"the project has been going on too long to be cancelled"
That is a sad conclusion. We've wasted X amount of money but rather than fess up to it we will continue to waste more.
Anyway, any new benefits system should not be IT-driven:
1. Define the new benefit entitlements
2. Implement it using a paper-based system
3. Migrate each step of the paper-based system into IT, incrementally
The trouble is, step (1) is always stupidly designed. As someone who has in the past claimed Working Families Tax Credit (child element), the number of forms to fill in each year was simply ludicrous.