By Mark Smulian | 23 June 2011
The Department for Work and Pensions could fail to achieve its target savings by 2015 without an adequate plan, auditors warn today.
In the first of a series of reports on how Whitehall departments are implementing cost reductions in 2011-2015, the National Audit Office concludes that the DWP’s efforts to cut spending ‘will not succeed without a good understanding of its expenditure, a clear vision, and a coherent, well-informed plan’.
NAO head Amyas Morse said: ‘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.’
By then the DWP must save £16.9bn from benefit and pension payments, and £2.7bn from its running costs.
This year it is due to spend £155.6bn on benefits and pensions and £7.8bn on administration.
Running cost savings were expected to come largely from increased automation and staff reductions, but the NAO warned these should be coherent and not a series of random cuts.
The report, Reducing costs in the Department for Workand Pensions, says: ‘Any deterioration in the accuracy of benefit decision-making or levels of fraud, for example, could increase the risk of overpayments.’
‘It is therefore crucial that the department executes reductions in running costs in a structured way so as not to undermine the reforms to the benefit system.’
But it says the DWP lacks a model of how to make such structured cuts, even though its agency, Jobcentre Plus, has ‘developed its model of how it will operate in the future to a greater extent than other parts of the department’.
Having such a ‘target operating model’ would mean DWP managers were ‘more likely to be able to prioritise what changes are needed and to explain to staff what their role might be’, the NAO says.
A DWP spokeswoman said: ‘Our plans to deliver long-term savings will be met by reforming our existing work practices and removing unnecessary layers of administration while still retaining the best experience and focusing on delivering services.’
Departmental officials will face questions from MPs on how they will make the spending cuts without harming ‘vulnerable people claiming benefits and drawing pensions’, Public Accounts Committee chair Margaret Hodge warned.
She added that it was ‘now time for a more structured approach’ to this by the DWP.
