£1bn cuts forcing DWP to consider radical outsourcing and digital measures

Profile picture for user ddpreez By Derek du Preez March 10, 2014
According to a leaked document, however, Universal Credit will be protected (phew!)

Given that it has been about three weeks since I last wrote about the UK's Department for Work & Pensions, I was just starting to relax and think that maybe – just maybe – 2014 was going to be different and I would have some respite from covering the department's ongoing troubles. No such luck it seems. As I stepped off a plane in Barcelona yesterday, I received a tweet from an industry chum that linked to a Guardian story, which outlined how the paper has seen a leaked document of an internal review carried out jointly by the Cabinet Office and the Treasury.

The document states that the government's ambitious welfare reform strategy is at risk because of the severity of cuts being imposed on State Secretary Iain Duncan Smith's department.

The good news first – Universal Credit, the government's flagship welfare reform project that aims to merge a number of benefits into one new system, which has been plagued by set-backs and problems, is not part of the review and cannot be included in the comments made within this story. That's not to say that the Universal Credit project isn't at risk, given recent reports that it might be scaled back after the general election and the digital system being developed is woefully understaffed – but, for once, this story ISN'T about Universal Credit. 


However, that somewhat tepid good news has been marred by the revelations that even though DWP has made £2 billion of savings since 2009, future cuts of over £1 billion over the next two years could jeopardise the department's capacity to roll out reforms, including those of pensions, child maintenance and disability benefits.

The Guardian reports that all of the cuts so far have been relatively straightforward, but the review found that further savings can only be achieved via radical measures – such as outsourcing core services to the private sector, investing heavily in new IT systems and moving to digital-only customer services. It adds that going too far and too fast on the the efficiency savings “risks stymieing” the quality and effectiveness of DWP's services, which will in the end “lead to increased overall costs”.

“DWP faces a massive challenge to plan in a way that allows the department to live within its spending envelope,” states the report. 

A double blow

The leaked document is not the only surprising news to come out of DWP over the past few days. It was also revealed last week that department's CIO, Andy Nelson, has handed in his notice and will be leaving in the coming months. As Bryan Glick over at ComputerWeekly rightly points out, this is likely to be due to the role of the CIO itself diminishing within the DWP, given that it now has a Chief Technology Officer and a Director of Transformation in place – both of which have been put in charge of major projects.

However, Andy Nelson is a well equipped CIO, who has served in Whitehall for a number of years and would have been well placed to tackle any outsourcing challenges and investments in new IT platforms needed by the department – as proposed by the review.

Of course, DWP's line on the leak, as always, is that everything is hunky dory and no one needs to panic or fret – just us journalists overreacting about an internal review that was carried out jointly by the Cabinet Office and the Treasury.

“The department already has a track record of delivering significant reforms at the same time as achieving £2 billion in efficiency savings, and we'll continue to do so. Unemployment is falling, employment is at a record high and we are reforming welfare to make sure work pays,” a department spokesperson said. 

So what do we know? The review revealed the following:

  • The introduction of the claimant commitment by ministers last year – a document for jobseekers to sign on a regular basis, which urges them to carry out a number of activities in order to get their benefits – has actually had a “significant impact” on costs. This is because by making jobseekers attend jobcentres more regularly, local offices that had been planned for closure had to be kept open.
  • There are new plans to ditch paper-based form-filling in an attempt to cut further costs and move to an online-only approach to customer service.
  • Benefit payments into Post Office card accounts – cash accounts used by nearly 3 million people – will be stopped.
  • Claims for attendance allowance – payments to disabled people over 65 – will only made available online. Currently only 2 percent of attendance allowance claimants are made online.
  • Officials are analysing all contracts with external private suppliers to check for potential overcharging on hundreds of millions of pounds' worth of agreements (a move likely triggered by the findings from the Ministry of Justice and its contracts with G4S and Serco).
  • The possibility of reducing prices on future contracts is also being considered.


There is lots of conflicting stuff here. On the one hand DWP needs to look to outsourcing to private companies to reduce costs, whilst on the other it is examining current outsourcing arrangements for overcharging (also, let's not forget that it is currently having troubles with Atos on its health check contract, where the supplier is currently attempting to exit the agreement).

On the one hand the review argues for digital only services, whilst we all know that there is a challenge for DWP to not exclude those without access to the internet.

On the one hand the department has hired a CTO and a director of transformation to bring digital capabilities back in house, whilst on the other hand we are being told it needs to invest in what sounds like traditional IT platforms and outsourcing arrangements. All very confusing. 


The problem is that in an ideal world DWP would have a far bigger budget to do things properly. However, in these austere times, it just doesn't have that luxury. Of course it's cheaper to have an online-only service for claimants seeking benefits, but if currently only 2 percent of disabled people over 65 do so, is that a good idea? If the department is going to massively save on costs not only by moving to digital platforms, but by making it difficult for those people to claim, then I'm not sure that is fair.

A hybrid approach is still currently the best answer whilst we still have people living in the UK that don't have access to or don't feel comfortable using digital technologies – yes make it digital first, make it mobile first, save as much as you can doing that. But there has to still be an option for those that aren't able/or comfortable to use those routes.

Also, despite DWP's claims that everything is absolutely fine in-house, its recent track record of ditching useless IT assets developed by third party suppliers, whilst being criticised for poor governance and weak management, doesn't exactly fill you with confidence that all of this will be carried out properly.

DWP should consult with the Government Digital Service on this, get a succinct plan together, make it publicly available for consultation, and then it should build up its digital capabilities in house to create what it can, whilst also using the Digital Services Framework and the G-Cloud for any external requirements – both of which have historically proven to be cheaper than going to traditional providers.