“The Department’s big challenge is to cut
costs by £20 billion in four years, while achieving substantial
reform of the welfare system. It will not succeed without a good
understanding of its expenditure, a clear vision, and a coherent,
well-informed plan. There are signs of progress, but the Department
will have to improve in all three areas if its March 2015 targets
are to be realistic.”
Amyas Morse, head of the National
Audit Office, 23 June 2011
The Department for Work and Pensions will have
to make rapid progress in reorganising the way it operates if it is
to meet its target of achieving sustainable running cost reductions
of £2.7 billion while implementing substantial welfare reforms and
a £17 billion reduction in benefits and pensions by 2014-15,
according to the National Audit Office. The Department has the
largest annual expenditure of any central government department and
so its cost reductions will be central to the Government’s meeting
its priority objective of reducing the budget deficit.
Since 2007, the Department has reported
reductions of £2 billion in its running costs, and initial out-turn
data show that it met its target from the June 2010 Budget to
reduce running costs by £535 million in 2010-11. However, in
the first of a series of reports on how government departments are
implementing the spending cuts from the 2010 Spending Review, the
NAO has concluded that the Department must make progress quickly in
order to be able to demonstrate that it can secure sustained cost
reductions in a structured and strategic way. Given the
challenges posed by major welfare reforms, the Department cannot
rely on uncoordinated annual savings plans.
Today’s report recognizes that the DWP is only
at the start of its new cost reduction challenge. However,
without basing its running cost reduction plans more on robust
information on the profile of its business costs and how that
relates to the value of the services delivered, the Department is
not in the position to make rational choices about what it should
stop doing, what it should change and what it should
continue. Recent cost reductions have been based largely on
budget restrictions rather than on fundamental reform of working
practices.
Three months into the Spending Review and the
Department does not yet have a detailed model of how it wants to
run in the future. Without such a model, senior managers are
less likely to be able to prioritise the changes that are needed
and to explain to staff what their role might be. The existing
plans specify the respective budgets available for 2011-12 but only
the Jobcentre Plus plan specifies what structural changes are
needed and the steps involved in achieving them up to
2014-15. .
Publication details:
HC: 1089, 2010-2012
ISBN: 9780102969740