensions secretary Iain Duncan Smith said: “I am pleased to say that while we press ahead with delivery, we are also ensuring that we have the best long-term approach in place for this transformative benefit.
“I’m determined to get this right and will not follow the old ways of governing – launching with a big bang and having to clear up the mess afterwards.”
But his shadow number, Liam Byrne, said that Universal Credit had become the biggest white elephant in Whitehall.
He said: “David Cameron and Iain Duncan Smith have spent £420m of taxpayers’ money to deliver Universal Credit in the grand total of just ten jobcentres – that’s less than 1.5% of the nation’s jobcentres.”
Universal Credit is already being trialled in two pilot areas, with a further two starting later this month.
The roll-out announced by the Government will extend the scheme to Hammersmith, Rugby, Harrogate, Inverness, and Shotton in North Wales.