Mike Driver, Department for Work and Pensions

Spending Reviews - a perspective from a spending ministry

Mike Driver, Director General, Finance GroupJacinda Humphry, Director, Planning and Performance ManagementPhill Wells, Deputy Director, Planning and Performance Management

Italy – UK Spending Review SeminarRome, 6 February 2014

2Department for Work & Pensions

About the Department for Work and Pensions

Families & Children -

recognising the importance

of family in providing the foundation of every child’s

life

Supporting separated families to play an active

role in the lives of their children.

Working Age -encouraging

work & making work pay

Promoting high levels of

employment by helping people,

including the disadvantaged, into work and to stay in work by making it

pay.

Disability & Ill Health –

enabling work, independence

& wider participation in

society

Fulfilling potential and having

opportunities to play a full role in society.

Controlling costs – improving services to the public by delivering value for money and reducing fraud and error

Social Justice – transforming livesProviding support to the most disadvantaged in order to help them turn their lives around.

One DWPCreating an extraordinary Department, working together as One DWP.

For Retirement - providing a

firm foundation & promoting

saving

Helping people to meet the challenges of an ageing society

and maintain standards of living

in later life.

Families & Children -

recognising the importance

of family in providing the foundation of every child’s

life

Supporting separated families to play an active

role in the lives of their children.

Working Age -encouraging

work & making work pay

Promoting high levels of

employment by helping people,

including the disadvantaged, into work and to stay in work by making it

pay.

Disability & Ill Health –

enabling work, independence

& wider participation in

society

Fulfilling potential and having

opportunities to play a full role in society.

Controlling costs – improving services to the public by delivering value for money and reducing fraud and error

Social Justice – transforming livesProviding support to the most disadvantaged in order to help them turn their lives around.

One DWPCreating an extraordinary Department, working together as One DWP.

For Retirement - providing a

firm foundation & promoting

saving

Helping people to meet the challenges of an ageing society

and maintain standards of living

in later life.

The department’s objective is to help people lift themselves out of poverty and stay out of poverty, through work, saving and support


And an outline of our key governance arrangements

Departmental Board• Advises on strategic and operational issues• Scrutinises and challenges Departmental

policies and performance

Executive Team• Agrees the framework of responsibilities,

plans and resourcing to deliver agenda• Ensures the culture of the Department best

supports the agenda

Departmental Audit Risk and Assurance Committee

• Independently challenges the appropriateness and adequacy of the Department’s governance, risk management and assurance processes

HM Treasury• On-going scrutiny of departmental spending,

monthly forecasting and forward planning

National Audit Office• Scrutinises public spending on behalf of

Parliament including formal audits of annual accounts and regular, specific value for money studies

Parliament• Department expenditure is voted by

Parliament and committee system provides detailed and rigorous challenge, especially by the Public Accounts Committee

Internal External


DWP’s overall budget for 2013-14 was £171.8bn….

Child Benefit £11.2bn

HMRC (Benefits + Credits)

AnnuallyManaged

Expenditure£40.2bn

Tax Credits +

In-work Benefits£28.9bn

HMRC (Benefits + Credits) Departmental Expenditure Limit £160m

Other Benefits £2m

Source: No.10 Transparency Return and DWP Statistics


…. of which £7.98bn was under our direct control


Departmental resources and Annually Managed Expenditure both controlled more tightly….

• SR10 and SR13 also sought significant savings in social security expenditure as a key element of deficit reduction programme

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

£ m

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0

20,000

40,000

60,000

80,000

100,000

120,000

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Baseline expenditure Non-baseline expenditure Headcount


The Spending Review process…. And how it works for us

• Spending Review sets multi-year financial limits– Department operates internal continuous planning process– Additional in-year fiscal events: Budget and Autumn Statement

• SR process formally announced by Treasury– Set information requirements– Overall objective for Government and initial indication of departmental

contribution

• In reality, work in the department starts much earlier…..

• Led from within Finance Group but involves wider department from the outset


Spending Review 2010 – the key decisions on Annually Managed Expenditure….

• Once-in-a-generation welfare reforms were enacted in the Welfare Reform Act 2012 including:

– Universal Credit– Personal Independence Payment

– Time limits to incapacity benefits– Housing Benefit reform

• Alongside major long term reforms to State Pensions and state pension age

• Designed to deliver improved work incentives, better support for the most vulnerable and….

• …Expenditure reductions in the short and long term - SR10 proposed welfare savings of £7bn a year


… and on Departmental expenditure

• Between 2010 and 2015 DWP DEL budget will reduce by 34%

• Overall workforce will fall from 110,000 to around 70,000 full-time equivalents– SR10 corporate centre organisation redesign – resulted in 40% headcount

reductions in 2011-12

– A single DWP Operational organisation created from a number of separate delivery agencies and 25% efficiencies over 4 years

– 2013-14 voluntary exit scheme – reducing operational staff who were originally planned to be working on delayed key reforms – circa 3,300 FTE at a cost of £120-140m generating £100m annual and recurrent savings

• Other changes included refreshed estate strategy and new cross-Whitehall shared services model


Pre-conditions for a successful Spending Review…

• Clarity

• Strong relationship DWP and HM Treasury officials

• Internal co-operation

• Permanent Secretary (as Accounting Officer) and Ministerial involvement


… but on reflection, several other issues matter

• Truly “zero-based”?

• Stability of the policy environment

• Capacity and capability of the organisation to deliver

• Evidence and ideology

• Reaching a “final” agreement


What happens post-Spending Review?

• Formal settlement letter received

• Subsequent negotiations with HM Treasury on points of detail

• Departmental allocations, and monthly control process (in year)

• Multi-year plans to deliver in medium term within voted funding

• Adjustments to settlement agreed at two annual fiscal events – Budget (March) and Autumn Statement (December)

Mike Driver, Department for Work and Pensions

Business

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