Two numbing words that spell the end for thousands

Analysis

"Process re-engineering" were the two numbing words which dropped from Peter Lilley's lips yesterday as he defended the requirement on his department to seek at least a 25 per cent improvement in efficiency over the next two to three years.

Precisely what that will mean for staff and claimants remained unclear yesterday, but it is likely to range from more contracting out and privatising of services, to thousands fewer staff - perhaps 20,000 fewer, according to the unions - to changes to benefit rules to make them simpler to organise and computerise, to fewer benefit offices and fewer staff in DSS agency outposts from Hastings to Blackpool, Washington and Newcastle upon Tyne.

It will also involve unpacking the process by which benefits are administered to see if savings can be made. The average income support claim - of which there are many millions a year - takes 26 minutes to process, according to the department. Reduce that by five minutes by changing procedures, and large savings would be made.

Whether this will hurt claimants or help them will depend on the precise decisions taken. Take two recent examples. Cold weather payments used to have to be claimed in arrears - producing low take-up and high administrative cost. Now they are computerised, and paid out automatically at much lower cost. A win-win position for both the department and claimants.

But equally, since October, the DSS now pays a standard rate of mortgage interest to income support claimants. That removes the need to calculate the payment for each claimant's building society - but leaves those whose interest rate is higher out of pocket. The department's running cost budget wins, some claimants lose.

In other words, changes to benefit rules and regulations are likely to contribute to the savings, although the department yesterday blew cold on suggestions that this would involve more self-assessment or tougher requirements to prove entitlement to benefit.

The demand for further savings comes because expenditure on the long- term sick and disabled, the elderly, family credit and other benefits is expected to rise over the next three years as a result of demography and policy, while the Treasury is demanding cuts in running costs of 12 per cent across Whitehall over the same period.

That doubles savings already pencilled into DSS plans which project a 10 per cent cut on the current pounds 3.3bn running costs by 1997/98 and a 10,000 reduction in staff from 89,000 to 79,000 by the same date.

The department has made changes on this scale before. Back in 1979, it employed 10,000 more staff but dealt with half the present number of unemployed, a third the number of lone parent claimants and did not have the Child Support Agency. In achieving that, the 1988 social security changes, which simplified benefits but made them more rough-and-ready and less tailored to individual circumstance, were crucial: easing computerisation of the system.

Similar changes have now to be achieved on a dramatically shorter timescale, producing in the words of Ann Bowtell, the department's permanent secretary, a "step change" in reduction of running costs that "cannot be achieved by working harder or pruning costs".

She has told staff: "We must address the complexity of the system and find practical ways of making services easier to run. We need to change our business in terms of decision making and the rules we have to follow."

Faith Boardman, the chief executive of the Contributions Agency, has told staff it will have to get "significantly smaller whilst delivering more" and that will mean "some less essential functions will be cut out entirely".