Hey big spender – the growth and growth of DWP

John Redwood MP reviews the Department of Work and Pensions' performance in controlling its spending

How has the DWP fared?
Sir John Redwood MP
On 26 July 2012 09:15

For the next few days I am going to look at a range of departments to see how they are getting on with controlling public spending. Let us begin with the biggest of them all, the Department for Work and Pensions.

In the original Coalition spending review they proposed increasing current spending from £158 bn in 2010-11 to £171 bn in 2014-15. 2010-11 turned out to be £160 billion, and last year spending reached £166.7 billion. This was £3.3 billion or two percent more than the 2010 plan for that year.

So why has it proved so difficult to keep to plan? The main reason for the increase was the substantial uprating of pensions. The state retirement pension accounts for 44 percent of the total spend. The Coalition made the policy more generous with the triple lock pledge for better upratings. Higher inflation did the rest, requiring a larger increase.

The second highest area of spending is housing related benefits. Housing benefit, Council Tax benefit and rent rebates added up to £27 billion last year, or 16 percent of the total.

This year should see the first impact of the new housing cap at £26,000 per home. This remains high, so it will not do much to cut the rate of climb of housing benefits. Upwards movements in rents, especially in London, and the failure of most Councils to cut Council Tax mean continuing upwards pressure on the costs of this benefit.

The department has made a substantial reduction in its running costs. These have fallen from £9 billion in 2010-11 to £7.7 billion in 2011-12. Staff numbers are down from 126,272 in March 2010 to 104,182 in March 2012.

It has not yet achieved a breakthrough in the inherited high levels of fraud and error. These are still estimated at two percent or around £3.3 billion. The Coalition government thinks policy change, bringing in the new universal credit, should cut this fraud and error rate substantially.

As more people get jobs, benefits to unemployed people will fall, but these are a small proportion of the total budget. Disability Living allowance is expected to rise as a cost over the life of the Parliament. The falls in unemployment benefit cannot offset the higher pensions and disability benefits, so this budget will continue to rise.

The Rt Hon John Redwood MP is the Member of UK Parliament for Wokingham and the Chairman of the Conservative Economic Affairs Committee. His articles are cross-posted on his blog by agreement

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