The government’s Work Programme give monetary incentives to private and not-for-profit providers for getting the unemployed into work. However, the Social Market Foundation’s, Ian Mulheirn discusses new research which finds that the programme is now at risk of financial collapse due to contractors failing to meet the minimum requirements to due to the unreachable performance standards expected of them. Such a collapse would be bad for job-seekers, subcontractors and the taxpayer.
The Government’s flagship back to work scheme, the Work Programme, is in peril. The bold new scheme, which pays private and not-for-profit providers by results for getting the long-term unemployed into work, looks likely to substantially undershoot the Government’s expectations, putting it at risk of financial collapse.
That’s according to new research published by the Social Market Foundation (SMF) today. Our paper, Will the Work Programme Work? examines the viability of Work Programme by forecasting the likely performance of the providers during its first three years, based on the actual performance achieved under Labour’s welfare to work scheme and the forerunner to the Work Programme, the Flexible New Deal (FND).
The analysis suggests that providers won’t hit the Department for Work and Pensions’ (DWP) minimum expectations in years one and two of the Work Programme, and even by year three, 22 out of 24 FND contractors would have failed to meet the minimum requirements of the new flagship scheme. As the Department has threatened to terminate the contracts of providers who do not meet these challenging benchmarks, this threatens the viability of the policy. The likely performance levels also mean that funding per jobseeker on the scheme will be significantly less than anticipated, creating real problems for private and voluntary sector providers already operating on extremely tight funding.
But anyone listening to this morning’s Today programme will have heard Employment Minister Chris Grayling dismiss this research as ‘flawed’, claiming that it is impossible to compare the Work Programme to FND. Grayling’s argument centred on the point that FND involved different groups of jobseekers to the Work Programme and that comparison of the schemes was therefore impossible. It’s true that the Work Programme caters for a larger group of jobseekers than did its predecessor – including sickness benefit claimants as well as the long-term unemployed. But SMF’s analysis is carefully based on comparable groups of long-term unemployed people – the main group helped by the new scheme.
While these groups of jobseekers are comparable, differences between the two programmes remain. But our analysis takes these into account to predict Work Programme performance based on the FND implied success rates. Even on optimistic assumptions, it concludes that the Work Programme performance targets are impossible for most providers.
Grayling’s objections, therefore, don’t stack up. And it’s not just the SMF that have raised concerns about performance levels. The Work and Pensions Committee of the House of Commons recently demanded clarity over how the DWP have come up with these challenging targets, and many providers have themselves expressed their doubt that the scheme will work. In the deteriorating economic climate, with the claimant count having risen by almost 110,000 since bids to deliver the Work Programme were invited, its future looks precarious.
Widespread provider failure or a late bailout would be bad for jobseekers, expensive for the taxpayer and fatal for many subcontractors, especially not-for-profit providers. In the light of this new evidence and the deteriorating labour market outlook, DWP should revise its minimum performance expectations, and introduce more credible incentives. It should also establish greater transparency about how it derived its estimates of minimum performance, and clarify how they would vary if economic conditions deteriorate, to create greater certainty and strengthen accountability. And, to advance the Government’s aim to be the “most transparent government in the world”, DWP should publish monthly provider performance data, starting immediately, not in autumn 2012 as currently planned.
This article first appeared on the Public Finance blog on 22 August.
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