TAXPAYERS risk losing billions of pounds if the UK Government fails to stick to its challenging timetable for introducing new computer systems to run its flagship benefits reform, Britain's value-for-money watchdog has warned.

The National Audit Office stressed Coalition ministers had failed to put in place contingency plans to cope with any setbacks to the digital service, which is due to deliver Universal Credit.

It warned the controversial programme, which amalgamates six benefits into one and is meant to give people greater financial incentives to work, was already six months behind schedule and a further six-month delay could mean a £2.3 billion loss in the benefits to society expected from people being moved off benefits and into work.

Margaret Hodge, the Labour MP who chairs the influential Commons Public Accounts Committee, said the Department for Work and Pensions was "still not getting it right" on UC and warned it was "throwing good money after bad".

The NAO report was published as Labour claimed the Government's primary welfare reform was moving at a "glacial pace" and claimed it might not be fully operational by 2020.

But, in a Commons statement to announce a wider roll-out of the programme - one in three of Britain's jobcentres is due to be operating the new benefit by spring 2015 - Iain Duncan Smith, the Work and Pensions Secretary, insisted it was right to have a carefully controlled introduction and stressed UC would bring £35bn worth of benefit to the country.

Last year the watchdog published a damning report which found UC was beset by "weak management, ineffective control and poor governance" and that £34 million had been written off on failed IT programmes.

Mr Duncan Smith "reset" the programme and the 2017 deadline was put back by two years.

Rachel Reeves, his Labour shadow, said: "The NAO report is further evidence that the Government's handling of UC has been disastrous.

"It's neither on time nor on budget. Ministers must urgently get a grip of the huge waste."

A department spokesman said the NAO report recognised it was reducing risks and making progress. "When fully in place the economy will benefit by £7bn each year and is set to make three million families better off by on average £177 a month," he added.

Labour said House of Commons Library figures showed the Lib-Con Coalition was set to spend £5bn more on tax credits than it had expected to do over the five years of this parliamentary term.

Ms Reeves blamed the overspend on rising levels of low pay, which, she said, had left more people reliant on in-work benefits.