Sir John Bourn, head of the National Audit Office, reported today on the complexity of the benefits system, which he considers is one of the most important issues affecting the performance of the Department for Work and Pensions. According to the report to Parliament, tackling the problems associated with a complex system requires a systematic and strategic approach focusing on the system as a whole.
The Department has already taken a range of actions which illustrate key principles for a way forward: specifically designing new benefits to reduce complexity, systematically removing anomalies, simplifying processes including customer input, sharing information, using technology to protect customers from complexity, and making the most of external scrutiny mechanisms. Sir John called on the Department to develop a strategy to tackle the problem both in the short and long term. This would build on the Department’s commitment made earlier this year to develop ways of simplifying benefits.
The Department for Work and Pensions is a complex organisation with millions of customers and a wide range of responsibilities and relationships. It administers around 40 benefits, allowances and grants to a wide and diverse population. Benefit legislation and supporting regulations are inherently detailed to allow the Department to pursue the objective of equity and fairness between individuals in the same or differing situations, while providing incentives, meeting specific needs and incorporating safeguards against abuse. Complexity also allows the Department to secure its objectives cost-effectively and fine-tune regulations to allow for more specific targeting of groups or individuals.
Complexity is not a new issue and the current benefits system is an accumulation of years of legislative change. The Department of today has to live with decisions made in the past. Complexity arises in various ways. The incremental small-scale changes can add to the complexity, as can the way benefits link up with each other and with other forms of assistance. Benefits are administered at a local level by the Department’s agencies and local authorities; and complex delivery arrangements can also arise as a consequence of the design of the benefits themselves.
The effects of complexity can be seen in many ways. For example, it can be associated with errors in benefit payments, due to staff and customer mistakes. It can also reduce the ability of staff to explain benefit regulations to customers and makes it hard for some customers to understand what is required of them. For the last 15 years, Sir John has given a qualified audit opinion on the accounts of the Department for Work and Pensions and, previously, the Department of Social Security. This qualification is in part due to the extent of errors in the payment of benefits.
Successive governments have advocated simplification. In February 2005, the Department published its Five Year Strategy in which it stated that it would be “..exploring and developing ways to simplify benefits while continuing to protect social security expenditure.” The strategy also recognised that this will not necessarily save money. This is because savings arising from administrative simplifications may be substantially exceeded by increased programme costs. Overall, the Department has made progress in tackling the complexity of the system and in designing ways of managing it to protect staff and customers, but it recognises that there is more to be done.
An appropriate degree of complexity exists where there is a balance between the system being detailed enough to meet the needs of a wide range of different individuals in various circumstances, yet straightforward enough to run efficiently. According to the NAO, the Department for Work and Pensions has not yet achieved this balance. This is indicated by:
Dealing with the problems associated with complexity is a long term project which will require a systematic and strategic approach focusing on the system as a whole. The report provides an overview of the system, explains how complexity arises, summarises some of the main consequences, and looks at what the Department is doing to manage the complexity. The report encourages the Department to build on and extend its current work to tackle the problem in the short and long term taking account of the following key principles: