The institutions central to the operations of the political economy should not be seen as entities that are created at one point in time and can then be assumed to operative effectively afterwards… the operative force of many institutions cannot be taken for granted
– from Peter Hall and David Soskice, An Introduction to Varieties of Capitalism
The Department for Work and Pensions (DWP) was created in 2001. We should ask whether now is the time to disband it.
I ask this as a question of long-term policy and the administration of a significant part of Britain’s political economy (or “state”), rather than a short-term campaigning question designed to score political points. However, it would have the political advantage for whoever achieves power in 2015 of drawing some sort of line under what have proven to be poorly motivated and poorly executed welfare reforms since 2010.
To explore my question, below I outline why department organisation is important for the political economy, some history of the DWP, what the current DWP looks like, and then some top-level thoughts on what might be done with the current responsibilities of the DWP.
My motivation in the post that follows is rooted in an interest primarily in equality of opportunity for disabled people and what a future disability rights agenda might look like (spurred on by Neil Crowther’s thoughts), though it inevitably covers a wide range of areas relevant to DWP’s current remit.
At this stage I’m just musing on the initial question, in the hope others who (a) know more, and (b) think better, will think about, comment on and develop the question and answer.
Why are government departments and their reorganisation important?
First, a very brief bit about why the set up of government departments is important. (I appreciate that most readers will find something better to do at this point and stop reading.)
How governments are set up is vitally important to how the political economy works. The way they are organised reflects the direction of the public sector as a whole, since they sit atop a vast array of government agencies. The people who sit atop the departments – Ministers – are also Secretaries of State, and so have seats at Cabinet and its associated subcommittees.
As the Institute for Government (IfG) highlights :
Departments are the key bridge between the core executive of Prime Minister, Cabinet, Treasury and other core departments and committees on the one hand and the ‘front-line’, delivery-level public sector agencies on the other.
It tends to happen in the wake of elections, but departments often get reorganised – see these lovely timelines of government department reorganisations highlighted by Public Strategist.)
Changes to the “machinery of government” is in the hands of the Prime Minister, and the IfG notes three factors that influence Prime Ministerial decision making on departmental reorganisation:
- External change – new demands and priorities for the government to grapple with
- Administrative challenges – based on the performance of existing departments and administrative arrangements
- Political considerations.
Though the IfG notes that machinery of government changes are best when factors 1 and 2 are the main drivers, senior civil servants who have been there, done that and bought the t-shirt say
the vast majority of departmental reorganisations occur primarily as a response to political pressures at Cabinet level, including both the need to create jobs to satisfy a particularly valuable member of Cabinet as well as the need to contain the size of Cabinet – with policy and delivery requirements taking second priority.
Furthermore, “pressure from stakeholders or media criticisms rarely feature in officials’ lists of political influences”.
Political factors were a major component of Tony Blair’s thinking when he created the Department for Work and Pensions (DWP) in 2001.
Up until 1988, the government department most like the DWP was the Department of Health & Social Security (DHSS). This was split into the Department of Health and the Department for Social Security (DSS) respectively, until the DSS itself changed to become the DWP in 2001, taking on responsibility for employment (including policy) from the old Department for Education & Employment.
The main reasons for the creation of the DWP was to bring together two considerable parts of the state: social security for non-working people of all ages; and employment services and benefits for people of working age. From its very start, the DWP was set up to bring closer the relationship between work and benefits.
But it may never have been the DWP that was the sponsoring department of this close relationship. A series of dedicated working parties resulted in a recommendation from senior civil servants that the responsible department should be the Department for Education & Employment, enabling the relationship between education and employment – as well as skills and so the future economy’s workforce – to continue.
In the end, however, political considerations outweighed the policy potential (the first DWP Secretary of State was Alistair Darling) and Blair decided instead to create the DWP (a re-worked DSS) to take on employment and working-age benefits responsibilities, along with two other elements: administering benefits for (1) older people and (2) disabled people.
Despite the political fudge, senior civil servants rated the creation of the DWP the most successful departmental change in the 30 years since 2009, primarily because of the administrative sense in linking benefits to job seeking and the wider link with pensions. “Success” in this context, though, should probably be qualified: the IfG estimates that the creation of the DWP cost £175m (though only 3% of the associated budget) and there have been nine Secretaries of State between 2002-2013.
Where does this leave us with DWP?
DWP as it is now is a complicated beast, as its annual report for 2012/13 shows (pdf). It is the biggest public service delivery department in the UK, serving over 22 million people and paying £166 billion in benefits and pensions.
