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The Department for Work and Pensions could fail to achieve its target cost reductions of £2.7bn by 2015 without an adequate plan, a report has warned.
According to the National Audit Office the department would need to make "rapid progress" if it is to reduce its overall spending by £17bn over the next four years.
As the department with the largest budget in Whitehall, if the DWP fails to cut its spending by as much as planned it could throw the government’s deficit reduction plan off course.
In the first of a series of reports on how Whitehall departments are implementing cost reductions in 2011-2015, the NAO said DWP had not established a clear plan beyond 2011-12 for reducing spending and warned there could be a "risk of not achieving substantial savings".
The department must reduce its running costs by £2.7bn and the costs of benefits and pensions by £17bn by 2014-15.
Running costs have been cut by £2bn since 2007, but the NAO said the DWP must make progress quickly to demonstrate it can secure sustained cost reductions.
It said that given the challenges posed by major welfare reforms, the DWP is not able to rely on "uncoordinated annual savings plans".
At present, reductions have been placed mainly on budget restrictions as opposed to fundamental reform of working practices.
Amyas Morse, head of the NAO said: "The Department’s big challenge is to cut costs by £20bn in four years, while achieving substantial reform of the welfare system. It will not succeed without a good understanding of its expenditure, a clear vision, and a coherent, well-informed plan.
"There are signs of progress, but the department will have to improve in all three areas if its March 2015 targets are to be realistic."
A department spokesman said: "Our commitment to securing cost reductions is clear. We've already met the target set in the June 2010 budget to reduce our running costs by £535m in 2010/11 and we have a transformation programme in place to achieve sustainable cost reductions.
"Our plans to deliver long-term savings will be met by reforming our existing work practices and removing unnecessary layers of administration while still retaining the best experience and focusing on delivering services."
Dods Parliamentary Communications Ltd
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