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DWP to face a £535m spending cut ahead of new Pensions Bill

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  • DWP to face a £535m spending cut ahead of new Pensions Bill

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UK - The Department for Work and Pensions (DWP) will be expected to make savings of more than half a billion pounds this financial year, according to HM Treasury.

In a statement setting out plans to cut £6.243bn (€7.24bn) of spending in the next year to help tackle the UK's £156bn deficit, George Osborne, chancellor of the Exchequer, and David Laws, chief secretary to HM Treasury, claimed the intended savings were both "feasible and advisable".

The Department for Business Innovation and Skills (BIS), which last week highlighted its intention to try and part-privatise Royal Mail, will have to make the most savings (£836m), but the DWP is also required to save £535m, a figure only beaten by cuts in education, transport, local government and by the devolved administrations of Scotland, Wales and Northern Ireland. (See earlier IPE article: Auto-enrolment still on track as new UK government rings changes)

Laws and Osborne said the programme of cuts would be overseen by a new 'Efficiency and Reform Group', with around £1.7bn saved by "delaying and stopping contracts and projects, including immediate negotiations to achieve cost reductions from the major suppliers to government". A further £1.15bn will be cut from consultancy and travel costs.

One of the supplier contracts that may come under review as part of this process is the administration contract between the Personal Accounts Delivery Authority (PADA) and Tata Consultancy Services (TCS) that was signed in March 2010. The existing 10-year contract is split into two stages, with the first part scheduled to run until October 2010, to allow TCS to begin the activity required to set up and administer the National Employment Savings Trust (NEST). (See earlier IPE article: Tata confirmed as NEST admin provider)

However, PADA stated in March that before the expiry of the first stage "a decision will be made on whether to proceed with the contract for the remainder of the contract term".

Speaking at a press conference today, Laws was unable to comment on specific pilot schemes and contracts that might be scrapped or renegotiated. But he highlighted there were likely to be "hundreds of agreements" that had been signed off since 1 January 2010 that would need to be reviewed.

He did note, however, that there were two types of contract: those signed off at a departmental level, and those requiring approval from the Treasury. In regard to the former, the relevant government department - such as the DWP - would have to decide whether the contract representing good value for money, Laws said.

The outline for the proposed cuts comes ahead of the Emergency Budget on 22 June 2010 and the Queen's Speech on March 25, which is expected to set out plans to introduce 21 Parliamentary Bills, including a Pensions and Savings Bill.

According to reports in the Daily Telegraph newspaper - which claims it has seen a draft version of the speech - the government is expected to introduce a Pensions Bill after the summer recess that could allow for the restoration of the earnings link to the basic state pension, and a timetable for a review into the dates at which the rise in the state pension age could be brought forward.

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