Using tables on relevant expenditure for 2013/14 from the Institute for Fiscal Studies (pdf)  we see that the DWP administers the following :
For people over retirement age:
|Area of spend||Total spend|
|State pension + additional state pension + pension credit||£63.4bn + £18.8bn + £7.3bn = £89.5bn|
|Attendance Allowance / Disability Living Allowance||£10.5bn|
|Winter Fuel + TV licenses||£2.8bn|
For people of working age:
|Area of spend||Total spend|
|Out of work benefits: ESA + JSA + Income Support + Incapacity Benefit||£9.2bn + £5.7bn + £3.0bn + £0.9bn = £18.8bn|
|Disability (DLA/PIP + Severe Disablement Allowance + Carers’ Allowance)||£9.1bn + £0.7bn + £2.0bn = £11.8bn|
This gives us a total expenditure for DWP in 2013/14 of £173.4bn.
Look what happens, though, if we re-arrange this spending. What we then have is the following, for all ages:
|Area of spend||Total spend (£ / % of spend)|
|Housing Benefit||£6.4bn + £17.1bn = £23.5bn (14%)|
|Disability benefits||£10.5bn + £11.8bn = £22.3bn (13%)|
|Out of work benefits||£18.8bn (11%)|
|Child & Maternity benefits||£10.4bn + £2.4bn = £12.8bn (7%)|
|Other||£1.9bn + £2.0bn = £3.9bn (2%)|
|Winter Fuel Payment + TV licenses||£2.8bn (2%)|
These numbers suggest to me that the question of whether to disband the DWP is worth asking.
More than this, though, there are major reasons that suggest to me the question of whether to disband the DWP is also worth answering.
By the time 2015 arrives, and some 14 years after it was created, we have to consider the possibility that the DWP is no longer able to support government in meeting its long-term policy and administrative goals.
I suggest this for three reasons.
The first and most important reason is that DWP does not seem to be able to respond to the new demands and priorities placed on it by external change. This includes in key areas of its remit such as employment, housing or disability, and especially where these issues intersect. Policy in these areas has been stagnant or unimaginative for some while now.
The second reason is the administrative challenges the DWP isn’t rising to. The administrative failures of the £3bn-£5bn Work Programme (quite aside from the policy failures) are well documented, as are those associated with the £540m-worth of contracts with Atos and Capita for the new Personal Independent Payment. Then there’s Universal Credit, on which the Public Accounts Committee believes a substantial part of the spend on IT so far – some £303m – will have to be written off.
The third reason is that, politically, the DWP – with its nine Secretaries of State in 11 years, the significant and broadening chasm between political rhetoric and policy reality, and its administrative problems – is an issue.
If we look back to the reasons why Prime Ministers embark on machinery of government changes – external changes, administrative issues and political necessity – we find we have a clean sweep for the DWP.
What might we do?
So, what if we considered disbanding the DWP and instead gave its responsibilities to other (existing or new) departments?
The theoretical game of departmental musical chairs has already started. The Economist has mooted some sort of Department for Economic Reform, which might take responsibility for employment policy and job centres from DWP, bring in post-16 education and training from the Department for Education and cities and local growth from the Department for Communities and Local Government.
Similarly, Neil Crowther has suggested something similar when it comes to a future disability agenda, taking away disability employment support from DWP and giving it to a skills-based agenda, led by someone like BIS or, perhaps (my thought) the Department for Economic Reform above.
Whilst the music is still playing, then, here is my very initial, very rough suggestion for where DWP’s responsibilities may be allocated, based on its current spending responsibilities:
|Area of spend||Current spend||Where responsibility could be allocated|
|Pensions||£89.5bn||A separate agency for pensions|
|Housing Benefit||£23.5bn||A new department, derived from DCLG, that holds responsibility for infrastructure, including housing|
|Disability benefits||£22.3bn||Perhaps a “Department for Inclusion”, which builds extensively on parts of the Department of Health’s current remit|
|Out of work benefits||£18.8bn||The mooted Department for Economic Reform|
|Child & Maternity benefits||£12.8bn||Moved to the Department for Education|
|Winter Fuel Payment + TV licenses||£2.8bn||Winter Fuel moved to Department for Energy & Climate Change; TV Licenses moved to DCMS or even the BBC|
As I stressed at the start, these are just top-level thoughts for what might be done and are, to a large extent, fantastical. There are clearly various problems and issues of different orders with what I’ve suggested .
But the main point to take away from this post are the ideas that
- DWP isn’t a government institution we should assume will always exist
- The main reasons why a department ceases to exist have been fulfilled in the case of DWP, and so
- We should open up the discussion on what to do next with the policy and administrative responsibilities currently in DWP. My suggestions are an offering to start precisely this.
 – I am indebted to the excellent Making & Breaking Whitehall Departments by the brilliant Institute for Government (pdf) for analysis of machinery of government changes and the history of the DWP
 – These figures don’t include tax credits, since I believe they are administered by HMRC. Similarly, they don’t include Council Tax Benefit, which has been replaced by council-run support schemes, the central government subsidy for these is forecast at £4.3bn per year to 2016-17.
 – Not that this has ever stopped others from making silly suggestions. I’m looking at you, think tanks.
Update: Neil Crowther kindly highlighted this piece by Simon Duffy where he moots the possibility of closing down DWP as a practical solution to reforming Employment & Support Allowance.