It can be difficult to quantify the costs and savings to be made by investing in welfare to work programmes. The complex benefits and tax system has made it difficult to quantify whether overall public savings result from a claimant's move into employment.
We've undertaken two important pieces of work. The first demonstrates how to estimate the cost of programmes that help people into work. The second project helps us understand the savings to be made by moving people off benefits and into work.
Evaluating cost effectiveness of worklessness interventions
Published 10 August 2010
We've undertaken a review of the literature on evaluating cost effectiveness of worklessness interventions. The review aims to recommend a preferred approach for carrying out this type of evaluation that could be used across the West Midlands.
The review sets out the preferred approach and things to consider at each stage of an evaluation into the cost effectiveness of a worklessness programme. This gives service providers and policy makers guidance on how to establish the cost associated with an intervention.
Estimating public savings from moving people off benefits into work
Published 25 November 2010
We worked with the Department for Work and Pensions to provide headline figures on the cost benefits associated with moving claimaints off out-of-work benefits into employment.
The figures provide an estimated saving for a claimant who works for one year. The figures take into account the cost savings associated with reduced benefit payment including housing benefits, increased tax revenue, and include estimated savings associated with health and crime costs. The figures are based on an average claimant.
What this tells us is that, while the system of benefits and taxes may be complicated, there is a significant overall cost benefit to be made by moving people into work. The average saving is over £10,000 per person.
It's important to bear in mind that these figures are correct at October 2010. Future changes to the system may change the results.
Download our 1-page headline summary: pdf, 91kb | png, 74kb | flickr
Cost benefit analysis headlines
There is a clear cost saving to be made from a sustained move into work. While these figures do not factor in the cost of intervention programmes to assist people to access employment, they do show that for the average claimant a sustained period of work will result in significant public savings: on average, a saving of more than £10,000.
Table: Average public savings from moving benefit claimaints into work for one year
| Jobseeker's Allowance |
Incapacity benefit (now ESA) |
Lone Parent - Income Support |
| £10,700 |
£11,500 |
£9,300 |
In the West Midlands there are 482,000 out-of-work benefit claimants:
- 176,000 people claiming Jobseeker's Allowance
- 237,000 claiming Incapacity Benefit/Employment and Support Allowance
- 69,000 lone parents on Income Support
Possible impact of reductions in claimant numbers
- Moving just 1% of out of work claimants in the West Midlands into work for a year would save £52.5 million per year.
- Moving 10% of claimants into work for 1 year would save £525 million per year.
- Moving a quarter of claimants into work for 1 year would save £1.3 billion per year.
N.B. These estimates do not include any programme or administrative costs associated with supporting people into work. These estimates includes the savings to the exchequer of paying benefits versus tax income, as well as estimated savings relating to health and crime.
*Savings for new Employment and Support Allowance claimants are slightly higher than Incapacity Benefit. As most claimants are on Incapacity Benefit we have used the Incapacity Benefit saving here. Claimant numbers are for February 2010. Source: Department for Work and Pensions /West Midlands Regional Observatory.